LA passes $15 minimum wage; Tacoma may see proposal on November ballot

The $15 minimum wage campaign continues its march across the country. The Los Angeles City Council Tuesday adopted a $15 minimum, phased in over several years. 

Several other cities, including San Francisco, Chicago, Seattle and Oakland, Calif., have already approved increases, and dozens more are considering doing the same.

Familiar names appear in the coverage.

“The effects here will be the biggest by far,” said Michael Reich, an economist at the University of California, Berkeley, who was commissioned by city leaders to conduct several studies on the potential effects of a minimum-wage increase.

Reich was one of the economists who conducted research for Seattle Mayor Ed Murray’s minimum wage committee

Backers of a $15 minimum wage for Tacoma turned in signatures Monday. The Pierce County Auditor says the verification process will be completed by May 27. 

The initiative may not be the only minimum wage proposal on the ballot.

The $15 minimum wage issue could share the ballot with a competing measure blessed by the Tacoma City Council. Mayor Marilyn Strickland and the City Council created a task force to examine how to change the city’s minimum wage after the Tacoma-Pierce County Chamber asked her to create a group to study alternatives.

According to the proposed ballot measure, businesses making gross revenues of $300,000 per year or more would have to pay a $15 minimum wage with no phase-in period or exceptions based on a business’s number of employees.

The News Tribune editorial board recently weighed in on the proposals.
You have to credit the 15 Now Tacoma folks. With the threat of a radical ballot initiative, they’ve forced the capitalist running dogs of Tacoma — i.e., the City Council and Chamber of Commerce — to scramble for an alternative that will undoubtedly involve raising the minimum wage in the city…

The initiative, if passed, would move the current $9.47-an-hour minimum to $15 as soon as the measure is certified at the beginning of 2016. Were that to happen, Tacoma would be immortalized as a textbook case of utopian economics run amok.

…hundreds of the city’s small employers could no longer do business as usual. Some would fold; some would move to Lakewood, University Place or Fife; some would reduce hours, lay off employees or cut benefits to comply with the initiative…

A lot of workers would wind up with $0.00 an hour, which is what you earn when you have no job.

The editorial argued for an approach that raises the wage with “a degree of economic literacy.” Read the whole thing… it’s worth the time.
 
The FiveThirtyEight blog puts the $15 minimum wage in context, noting the significant variation in living costs across the country and the phase-in adopted by LA. 
According to data from the Council for Community and Economic Research, it costs workers about 40 percent more to live in Los Angeles than in the average American community. That means that $15 in LA is the equivalent of less than $11 in the U.S. overall.
That’s one reason discussions of raising the federal minimum wage quickly get complicated. FiveThirtyEight calculates the effective rate for major cities. Here’s a snapshot of the top tier. (Highlighting added.)
538 Chart
 
We’ve written about the effects of boosting the minimum wage on a metro level. 
In addition to the absolute costs of these measures, and the challenge they create in competing with other employers not subject to the same mandates, local governments’ wage and benefit regulations create compliance problems for employers operating in multiple jurisdictions…
 
Research is mixed on the effects of incremental increases in the minimum wage, but large increases are clearly associated with declining job opportunities for the young and unskilled.
For more discussion, see this Washington Research Council minimum wage analysis,  this column by Megan McCardle on the LA wage hike, and this short City Journal discussion on the effects of the higher minimum wage on young workers.

 

Minimum wage hike in Seattle – Legislative efforts stall

Today Seattle pulls onto the on-ramp en route to a $15 minimum wage. Some minimum wage workers will go to $10/hr; some to $11/hr. (Schedule here.)

The University of Washington, which may or may not be covered by the Seattle ordinance, announced it’s raising its minimum to $11. From the UW press release:

Of the approximately 39,000 non-student employees at the UW, 70 currently earn below $11 per hour. Effective Wednesday, they will reach the $11 level.

“We are pleased to be moving in synch with the rest of the city,” said Interim UW President Ana Mari Cauce.

The Seattle Times reports that the Seattle effort is receiving national attention.

The Washington Restaurant Association believes the city’s high minimum will have an effect on the industry.

