Seattle’s New Minimum Wage – Like It? Follow It!
Seattle is once again leading the way on issues designed to improve employee work life! Two years ago, Seattle Sick and Safe required employers to provide employees with up to 9 days a year of paid time off for personal or family health or abuse issues. This June, the Seattle City Council voted to move forward with the plan to increase the minimum wage for Seattle employees to $15/hr.
The implementation of the new minimum wage will be phased in. In April of next year, minimum pay rates will increase from $9.32/hr. to either $10 or $11/hr. depending on whether you are (or work for) a large or small employer (differentiated by more or less than 500 employees). By January of 2017, all large Seattle employers must meet the $15/hr. minimum wage, unless they offer healthcare benefits, in which case they can delay the $15/hr. pay minimum until the following year. Small employers (less than 500 workers) have until January 2021 to meet the new minimum wage standard.
In charted format, here’s an overview of Seattle’s phase in plan:
While most of the questions about the short and long term impact of minimum wage adjustments are unknown, critics of Seattle’s $7/hr. minimum wage increase continue to make the case that the actual economic impact of the wage adjustment will actually hurt the very employee populations the mandates are targeted to help. They argue that as increased wages kick in, pay gains will be offset by increased costs of goods and services. Or put another way, while improving “acceptable pay,” the underlying issues of affordable city living and the declining skillsets of US workers largely go unaddressed. They also worry about the employer’s changed motivation to fuel job creation or hiring in all areas directly (or indirectly) impacted by increases in minimum pay rates.
As employees start to enjoy the benefits of more pay and purchasing power, the longer term impact on job availability and security may end up being the price paid. Both employers and employees will need to wait – to see!
Anticipating impact to my own industry, staffing, I see both positives and negatives. While overtime opportunities for core employees will likely be reduced if not eliminated, there will be an offsetting need for more flexible or cyclically scheduled employees – a positive. But for those segments of the temporary help industries that employ large numbers of low skilled, low cost, entry level workers, and the landscape could be quite different. With both “temps” and “core workers” now being paid the same, some of the cost containment advantages of using unskilled “temporary employees” for beginning/entry level roles will go away, changing the hiring patterns of staffing industry customers.
As for the predicted job loss, we’ve already heard the stories of Seattle based companies who are moving their facilities out of the costly Seattle corridor. In some cases we see companies relocating themselves into more rural communities, away from the influence of Seattle’s wage and benefit mandates.
Some of these moves are a matter of survival. Companies who compete directly with third world labor pools are always impacted by changes in mandated pay and benefit programs.
There is no question that the staffing (recruiting and retention) strategies of both Seattle employers and employees located in nearby employment communities, will change. Whether you are a large or small employer, located in Seattle or Bothell, you are competing for employees from the same labor pools. Pay and benefit plans must remain competitive.
Unfortunately it will be increasingly difficult for employers to find a safe haven from the influence of government pay and benefit mandates. With all the good intentions of making living in their city “affordable” or to ensure “compassionate” treatment of employees in need, many city councils in and outside the state of Washington are looking closely at similar wage and benefit adjustments. With Seattle just unseating San Francisco as city with the highest minimum wage in the nation – other cities, including San Francisco, are not far behind.
And if the cities aren’t budging, chances are the states will. Massachusetts set an $11/hr. minimum wage to kick in 2015. Earlier this year, Minnesota raised its guaranteed wage by over $3/hr. California, Connecticut and Maryland have all passed laws increasing their respective wages to $10 or more in coming years.
As for federal level influence on minimum wage, the Obama administration has been a serious advocate of raising the minimum wage since 2008 when they inherited a $7.25/hr. minimum wage. Lacking congressional support for federal level minimum wage increases, President Obama recently used an Executive Order to increase minimum pay to slightly over $10/hr. for federal contractors – a gesture with primarily symbolic impact.
Neither Canada, Germany, Mexico nor China have national minimum wage programs, preferring instead to let local governments set pay in line with local costs of living that can vary dramatically. To date Australia has the highest global minimum wage of $16.88/hr. Compare that with China, where typical minimum wage mandates hover around a U.S. equivalent of less than a dollar an hour.
One thing is sure – the real impact of Seattle’s minimum wage mandates will be revealed over time. Never in the history of either State or local mandates have minimum wage increases approached the level being put in place over the next 3 years.