If you believe Washington’s minimum wage is so high it already puts the state’s businesses at a disadvantage, you might be against Initiative 1433.
If you believe the current minimum wage of $9.47 an hour isn’t enough to live on and raising it to $13.50 by 2020 would help workers and boost the economy, you might support I-1433.
Whatever opinion you hold, you might be right, economists say. Any change in working conditions has costs and benefits for workers, businesses and the overall economy.
Raising the minimum wage incrementally can improve the economy by boosting some workers’ pay, said Grant Forsyth, chief economist for Avista Corp. Raising it quickly can hurt businesses and prompt them to cut their payrolls or their workers’ hours.
The kind of raises in I-1433 – to $11 an hour in 2017, $11.50 in 2018, $12 in 2019 and $13.50 in 2020 – is unprecedented, so it’s impossible to predict, either in the short term or five to 10 years down the road.
“The problem is, we don’t know,” Forsyth said. “It’s sort of uncharted territory.”
The minimum wage is most common in the service economy, and about 70 percent of the Spokane economy is a service economy. But that’s about the same percentage for Seattle, or for the nation as a whole, Forsyth said.
The service economy is not just fast-food restaurants and sales clerks – it covers the health care industry, and many professional jobs like lawyers and accountants – but food services and retail stores are among the places most likely to have employees who start at minimum wage and are below the $13.50 per hour floor for wages that would be required in four years.
Andy Dinnison, who owns Boo Radley’s gift shop and Atticus Coffee House in downtown Spokane, has a foot in both industries.
“Obviously, there’s a lot of people barely making ends meet. I’m a business person that tries to do right by my employees,” Dinnison said. But the increases proposed in I-1433 are larger than the cost-of-living adjustments made each year under current state law.
In the Spokane urban area, about 1 worker in 25 – or about 4 percent of the workforce – was paid minimum wage in 2014, the most recent year for state statistics. That’s roughly 5,400 workers, about half of them employed in restaurants, bars, hotels or motels or related businesses, said Doug Tweedy, a regional labor economist for the state Employment Security Department.
The retail and health services industries have most of the rest of the minimum wage jobs in Spokane, Tweedy said.
On a percentage basis, Spokane is slightly higher than the state, which has about 3 percent of its workforce making minimum wage. It was also significantly higher than Seattle, which had only about 1 percent of its workers making minimum wage in 2014.
At least some workers making minimum wage have mixed feelings on the proposal.
“It could be higher,” said John Heitman, 22, who recently landed a minimum-wage job at the new Denny’s restaurant on North Division Street. “But that would also make my taxes higher.”
“Everybody’s got to make their money somehow,” said Mark Sherman, a seasonal laborer. “So if businesses have to pay more for their workers, they’ll just raise their prices.”
Kailey Godfrey, a 17-year-old hostess at Scratch restaurant on West First Avenue, said businesses should pay higher wages if they’re able to. “It just depends on the business and if they’re hurting,” she said.
Predicting how an increase in the minimum wage would affect the economy is difficult because there are so many variables, Tweedy said.
Mike Lish, president of D. Lish’s Hamburgers on North Division, agreed it’s the size and pace of the increases that concern him. Shortly after the restaurant opened in 1998, minimum wage went to $6.50 from $5.70 an hour as a result of an initiative. It has gone up slightly less than $4 in 18 years. Under I-1433, it will go up about $4 in four years.
“I’m still trying to figure it out,” Lish said. Prices will go up to cover some of the cost, although small local restaurants may have to raise prices faster and higher than national chains. Some employees may have their hours cut.
“I could look at some positions that I would consider extra,” he said. That might include a person he hires at minimum wage as a “sign spinner” to draw passing motorists into the restaurant.
Lish usually hires someone recommended by the House of Charity, giving them a chance to “get on their feet.” One such employee did so well as a sign spinner he was brought inside and now is part of the regular crew. Lish said that if wages go up, he might replace the sign spinner with a robot.
Forsyth said automation can be a long-term effect of higher wages as businesses look to cut costs. Some national restaurant chains have reduced the need for waitstaff by putting computer tablets on tables to take orders.
While the cost of tablets can be high, Lish said his restaurant recently debuted an application for a cellphone that lets people send in their order. “We might be pushing that a lot,” he added.
Paul Fish, owner of Mountain Gear, said he favors a living wage, and doesn’t think $13.50 is unreasonable. But he isn’t fond of making this kind of change through an initiative, which can’t be revised. He would prefer it come through the Legislature, where it can be amended as people offer new ideas.
“I don’t know how I’ll vote on this one,” Fish said.
Lynda Peterson, the owner and manager of Dick’s Hamburgers and Frankie Doodle’s restaurant, said the current minimum wage is only for new employees, but most of her employees other than managers make less than $13.50. The majority also work more than 30 hours a week. That could change if wages go up.
“I probably will have to shut down the night shift at Frankie Doodle’s,” she said. “You know your prices will have to go up.”
I-1433 also requires most businesses to provide workers with an amount of paid sick leave that’s calculated on the amount they work. Raise Up Washington, the group sponsoring the initiative, says that while opponents claim the changes would hurt the economy, studies don’t bear that out. They point to a U.S. Department of Labor study indicating states that raised their minimum wages in 2014 had faster job growth than those that didn’t.
The University of Washington studied the early effects of a minimum wage increase in Seattle and found mixed results. Seattle passed an ordinance that raised its minimum wage from $9.47 to $11 on April 1, 2015. It will hit $15 an hour for large companies in 2017 and for smaller companies by 2021.
That study concluded it was difficult to separate the effects of the mandated wage hikes from the effects of the strong economy in that city. Workers at the bottom of the pay scale had larger paychecks, but most of that was a result of the economy. Businesses that rely on low-wage workers showed signs of cutting back but were benefiting from the strong economy, so they tended to add jobs at the same rate as businesses outside the city. Even so, their employees worked about one hour less per week, on average.
The benefits and costs of a minimum wage increase tend to work each other out in the short term, so Spokane probably won’t see drastic changes in the next year or two if I-1433 passes, Forsyth said. “Five or 10 years down the road, it could be dramatically different. But the problem is, we don’t know.”
Reporter Chad Sokol contributed to this report.
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