“At the end of the day, the math of the industry has to change,” said Anton. “Seattle will have to invent a different restaurant model than the historical one.”

…“We can find a way to make this work,” Anton said. “We can continue to have a thriving small restaurant scene and work on a better situation for employees. Those don’t have to be mutually exclusive.”

Seattle economist Peter Nickerson believes there will be adverse consequences

“The people I worry about most are the people who are really low-qualified,” Nickerson said. They are “going to be competing against people who weren’t willing to wash dishes for $10, but will do it for $15.”

Another oddity of the Seattle law is its treatment of franchisees as large employers, an issue examined in Don Brunell’s column

While Seattle explores uncharted territory, legislative efforts to raise the statewide minimum wage to $12 have apparently stalled

Senate committee to hear $12 minimum wage bill; beginning to see effects in Seattle

The Senate Commerce and Labor Committee hears the House-passed $12 statewide minimum wage bill, HB 1355 today. Unintended consequences are not unusual when it comes to changes in payroll costs. As the Washington Research Council notes, some Seattle restaurants are already implementing changes in tip policy. 

The Council links to this Seattle Times story.

On Wednesday, Ivar’s will raise the wages of about 100 employees who make less than $15 at its sit-down restaurant Ivar’s Salmon House, at the north end of Lake Union

Those servers, bussers, dishwashers and others will see an increase in their hourly pay to a flat $15. They will not, however, get any tips because the restaurant will now tell customers they do not need to tip. To make up for that, the restaurant will share its menu-price increases with the employees. Ivar’s management expects that, under the new system, its hourly staff’s annual pay will end up being the same as, or higher than, what they earned last year.​

Also from the story:

Servers and bartenders at the Salmon House in 2014 made the state minimum wage of $9.32 an hour, along with $18 to $19 an hour in tips, on average, Donegan said, adding that the restaurant’s typical server or bartender made about $60,000 a year last year.

From our research report,

Washington employers and residents alike place a high priority on the equitable compensation and protection of those in the workforce. Policymakers must carefully consider wage and benefits mandates and system to ensure that such protection are maintained in a cost-effective manner so that employers can create more job opportunities for Washington citizens.

 The experiment continues…

 

Olympia considers $15 minimum wage; WRC examines effect on young workers

A new poll shows 69 percent of Olympia voters favor a $15 minimum wage in the capital city. 

The poll was conducted Jan. 22-25 by Patinkin Research Strategies, a research firm based in Portland, Oregon. According to the firm, 400 registered voters in Olympia were interviewed via telephone about their preferences for a $15 minimum wage.

The poll sampled people who were likely to vote in 2015, and about 65 percent were over age 50, said Ben Patinkin, president of the research firm.

That age breakdown is interesting, particularly when you consider that the workers most likely negatively affected by the rising minimum are the young and experienced. The Washington Research Council recently updated charts telling the story.
Washington teen unemployment rate is considerably higher than the U.S. average, no doubt – at least in part – because of the high state minimum wage (with no tip credit or training wage for young workers).
 
Some of those interviewed by the Olympian expressed concern about the effect of a $15 wage on business and the community.

…Max Brown, an Olympia resident who chairs the city’s planning commission [said], “I understand the argument that you’re going to get more money in the pockets of the people, but small businesses and entrepreneurs are not going to be able to make it work.”

One problem the minimum wage issue fails to address is income inequality and the shrinking middle class, he said. For example, a higher wage isn’t the same as lifting people up into higher-paying jobs through training and education.

“Until you’re able to step aside from the politics and think about it holistically, it’s really difficult to get good answers,” he said. “It’s not a one-size-fits-all kind of thing.”

Right. Training and education expand opportunity for everyone. The elevated wage risks reducing opportunities for young workers hoping to gain the skills and experience that will be careers and expand prosperity.

 
 

Seattle: High minimum wage & fastest growing high-end incomes

Seattle heads the list for cities with the fastest growth in high-end incomes in this Brooking analysis of income inequality.

Growth in High end income

As we noted yesterday, poverty ≠ inequality. Still, the Brooking study adds some important information to understanding urban income trends, information that may be useful to policy makers. 

