Minimum Wage – Puget Sound Sage

Seattle’s Minimum Wage Starts in Two Days (4/1/2015)

Seattle’s Minimum Wage Kicks in April 1^st 2015

With Seattle’s new minimum wage kicking in just two days, and tons of speculation about the impacts, I’d like to break down what it means for workers, businesses and our economy in some hard numbers.

What does Seattle’s minimum wage mean for workers?

Everyone in Seattle should be earning at least $11 per hour starting on April 1^st. Depending on the type of business you work for, the compensation package may look different. If you work for a large employer (500+ employees) like Target, McDonalds or Amazon, your paycheck should reflect an hourly wage of $11 per hour. If you earn minimum wage ($9.47) today, then in two days you should earn $1.53 per hour more before taxes. If you work 32 hours a week and are paid every two weeks, your paycheck should show an increase of $91 before taxes. By December 31^st 2015 you should have earned $1,836 more before taxes. That is enough money to buy a quality bed, put down a deposit on an apartment, or spend $10 on lunch three times a week for an entire year.

If you work for a smaller business (500 or less employees) your paycheck should reflect at least $10 in direct wages per hour, and $1 dollar in either tips or health care benefits. If you don’t get tips or healthcare benefits, you should be earning $11 per hour as your wage. So for example, if you are a tipped worker, your wages should reflect a $.53 cent increase AND your employer should show that you have earned least $1 in reported tips or they have contributed at least $1 per hour you worked towards a health care package. If you work 32 hours a week and are paid every two weeks, your paycheck should show an increase of at least $31 in pre-tax wages and at least $60 in compensation in the form of tips or healthcare benefits. By December 31^st 2015 you should have earned $636 more before taxes.

What does Seattle’s minimum wage mean for the economy?

The University of Washington[i] estimates that nearly 37,900 people are currently earning minimum wage in the City of Seattle. As we’ve already estimated, each person will earn between $636 and $1,600 more this year if they work 32 hours per week until December 31st.[ii] If we look at the aggregate increase for all 37,900 workers earning minimum wage – minimum wage earners in Seattle could earn between $24 million and $69 million more in 2015 than they would have without a higher minimum wage. That represents a significant increase in buying power for Seattle’s lowest wages workers. That’s enough money to buy between 2.4 million and 6.9 million $10 lunches.

What does Seattle’s minimum wage mean for businesses?

Every business has a different model and labor costs can represent a different percentage of your total labor costs. The implications for restaurants have been dominant in the media, so we’ll explore what the implications are for a Seattle restaurant. Using the Washington Restaurant Association’s break estimates of a typical budget breakdown featured in the Seattle Magazine, we can get a sense of the total operating costs. According to Anthony Anton, CEO of the Washington Restaurant Association: 36% of funds are devoted to labor costs, 30% to food costs and 30% to everything else. These restaurants then operate on a 4% margin.[iii]

If we look at a $1 million dollar business, labor accounts for 360,000 of their total operating costs. Assuming all workers earn minimum wage (which means this estimate is looking at the largest possible increase to labor costs as the typical wage for cooks in our region is $11.27 per hour and the typical wage for dishwashers is $10.45 per hour)[iv] their labor costs should increase between 380,160 (if all workers are tipped) and 417,600 (if no workers are tipped). It’s safe to say that the total labor costs will be somewhere between those two numbers. Assuming 50% of work hours are tipped and 50% are non-tipped). The largest possible increase to labor costs for this business would be 398,880 – representing a 10.8% increase in labor costs. However, what is that increase compared to total operating costs? With a 10.8% increase in labor costs, total operating is no longer 1 million, but 1,038,880 – a 3.8% increase in total operating costs. A restaurateur could conceivably raise prices by 3.8% to make up the difference. For a $10 meal, that is a 38 cent increase. In short – in two days 38,000 people should see increases to their paychecks and some prices may marginally increase. By the end of the year – millions more dollars will have gone to the people who drive our economy – workers.

[i] https://www.documentcloud.org/documents/1096119-uw-evans-report-on-15-minimum-wage.html

[ii] By comparing the number of FTE’s in Seattle (Employment Security Department Data) to the total number of jobs in Seattle (Puget Sound Regional Council Data) we were able to come up with a rough estimate of the typical hours worked for an employee in Seattle – 1600 hours per year or 32 hours per week.

[iii] http://www.seattlemag.com/article/why-are-so-many-seattle-restaurants-closing-lately

[iv] According to 2014 occupational wage data at the Employment Security Department the median wage for cooks in the Seattle Metropolitan region is $11.27 per hour and the median wage for dishwashers is $10.45 an hour.

Seattle City Council Committee Approves $15 Minimum Wage

A Seattle City Council committee unanimously voted today to pass the Mayor’s proposal for a $15 minimum wage. The ordinance passed out of committee will phase in the minimum wage over the next three to seven years. Specifically, it will require large businesses (500+ employees) to pay $15 by 2017 or 2018, and small businesses (less than 500 employees) to pay $15 by 2019 or 2021.

This historic vote represents a huge victory for workers, communities of color, and progressive leaders through the U.S. The final vote in Council is expected to occur next week.

$15/hour minimum wage proposal passes through Seattle City Council's committee with a unanimous vote. — Seattle’s $15/hour minimum wage proposal passes through City Council’s committee with a unanimous vote.

In the end, City Council did not make some of the dramatic changes recently rumored in the media, but they did make some modest amendments that alter the deal struck by the Mayor’s Income Inequality Advisory Committee.

