Minimum wage in Washington state

Minimum wage in Washington state https://wahospitality.org/wp-content/uploads/2010/12/minwage120910main.jpg

By Stephanie Davenport, contributing editor

Even before Seattle passed a $15 minimum wage, Washington already had the highest statewide minimum wage in the nation. We still do. Local restaurant owners are proud of this fact. If someone asks owners about their employees, you’ll hear about treating workers with respect and concern; like family. Many local restaurants not only pay the higher minimum wage, but also offer non-wage benefits. We are a progressive state.

Another surprising detail: The recent push for $15 per hour is actually the result of millions of dollars spent by unions, not because of true dissatisfaction of restaurant workers. In a 2013 survey of 5,100 current and former restaurant industry workers, 88 percent of employees said they are proud to work in the restaurant industry. Another 84 percent believe a job in the restaurant industry is a good one to have. And more than eight in 10 respondents believe restaurants provide opportunities for people to succeed based on their own hard work.

Most of America won’t perceive this, however. The recent trend is to see photos of fast food worker strikes on the news and think restaurant employees decided to picket all alone. In truth, strikes, in Washington, are being organized by the Service Employees International Union (SEIU) and unelected worker centers that are desperate to attract new members. The passage of the $15 per hour minimum wage, in Seattle, was their primary agenda, and they succeeded in passing a policy almost overnight that will impact thousands of people.

With the institution of the new wage standards, Seattle joins the ranks of the highest paid minimum wage employees worldwide. The new minimum wage could directly affect a quarter of Seattle’s workforce by the time it phases-in over the next seven years. Economics literature suggests that moderate increases in the minimum wage help workers. However, considering that a $15 minimum is a 64 percent hike – more than twice the federal $7.25 minimum wage – the effects might well be different. Some restaurants may cut jobs. Others simply might not choose to open or expand in Seattle. Others could try to find ways to automate jobs. Seattle has made itself the testing ground, and the results have yet to be seen.

History

The first big debate over minimum wage in Washington was in 1998. Prior to that, the minimum wage had increased once via ballot Initiative 518, and most felt the raise was clearly needed since the state was lagging behind the federal minimum. Additionally, I-518 included a tip credit.

However, in 1998, Initiative 688 passed and changed the state’s minimum wage forever. At that point, Washington’s minimum wage and the federal standards were the same. I-688 made Washington the first state to index minimum wage to inflation. From this point on, it increased annually. Washington soon had the highest statewide minimum wage in the nation. When I-688 passed, much like now, restaurateurs were concerned about what this would mean for their businesses. Labor costs are always one of the top expenses for a local restaurant.

Our industry is resourceful. Business owners made adjustments to menu prices, hiring, hours of operation, insurance and some took loans. By-and-large, the state’s restaurants survived. However, today there are three fewer people working at every restaurant than the rest of the nation, and unemployment, in Washington, grew steadily.

Additionally, restaurant profit margins dropped. Today the average annual profit a restaurant owner sees is $29,713. An average full-service restaurant owner, in Washington, will net around 4 percent, and quick-service nets about 7 percent. With the debt load to operate a business, this margin puts many local restaurants on thin ice.

Restaurants would continue on this path until 2014. Concurrently, union membership was steadily declining nationally. Union members were also diminishing in Washington – a state that was once a union stronghold. In the 1990s, union membership was around 23 percent. By 2000, it was below 18 percent. This caused a panic for union organizers, especially at SEIU, the largest union in Washington. The union found success in gaining more members and media attention during a 2012 orchestrated walkout in New York City. By 2013, according to SEIU’s own data, it had spent more than $38 million to organize around the minimum wage issue.

2014 and the “new” minimum wage

The first strike for organized labor and its million dollar investment came in SeaTac. In November 2013, unions pushed and solicited signatures for months in order to get a minimum wage proposition on the ballot. The law narrowly passed by only 77 votes out of an entire city of nearly 8,000 people. Along with setting the $15 minimum wage, the SeaTac law included the kind of employer mandates championed by organized labor. It also allowed for those mandates to be waived in a collective bargaining contract, possibly giving companies an incentive to enter into one.

The WRA and other business groups challenged the legality of the proposition, partially winning the case. The King County Superior Court ruled that the city of SeaTac does not have the authority to set workplace rules within Seattle-Tacoma International Airport because the aviation hub is owned by the Port of Seattle, a separate government entity.

Businesses within the airport were cut out of the proposition. Supporters, however, appealed the ruling. Before the Supreme Court issued a decision, the Port of Seattle agreed to a resolution. The resolution increases the minimum wage to $11.22 per hour, in 2015, and $13.00 per hour by 2017. The resolution also includes total compensation in the calculation, meaning tips, bonuses and credits for employer contributions to health benefits, retirement plans or education are counted as salary.