Across the 50 largest cities, households in the 95th percentile of income earned 11.6 times as much as households at the 20th percentile, a considerably wider margin than the national average ratio of 9.3. This difference reflects the fact that in big cities the rich have higher incomes, and the poor lower incomes, than their counterparts nationally. From 2012 to 2013, the inequality ratio widened in both cities and the nation overall, as incomes at the top grew somewhat faster than incomes at the bottom.

That growth in high-end incomes has fueled the urban momentum for minimum wage hikes.

These findings confirm that income inequality remains a salient issue in many big cities today. Moreover, they lend support to the concern that rising incomes at the top of the distribution are not—at least in the short term—lifting earnings near the bottom, even in local markets.

Since the debate over the $15/hour minimum wage started in Seattle in late 2013, many other cities—including Chicago, Los Angeles, New York, and San Francisco—are considering or have enacted increases to the minimum wage locally.

Businesses, responding to market signals, are also acting on their own to boost the minimum wage

Brookings concludes.

While the minimum wage is a potentially important means for helping low-earner households living in high-cost places, local policymakers should not ignore the other tools they have at hand—from education to economic development to housing and zoning policies—that are essential for improving social mobility and sustaining income diversity in big cities today.

That “potentially important” should not be overlooked. Seattle’s $15 adventure will be getting plenty of analysis, along with plenty of litigation.

In the Opportunity Washington research plan, we reported:

Research is mixed on the effects of incremental increases in the minimum wage, but large increases are clearly associated with declining job opportunities for the young and unskilled. The stakes are also high for small businesses. Economist Gary Burtless, with the Brookings Institution, notes, “The risk of a big minimum-wage hike at the city level is that the city’s low-wage employers will be harmed in their competition with out-of-town businesses that sell the same products or services.”

Washington employers and residents alike place a high priority on the equitable compensation and protection of those in the workforce. Policymakers must carefully consider wage and benefits mandates and system to ensure that such protection are maintained in a cost-effective manner so that employers can create more job opportunities for Washington citizens.

Expanding opportunity – including the opportunity to advance beyond minimum wage employment – should continue to be policymakers’ highest priority.

Votes expected soon on labor policy legislation: Sharp divide between chambers

The Associated Press has a good rundown on a number of labor policy issues expected to come to floor votes this week, including minimum wage, workers’ compensation, and paid sick leave. Unsurprisingly, the two chambers have sharply divided views on the proposals.

In the Democratic-controlled House, bills with strong enough backing to make passage seem likely include bills to raise the state’s minimum wage to $12 an hour, guarantee a minimum amount of sick leave and forbid retaliation over complaints of owed wages. Across the Rotunda in the Senate, a coalition of mostly Republicans holds power and has passed out of committee bills that would aid challenges to labor unions, restructure workers’ compensation and create a tier of legal wages for teenagers below the state’s official minimum hourly pay.

So far, leaders on each side have spoken as if they are unwilling to bend to the proposals being considered by the other, which creates the possibility the opposing ideologies in play could mostly cancel out.

The article includes comments from Opportunity Washington partner, AWB.

“If they want to see anything come out of the other side, they’re going to have to work to compromise on common ground on some things,” said Bob Battles, general counsel and government affairs director for the Association of Washington Business.

…”You continue to put costs on top of small business owners, and eventually the small businesses can’t continue to survive,” Battles said. “We’re going to push our small business folks out of the market. They operate on such tight margins already.”

The Washington Research Council recently published a policy brief, The Long-Lasting, Negative Consequences of the Minimum Wage, reviewing the economic literature on minimum wage increases. (Also discussed in this WRC podcast.)
 
In our research report, Opportunity Washington reviewed the importance of enacting and maintaining policies that stimulate private sector investment and job creation. With respect to workers compensation, we noted:
Similarly, the state has consistently had the highest workers’ compensation benefit costs in the country. In 2012, the most recent year for which data are available, benefit costs averaged $840 per covered worker, nearly twice the U.S. average of $434.9.
We suggested reforms in voluntary settlements and the definitions of occupational disease as ways to improve outcomes for workers and control costs.
 
