Seattle’s maximum debate on achieving $15 minimum wage
The committee trying to come up with a recommendation to raise Seattle’s minimum wage is down to its final few days of negotiations. A possible compromise would allow for a phase-in, with employees who don’t earn tips or benefits making higher wages during that time.
Seattle Times staff reporter
The committee trying to come up with a recommendation to raise Seattle’s minimum wage might be wrangling right down to the wire. The last meeting, scheduled for Monday, has been pushed back to Wednesday by Mayor Ed Murray, who said he’s hopeful a consensus can be reached that boosts the pay of the city's poorest workers without dampening the economy or killing jobs.
“They’re working hard. I think they need more time to get to an agreement. In the end, it may work, it may not, but if they don’t reach an agreement, I’ll send a proposal to the City Council based on the best thinking of the group,” Murray said Friday.
Both labor and business leaders on the two-dozen-member committee say they are considering potential compromises that would phase in a $15 minimum wage over five to nine years. During that time, employees who don’t earn tips or benefits would make a higher wage, according to several sources familiar with the proposal.
But other committee members say there is still deep disagreement over the issues of total compensation, the length of a phase-in and to what size business any wage hike should apply.
The proposed compromises, being circulated among committee members late last week, were rejected Friday by Seattle City Councilmember Kshama Sawant, who argued that creating a lower wage for tipped workers and a credit for health care and other benefits would undermine the state minimum-wage law. Washington is one of only seven states that do not permit a lower wage for tipped workers.
“When businesses say they want a health-care credit in the minimum wage, what they’re really saying is that they don’t want to pay $15 an hour,” Sawant said. She also objected to the high-stakes negotiations being conducted in secret.
But one labor leader said the potential compromise would still give workers a big pay raise and that the credit for other forms of compensation would be short-term.
“If we can get to $15 an hour in four or five years, that’s a victory,” said Dave Freiboth, executive secretary of the King County Labor Council and a committee member.
With almost one in four Seattle workers now making less than $15 an hour, the stakes are high and the potential impacts of the proposal still widely debated.
Activists with the group 15 Now already have filed a ballot amendment that would raise the minimum wage to $15 an hour Jan. 1, with a three-year phase-in for small businesses. They say they’ll start gathering signatures in early May for a November ballot initiative if Murray’s process doesn’t produce a strong proposal.
A business-backed group, OneSeattle, held its first news conference last week with the implication that if total compensation isn’t taken into account in the final proposal, it could file a competing minimum-wage initiative. The group also proposed a training wage for new workers and a phase-in period that applies to all businesses, regardless of size.
OneSeattle released a poll Friday of 400 likely voters that showed 47 percent supported and 48 percent opposed an immediate jump in the minimum wage to $15, with a phase-in for small businesses and nonprofits. The poll, by DHM Research, had a 5 percentage-point margin of error.
A poll released in February by EMC Research of 800 likely Seattle voters found 68 percent support a $15 minimum wage. The poll was commissioned by a coalition of labor unions and had a margin of error of 3.5 percentage points.
In addition to disagreement over what should count as wages, some other issues, such as enforcement and penalties, have barely been addressed, according to committee participants, who have been asked by Murray to keep details of the deliberations confidential.
Here’s how the most contentious issues are playing out:
Phase-in and size of businesses
15 Now activists — despite the name — have now proposed a three-year phase-in for businesses with 250 or fewer workers. The minimum wage would go up to $11 an hour in 2015, $13 in 2016 and $15 in 2017.
They say that will give businesses time to adjust to the new costs. And it will give nonprofit agencies, which typically receive government funding under annual contracts, an opportunity to negotiate for higher payment.
Making the $15 minimum wage effective immediately for large businesses will target those companies with the greatest ability to pay, said Philip Locker, political director of the Socialist Alternative Party and a leader of 15 Now.
“McDonald’s, Subway, Starbucks and Target can afford it. We hope that that’s one thing we can all agree on in this debate,” Locker said. Franchises would be treated as large businesses.
Business members of the committee have argued for a phase-in anywhere between seven and 21 years. Left unchanged, the state minimum-wage law, with its annual adjustment for inflation, would reach $15 in about 18 years.
OneSeattle insists that all businesses be treated alike. It fears that companies with a lower minimum wage, even for a short phase-in period, will lose workers to those paying higher wages.
But City Councilmember Bruce Harrell said it makes sense to treat businesses differently depending on size. He wants to see a phase-in for small businesses and nonprofits as part of any minimum-wage compromise.