Following the SeaTac proposition, the Legislature reconvened and Rep. Jessyn Farrell, D-Seattle, introduced a bill to increase the minimum wage to $12 per hour statewide over a three year period. The measure did not pass. While most business groups were opposed to the legislation, some speculate the unions also didn’t want the bill to pass. Unions, SEIU in particular, have realized greater success by passing new wage laws on a city-by-city basis than at the statewide level. Passage of wage laws at the local level creates a confusing patchwork of different requirements for employers, preventing representation for business on a level that competes with union’s millions.

The final step, thus far, was in Seattle. Unions considered a ballot measure, but found a quicker path to success with local legislators. Kshama Sawant, a socialist political activist turned candidate, announced her Seattle City Council run in March 2013. Her platform was based around the $15 per hour minimum wage. Eager to win, both candidates in Seattle’s hotly contested mayoral race jumped on board. By October, fast-food strikes, SeaTac’s $15 initiative and the insurgent Sawant campaign dominated local political headlines.

Former State Sen. Ed Murray won the race for Seattle mayor by 56 percent of the vote, and quickly began moving the minimum wage agenda forward. In December 2013, he created the “Income Inequality Advisory Committee” (IIAC), appointing David Rolf, president of SEIU, and Howard Wright, of the Seattle Hospitality Group, as co-chairs.

In April 2014, the IIAC delivered recommendations to the mayor. Less than a month later, Mayor Murray announced a proposal for a $15 per hour for minimum wage. The WRA worked with the IIAC and the mayor to ensure that restaurants were considered in the final recommendations. Much of what local restaurants asked for was not included. However, like the Port of Seattle resolution, the Seattle plan uses a phased-in approach and inclusion of total compensation in the wage calculation.

The mayor sent his proposal the City Council. Within weeks, the proposal was passed unanimously as a city ordinance.

The national perception

In addition to the unique set of circumstances in Seattle, minimum wage has become a focus statewide. National feelings about minimum wage have contributed greatly to support for the changes in Seattle. When President Obama spoke this past Labor Day, he said, “All across the country right now there’s a national movement going on made up of fast-food workers organizing to lift wages…”

The millions invested by SEIU are working. A large part of its success also comes from the economy. Despite the fact that we are slowly pulling out of a recession, most people feel their personal economic situation has not improved. This leads to viewing others in the same light. Therefore, most Americans believe income inequality is real.

In 2013, the WRA initiated an extensive research program in partnership with the California Restaurant Association, National Restaurant Association, Association of Washington Business and Washington Roundtable. The findings revealed:

  • More than half of voters do not feel they are “getting ahead” economically.
  • More than 60 percent of participants support a hike in the federal minimum wage to $10.10 per hour.
  • Most respondents felt large companies make profits at the expense of workers.
  • More than 70 percent of participants believe higher wages lead to more economic activity.

Another interesting result of the survey is that 59 percent of participants believe $15 per hour is too high for the minimum wage; however, nationally, people are concerned that the federal minimum wage isn’t keeping up with economic needs.

The view in Seattle, while impacted by public support of minimum wage increases, is still radically different than the views outside of the city.

Current work in Seattle

Although the Seattle ordinance will go into effect on April 1, 2015, the finer details of the law have yet to be smoothed out, and will be done so in a minimum wage rulemaking process expected to begin in early October.

During the rulemaking process, many parts of the new law that are vague, unclear or, in some way, need further definition will be discussed, clarified and decided upon. Through constant contact with the mayor’s office and key individuals in various city agencies, the WRA has made it clear that restaurants and other members of the hospitality industry must be represented during the process.

Shortly after the Seattle City Council and mayor’s office passed Seattle’s new minimum wage law the “Labor Standards Advisory Group” (LSAG) was formed to discuss and debate strategies for the city to do effective education, outreach, technical assistance and enforcement of all current city labor laws. In addition to minimum wage, the group examined mandatory sick leave, criminal background checks and wage theft. The Seattle Restaurant Alliance and Seattle Hotel Association have a representative on this group. The WRA strongly supports the participation of these hospitality groups and their work as the voice of restaurants on this issue.

After two months, LSAG concluded its work and forwarded a set of recommendations to the mayor and Council. These recommendations came from a three month grueling debate and discussion between employer and labor organization representatives.

LSAG’s recommendations are as follows:

Create a “one stop shop” within Seattle for employers and employees to have access to education, outreach, technical assistance and help with compliance as needed.

Education and outreach should be carried out in a manner that reaches the largest number of people in Seattle (in person, website, phone, etc.) and gives extra emphasis on women and minority-owned businesses as well as employers and employees for whom English is a second language.