And, regarding the minimum wage and paid sick leave, 
Washington employers and residents alike place a high priority on the equitable compensation and protection of those in the workforce. Policymakers must carefully consider wage and benefits mandates and system to ensure that such protection are maintained in a cost-effective manner so that employers can create more job opportunities for Washington citizens.
As Battles points out, there may be common ground on some of these issues. The first priority, however, must be to nurture policies that expand opportunity and prosperity. 

Maximizing minimum wage, minimizing opportunity? For some, yes.

Efforts continue in the Legislature to increase the Washington state minimum wage, currently the highest minimum in the nation. Mike Rowe, the popular host of Dirty Jobs, recently posted on one of the unacknowledged effects of boosting the minimum wage. He was reflecting on his early teenage job at a movie theater. 

I thought about all this last month when I saw “Boyhood” at a theater in San Francisco. I bought the tickets from a machine that took my credit card and spit out a piece of paper with a bar code on it. I walked inside, and fed the paper into another machine, which beeped twice, welcomed me in mechanical voice, and lowered a steel bar that let me into the lobby. No usher, no cashier. I found the concession stand and bought a bushel of popcorn from another machine, and a gallon of Diet Coke that I poured myself. On the way out, I saw an actual employee, who turned out to be the manager. I asked him how much a projectionist was making these days, and he just laughed.

“There’s no such position,” he said. I just put the film in the slot myself and press a button. Easy breezy.”

He concludes:

From the business owners I’ve talked to, it seems clear that companies are responding to rising labor costs by embracing automation faster than ever. That’s eliminating thousands of low-paying, unskilled, entry level positions.

Anecdotal? Sure, but the Washington Research Council has just published a policy brief and podcast taking a more academic look at the data. The brief has a lot of good information, which lawmakers and advocates may want to evaluate as they consider policies that may have the unintended consequence of foreclosing opportunities for those most in need of the chance to get ahead.

Increases in the minimum wage are a tradeoff. Some gain, but many lose. Those who keep their jobs and their hours benefit. But those employees who lose their jobs or have their hours reduced lose out. Research shows that the negative impacts on individuals and businesses are real and long-lasting.

Make sure the policies are tailored to the objective. It’s not as easy as it looks.

For an interesting look at the other end of the wage curve, consider this: Americans have a 1 in 9 chance of making it into the 1 percent – staying there is the problem.

Legislature considers minimum wage, paid sick leave; business groups voice concern

Tuesday the Tacoma City Council passed a paid sick leave ordinance, which will go into effect in February 2016. The cities of SeaTac and Seattle have previously passed paid sick and safe leave ordinance, by initiative and council vote respectively. In Olympia, the House Labor Committee is considering a similar statewide measure:

Under House Bill 1356, employers with more than four full-time or equivalent employees would be required to grant paid sick leave to employees for medical reasons involving themselves or family members.

Additionally, the bill would require employers to grant safe leave for employees who are at threat of domestic violence, sexual assault and stalking, or in times when their workplaces or children’s schools have been closed for public health concerns.

The House committee also is considering a bill to raise the state minimum wage to $12 an hour, generating concerns from affected employers.
Representatives of grocery stores, restaurants and farms told the House Labor Committee they would lose customers if they raised their rates or prices to pay higher wages.
Others argued the proposal didn’t go far enough. (Another bill has been introduced to require triple pay for working on Thanksgiving.)
 
In our online research report, Opportunity Washington considered the effects of state and local measures to set employment policies.
In terms of wage and benefit policies, Washington has long had the nation’s highest statewide minimum wage. That has now been exceeded in multiple jurisdictions as local governments have adopted their own wage and benefit laws…
Research is mixed on the effects of incremental increases in the minimum wage,101 but large increases are clearly associated with declining job opportunities for the young and unskilled. 
We urge a focus on policies that encourage job creation and provide increased opportunities.
Washington employers and residents alike place a high priority on the equitable compensation and protection of those in the workforce. Policymakers must carefully consider wage and benefits mandates and system to ensure that such protection are maintained in a cost-effective manner so that employers can create more job opportunities for Washington citizens.