Below, we highlight and explain some of the most significant changes:

Amendments that support workers:

Council strengthened the power for the City to enforce the minimum wage throughout the ordinance. The City of Seattle is undergoing a separate stakeholder process that will determine how the City handles all labor enforcement strategies; however, the amendments passed today allow for stronger mechanisms than in the Mayor’s proposal. They include:

Extending the period a worker has to report a violation after it has occurred, from just 180 days to three years, which dovetails Washington State law.
Ensuring that, if wage theft occurs, employers must not only pay back wages to wronged workers, but they may be subject to a penalty up to $500 for first time violations, $1000 for second time violations, and $20,000 for subsequent violations.

Councilmember Sawant successfully inserted a provision that codifies the City’s intent to identify additional funding for non-profit organizations.

Amendments that weaken the ordinance for workers:

Council pushed back the effective date to April 1, 2015 from January 1, as originally proposed.

The City will allow employers to pay a sub-minimum wage (85% of the minimum) to 14 and 15 year old youth, people with certain disabilities, and apprentices. Employers must apply for a waiver granted by the Department of Labor and Industries – a practice already done under State law. This provision will potentially allow for discriminatory wage practices that are currently allowed under State law. However, the employer will also have to apply to the City for a permit as well. Between the two permits, the requirement for a waiver will create transparency for workers and the public about which employers are requesting and have received permission to pay sub-minimum wages.

Implications of the Mayor’s Proposal for a $15 Minimum Wage

What is the Income Inequality Committee’s proposal to raise the minimum wage?

If the Council approves the Mayor’s proposal to raise the minimum wage, low-wage workers in Seattle and our local economy will see significant economic gains.

46% of Seattle’s low-wage workforce, who work for large employers, will make $15 by 2018.
Local small businesses and small non-profits will have 5 to 7 years to phase in the minimum wage to $15, and will reach parity with big businesses in 2025.
After all businesses have phased-in the minimum wage, the minimum wage standard will be equivalent to roughly $14.30 in 2015 dollars.

Table 1. Mayor of Seattle’s Minimum Wage Proposal

The Mayor’s proposal phases in the minimum wage in four separate tiers: A, B, C, D. As of January 1, 2015, the minimum wage for most businesses in Seattle will be $11/hr. The minimum wage standard will be tied to inflation starting on January 1, 2018. By the end of 2025, all businesses in the Seattle will pay the same exact minimum wage: an estimated $18.13/hr with a 2.4% adjustment for inflation.

Table 2. Phase-In Tiers For Proposed Minimum Wage

Who Will Benefit from the Mayor’s Income Inequality Proposal (And When)?

Who will see a wage increase, and when, depends entirely on who you work for and what types of benefits you receive. Combining government data with a report produced by the Center for Economic and Policy Research, we estimate that nearly half of Seattle’s 102,000 work for large businesses, and 26% receive health-care coverage. For exact breakdowns of workers for each tier of minimum-wage phase in, see Table 3.

Table 3. Number Workers affected by Tier of Minimum Wage Phase-in

How much more money will workers earn?

Over the next 10 years, low-wage workers will earn nearly $3 billion dollars more than their current wages (assuming current wages rose in line with inflation). Our recent report shows that Seattle’s low-wage workforce earns an average of $11.95 per hour and works roughly 32 hours per week. We estimated their new earnings based on the difference between the proposed minimum wage and the current average wage of a workers making less than $15 an hour. The table below shows that how much more in earnings workers affected by the policy will make in each year of the phase-in. For example in 2017, when large businesses who do not provide health insurance reach $15 per hour low wage workers will earn nearly 150 million more in 2017, than if their wages had only increased with inflation. Over the 10 year phase-in period, the cumulative earnings for affected workers would be $2.9 billion dollars.

1 Our recent report showed that roughly 102,000 workers earn below $15 an hour. Using Economic Census data to estimate that 46% of workers are employed by large businesses with more than 500 employees anywhere in the nation. A national report, from the Center for Economic and Policy Research, indicates that only 26% of low wage workers receive healthcare coverage, and our own analysis of Census MicroPUMS data indicates that there are nearly 10,000 tipped workers in Seattle.

New Study: Who are Seattle’s Tipped Workers?

The $15-an-hour minimum wage in Seattle has been focused on a debate over tipped workers, who according to our analysis, comprise of less than 10% of workers who earn below $15 an hour.

In this policy brief, we shine a spotlight on all tipped workers in Seattle, so that city elected officials can focus on practical solutions for raising the minimum wage, instead of relying on speculation about who tipped workers are and what incomes they earn. To inform our research, we combined an analysis of government data with interviews of workers in various tipped professions. Our analysis demonstrates that the average tipped worker in Seattle is roughly 32 years old, has at least some level of college education, and earns less than $15 an hour – even if you include tips in their hourly earnings.

Tipped workers generally earn below $15 an hour, including tips. Although there has been much attention paid to a few high-earning, tipped restaurant workers, this group is not representative of the tipped workforce in general.

Highlights:

Tipped employees are more likely to earn low wages: the average annual pay for waiters and waitresses in the City of Seattle is $22,620 per year. Waiters and Waitresses make up 61% of Seattle’s tipped workers.
Tipped workers are disproportionately women: 59% of tipped workers are women, even though women comprise of only 46% of Seattle’s workforce.
Tip credit encourages wage theft: Nationwide, full-service restaurants were found non-compliant in 84% of Department of Labor Wage and Hour Investigations.

Seattle’s Minimum Wage Kicks in April 1st 2015