by Raul Hernandez
When Seattle lawmakers committed to gradually raising the minimum wage to $15 per hour, Chase Gunther worried that his job prospects would suffer.
Working as a line cook in a Seattle restaurant, Gunther was hesitant at the idea that other restaurant employees working less skilled positions would end up with his same pay rate. After all, how could a busser earn the same as a cook?
“I didn’t know what was going to happen. I was originally the type of person that was against it,” said Gunther. “I thought, ‘I don’t want a dishwasher or someone working at McDonald’s making the same amount as me.’ But what ended up happening was that all our wages went up.”
Seattle’s food and beverage sector added a little over six and a half thousand jobs over the past 12 months, according to the U.S. Bureau of Labor Statistics. This has created a job market where businesses are bidding for good workers.
Source: Federal Reserve Bank of St. Louis and U.S. Bureau of Labor Statistics
The city’s minimum wage ordinance, which took effect in April of last year, was criticized for placing too much of a burden on businesses. Critics said that it would devastate the local economy as employers struggled to cope with rising payrolls.
While there are still questions as to whether the cost of the wage hike will be passed along to customers or if it will accomplish the goal of lifting families out of poverty, more than a year after starting to raise it’s minimum wage, Seattle’s restaurant business is booming.
“Everywhere I look there are new restaurants popping up,” said Gunther. “I just see old, dilapidated building turning into new restaurants. There aren’t enough line cooks to fill all the positions.”
It is still too early to officially declare the minimum wage hike a boon for business, as there are still several more increases scheduled for the coming years in order to reach the $15 mark. But for now, business is good.
Nationally, the food service industry is of particular importance to the minimum wage conversation. In 2013, more than 1.5 million low-wage workers were employed in “food preparation and serving related occupations,” according to a Pew Research Center study. The next closest group was “sales and related occupations” with 477,000 workers.
Since the minimum wage was raised, not only has Seattle’s restaurant sector seen a spike in hiring, there are also signs of a more motivated workforce.
Nicole Vallestero Keenan was part of the team that crafted Seattle’s minimum wage legislation. As a member of the Income Inequality Committee formed by the Mayor, she believed that the jump to a $15 minimum wage could be a great motivator for unemployed workers and strengthen the local economy at the same time.
“It’s the difference of being able to buy that new mattress you needed, or take your kids out to a movie every now and then, or being able to quit that second job and just have one main job,” said Keenan. “We need everyone to be able to participate in our economy in order to have strong economy.”
Source: U.S. Bureau of Labor Statistics
Hidden beneath a rising unemployment rate – 5.1 percent, same as the national average – is a fast growing labor force. Seattle’s labor force has exceeded two million for the first time ever, according to the Bureau of Labor Statistics, which tracks labor force participation in the Seattle–Tacoma–Bellevue metropolitan area.
The heavy spike at the end of the graph indicates that many potential workers who were not actively seeking employment have now decided that it would be worthwhile to begin finding a job.
The spike also coincides with the passing of the minimum wage legislation by the state legislature. While this is not proof of causation, the link is hard to ignore.
But as Seattle’s restaurants have adapted to the new normal, there have been some growing pains. While low-wage workers are benefiting from their increased earnings, many businesses are left to figure out how to accommodate their rising payrolls.
Some businesses have opted to pass the burden on to their customers. Several chain restaurants have reportedly raised their prices already. It used to cost one dollar for a soda at a local McDonald’s in Seattle. Now that same soda costs $1.59.
Erin Shannon, Director of the Center for Small Business at the Washington Policy Center, sees this pattern not only among large chains, but also among smaller restaurants that are getting their first taste of an increased minimum wage this year.
“Within the restaurant industry in Seattle, prices have increased nine percent from a year ago,” said Shannon. “Restaurants are also eliminating tipping for servers and instead implementing a universal service charge which they then distribute to all of the workers.”
But even with all these adjustments, it seems that business in Seattle’s food and beverage industry is still strong and getting stronger.
Of course, this increase in employment gives no indication of what types of workers these businesses are hiring. And with the a primary goal of the minimum wage increase being to lift people and families out of the financial basement, it’s important that these jobs go to unskilled workers.
Unfortunately, that does not seem to be the case.
“Business owners are saying that they can no longer hire young, unskilled workers because they simply can’t afford it,” said Shannon. “If they are going to pay that high of a wage, they are going to pay someone who already has the skills and experience that they need to do that job.”
Nationally, this seems to be a persistent question regarding the minimum wage: Will it actually bring families out of poverty?
David Neumark, a resident economist for the Federal Reserve Bank of San Francisco, explores this topic in depth, writing several “economic letters” for the FRBSF.
“The ineffective targeting of low-income families does not imply that higher minimum wages do not, on net, help the poor,” writes Neumark. “Instead, the implication is that, for every dollar of benefit to poor families, there is also a large benefit to nonpoor families.”
In 2014, one in seven people were living in poverty in Washington according to the Washington State Budget & Policy Center. If those are not the people being benefitted the most by the minimum wage increase, then perhaps there needs to be a reexamination of how the issue of poverty gets solved.
But for now, Seattle is showing the rest of the country that a gradual increase in the minimum wage does not spell automatic, economic doom.