If the city considers creating community partners through contracts to do education and outreach, those partners must be thoroughly vetted and, if chosen, held to high standards of integrity throughout the life of the contract. These contracts’ focus should primarily be to partner with groups within various ethnic communities who can reach employers and employees of those ethnicities in ways the city cannot or struggles to do so.

Enforcement is important. Note: Beyond this general statement, our two caucuses could not agree on a variety of the details of this recommendation. Instead, two different approaches were submitted on how Seattle should enforce its labor laws.

What’s next?

Undoubtedly, organized labor and other progressive groups will continue to pursue increases in the minimum wage in cities and other local governments.

Beyond minimum wage

Of equal concern, however, is the ongoing pressure on local governments to enact labor and benefit policies unique to their communities. For example, policies requiring paid sick leave have been adopted in Seattle and SeaTac, and are currently under discussion in other cities around the state. These policies commonly have differing standards, making it very difficult for employers that work in, or serve, multiple cities to comply.

Beyond paid sick leave, San Francisco is considering policies that would severely limit the ability of employers to hire part-time employees – instead, the city is considering requiring employers to hire full-time employees even if their workflow is better suited for a part-time workforce.

Accordingly, while the minimum wage is of grave concern, the WRA is equally concerned over the challenges that would be faced by all businesses in the state under a patchwork of city-by-city wage and benefit laws.

Washington is not alone. Cities around the country and even some states are seeing unions work to push ballot initiatives and local ordinances to increase the minimum wage and require additional employer paid benefits.

The WRA is working to find restaurateurs that can talk to their local governments and with their local media about how the minimum wage will impact their businesses.

 

Legislative action

Soon, the state Legislature will reconvene and is likely to consider bills that would increase the minimum wage across the state and resurrect mandated employer paid sick leave from last session. Also anticipated: Unions will come forward with additional proposals to limit the use of part time workforces. The WRA will continue its work with members of the Legislature to find a compromise and statewide solution that values the differences of each community in the state while taking into account the cost of living.

 

Ballot initiatives

The 2016 general election seems distant, but the WRA would not be surprised if the labor unions are planning to pursue an initiative to the voters on the minimum wage and/or adding specific benefits. The ideas have widespread appeal, and, if they appear on the ballot, would lead to increased turnout of voters inclined to support those causes.

 

Looking forward

The WRA is exploring a number of options to address and protect our members interests. In doing so, we ask you to consider these questions and send us your thoughts and comments.

 

Should the state consider enacting a comprehensive wage and benefit policy, and “pre-empt” the ability of local governments to enact city-by-city policies on these issues? It’s a difficult question. Voters and lawmakers historically have been reluctant to limit the authority of local officials. However, with the prospect of city-by-city regulation of wage and benefits across the state, it may be time to have a serious debate on a statewide policy. This is also a challenging prospect for small and large business to consider – it could entail compromise. The WRA believes an open dialogue should be pursued. What do you think?

 

The ordinance adopted by Seattle includes some important policies favored by the hospitality sector. But the ordinance contains a number of major problems including the differential treatment of large vs. small businesses and the phase-out of recognizing total compensation. The WRA will continue working to organize hotels and restaurants in Seattle.

 

The WRA regularly communicates with elected officials, the media and other stakeholders on the impact of the ordinance. Furthermore, we will continue to work in person with the Seattle City Council and the mayor’s office on future changes to the ordinance. The WRA has not ruled out seeking amendments to the ordinance over the next three to seven years.

 

In another interesting turn of events, in 2015, all the Seattle City Council members will elected by district instead of city-wide. This election creates a unique opportunity to educate, engage in the election process and communicate the needs of the hospitality sector leading up to the 2015 elections.

 

You can help

The WRA is looking to create groups of ambassadors who are willing to tell their stories. It is a critical time for restaurants to start a dialogue their local officials, the media and legislators. The importance of local owned business owners communicating with elected officials and the media cannot be emphasized enough. The unions have very compelling messages in support of raising the minimum wage and increasing benefits for workers that have led to oversimplified and hastily implemented policies that could have severe impacts for many. The best way to combat this is for locally owned businesses to communicate:

 

How they help move people upward by providing training and career opportunities.

How they contribute to the local economy and fabric of the community.

That workers in restaurants are treated fairly.

That locally owned small businesses need support to thrive and grow.

 

The WRA will work with our members across the state to train, mentor and prepare them to communicate. Please let us know if you are willing to be a spokesperson for your business and part of a coalition of other WRA members affected by wage hikes. If you are interested in being involved please contact us at (360) 956-7279, ext. 110, or email stephanied@warestaurant.org.

(Source: Washington Restaurant Magazine, October 2014)

 

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