“We’ve heard a lot of pain from small businesses, particularly those owned by immigrants and refugees and from nonprofits, about the impact on their bottom line,” he said. “The proposal we’re trying to reach takes that into consideration.”
High-profile Seattle chefs including Tom Douglas, Ethan Stowell and Tamara Murphy say their businesses will have to cut staff, cut hours and raise menu prices if the city minimum wage goes up 61 percent, the jump from the current state minimum to $15 an hour.
“What’s being proposed in Seattle is unprecedented. We’re going from the highest minimum wage in the country to a higher one,” said Linda Di Lello Morton, co-owner with Murphy of Terra Plata and the Elliott Bay Book Company Cafe.
Restaurant owners say that about a third of their costs are labor. Their profit margin is about 4 or 5 percent. And restaurants and other food-service and preparation businesses employ the city’s largest percentage of low-wage workers.
Thirty-four percent now earn the minimum wage, and 66 percent make $15 or less, according to a University of Washington study done for Murray’s committee. That includes tips, to the extent that employees self-reported the income to the U.S. Census.
Douglas, who made headlines last year when he raised the salaries of his cooks and bakers to $15 an hour, said he didn’t give his “front of the house” waiters, bartenders and hosts a raise because they receive tips. He said those workers average $20 an hour with tips and make $40 or $50 an hour on some shifts.
He said tips are recorded on credit-card receipts, reported to the state and IRS as income, and that employers pay payroll taxes on them.
“In fact they ARE the wages of our industry,” Douglas wrote in a nine-page open letter on his restaurant blog.
But advocates for low-wage workers say that only 10 percent of all Seattle workers making less than $15 an hour are tipped. And most don’t make as much as waiters at popular Seattle restaurants.
Nicole Vallestero Keenan, research and policy analyst for Puget Sound Sage, a progressive think tank, calculated the pay of tipped workers using occupational wage data from the Washington State Employment Security Department. She found that the median wage for waiters and waitresses in the city is $12.51 an hour, including tips.
She noted that tipped workers are not only restaurant servers, but also baristas, hairdressers, manicurists, doormen, bellhops, concierges and personal-care workers.
Business leaders aren’t arguing with the $15-an-hour goal. But most want all reportable income, including tips and the value of other benefits such as health care, to count toward a $15 minimum wage.
OneSeattle, which includes the Seattle Metropolitan Chamber of Commerce and the Washington Restaurant Association, argues that if all labor costs, such as sick leave, vacation, payroll taxes and training are added, Seattle’s minimum-wage workers now are actually making $15.17 an hour.
Anthony Anton, executive director of the Washington Restaurant Association, said businesses have consistently said that any minimum-wage proposal must recognize the value of benefits that employers provide in addition to wages, including tips and health care.
“What we’re asking for is a recognition of total compensation. We’re open to [the mayor’s committee] being creative in how they get there.”
Jasmine Donovan, vice president for communications for Dick’s Drive In, wants the minimum-wage proposal to recognize that some companies give generous benefit packages to employees. Dick’s, for example, starts workers at $10.25 an hour and offers health insurance, child-care assistance, paid vacations, scholarships for continuing education, and a 401(k) with a 50 percent employer match.
“What I would love is a solution that incentivizes employers to offer benefits, especially scholarships. Better education and skills is the best way for employees to get higher paying jobs,” she said.
A study for Murray’s committee by researchers at the University of California, Berkeley, found that of nine cities and counties that had enacted local minimum-wage laws, five count commissions as part of wages. Three count money spent on health benefits and child care.
But labor advocates say that the more forms of compensation that count toward the minimum wage, the more likelihood of payroll fraud and wage theft. Vallestero Keenan cited a U.S. Department of Labor study that found almost 84 percent of restaurants across the country had some type of wage and hour violation between 2010 and 2012.
Additionally, a National Employment Law Project study found that 26 percent of low-wage workers experienced some wage theft.
City Councilmember Nick Licata visited San Francisco earlier this month to see how that city enforced employer mandates including minimum wage, paid sick leave and a health-care-benefit ordinance.
“Seattle needs a more robust enforcement system. The more complicated the wage laws, the greater the need for stronger auditing functions,” Licata said.
Lynn Thompson: 206-464-8305 or email@example.com.
On Twitter @lthompsontimes
Information in this article, originally published April 19, 2014, was corrected April 21, 2014. A previous version of this story incorrectly attributed two quotes to business group OneSeattle’s website.