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The Grand Experiment

March 25, 2015

On April 1st, Seattle’s new minimum wage begins phasing in. Big businesses have to reach $15 an hour by 2018. Small businesses have until 2021. There is still an ongoing debate about what the 60 percent increase will mean for the city’s businesses. But the question of whether the $15 an hour minimum wage is good or bad for the economy might be settled soon.

When Mayor Murray signed the city’s new $15 an hour minimum wage law, he quoted President Franklin Delano Roosevelt. Speaking during the height of the Great Depression, Roosevelt said, “The country demands bold, persistent experimentation. It is common sense to take a method and try it: If it fails, admit it frankly and try another. But above all, try something.”

In many ways, Seattle’s new law is a bold experiment. No city has ever attempted an across-the-board 60 percent wage increase before. And there are still unresolved questions about the possible costs and benefits.

What Are The Benefits?

The wage increase is meant to help people like 20-year old Angie Garcia. She’s a single mother who works at McDonalds, making $9.60 an hour. Garcia lives with her parents, and when she goes to work at 5am, she leaves her child with her mother.

20 year-old Angie Garcia with her infant daughter. Garcia earns $9.60 an hour working at McDonalds. She is looking forward to a raise so she can start giving money to her mother, who cares for her baby while she works.

“It’s not easy, and I feel bad because I can’t pay her. She understands. But yeah, I feel better if I can pay her a little bit,” Garcia said. But with the minimum wage set to rise in April, Garcia is hoping to pay her mother, maybe even save enough to go back to school. She hopes one day to become a child psychologist. “It’s going to change everything, it’s going to help a lot. A really, really big help,” she said.

Supporters of the new law argue that when low-wage workers get a raise, they tend not to put that money in the bank. Instead, they spend it. “Because your income is so small, when you get a slight increase in wages, you tend to do things you wouldn’t do,” said Socialist City Councilmember Kshama Sawant, one of the people who spearheaded the minimum wage movement in the city. Minimum wage workers would “buy better groceries, probably take your family out for a dinner, take your kids out for ice cream, buy your daughter some books,” she said. And in that view, raising the minimum wage should actually boost local businesses.

“Money in people’s pockets means people are spending money. I think it will stimulate the business climate, and there is some data to indicate that is true around the country for states and cities with a higher minimum wage,” said Mayor Ed Murray.

What Are The Costs?

Not everyone buys that theory. Peter Nickerson is an economist and former Seattle University professor. “Nationally there is a lot of thought that this is a really whimsical idea, going to $15, you don’t see a lot of places saying let’s go to $15,” he said. The 60 percent increase is unprecedented for a city, Nickerson said. It will add more than $10,000 a year to the cost of employing each minimum wage worker, which will undoubtedly hurt many small businesses and potentially bankrupt many small businesses.

Local Restaurant Coastal Cafe will likely have to shorten business hours and increase prices to compensate for the elevated minimum wage.

“I can’t sit here and say we are going to lose 4,000 jobs or 50,000 jobs. But you don’t have to stretch it too much to say we are going to lose 20,000 jobs. It’s possible,” Nickerson said. And that uncertainty makes many employers, especially small businesses, uneasy.

“I am not a cry wolf type of person, until this came up,” said Jeremy Hardy, owner of Coastal Kitchen and Mioposto Restaurants. Coastal Kitchen has been a fixture of the Capitol Hill neighborhood for 20 years. Like many small businesses in the city, the restaurant had a tough time surviving the recent recession. Hardy used his retirement money to keep it afloat. “So to get through that and your volumes are starting to come back, starting to make money again, and then, at that point, this $15 an hour thing comes up. I was really angry,” he said.

Hardy supports raising the minimum wage, but he considers $15 an hour too high. Now, Hardy is resigned to the new law, and is figuring out how to survive in an industry that already operates on tiny margins. In anticipation of the wage increase, he’s raised menu prices three percent, and expects he will raise them every year as the wage goes up. Although he likes to be accessible to the neighborhood, he has also trimmed the restaurant’s hours, opening one hour later and closing one hour earlier. He is also considering closing at some points during the day. “We are looking at hourly sales, they really have to show that the volume is there. So to just stay open because you want to stay open, it doesn’t really make sense,” Hardy said.

Jeremy Hardy, owner of Coastal Kitchen, a neighborhood restaurant on Capitol Hill in Seattle. Now that the $15 an hour minimum wage is phasing in, Hardy is trying to figure out how to cut costs.

Many restaurants are also considering adding a service charge to the bill, to more directly pass higher labor costs on to diners, he said. Hardy says he has no question that he and other veteran restaurateurs will survive this wage increase. The recession honed his business skills, and so he knows he will figure it out. But he worries about the rest of the industry, in particular the many restaurants that are just getting started.

“We’ll be fine, but gosh if this was 20 years ago for us, I don’t know,” he said.


Made possible in part by

Deborah Wang

Deborah Wang is host of IN Close, the weekly public affairs program on KCTS 9 that features in-depth stories from across the Pacific Northwest.

She is also a news and feature reporter for KUOW Public Radio in Seattle. She covers a range of subjects, but mainly focuses on politics.

Deborah is an award–winning radio and television journalist whose career spans close to three decades. A long–time network foreign correspondent, she has reported from close to two dozen countries, including China, Vietnam, Cambodia, India, Saudi Arabia, Somalia, Rwanda, Kuwait, and Iraq.

Deborah's first reporting job was at public radio station WFCR in Amherst, Massachusetts, where she filled just about every role at the station, from newscaster to reporter to show host to news director. In 1988, she transitioned from radio to public television, working as a reporter and fill-in host at “The Ten O’Clock News” on WGBH-TV in Boston. In 1990, Deborah went to work for National Public Radio, serving as NPR's Asia correspondent based in Hong Kong. In 1993, ABC News hired Deborah to be a television correspondent based in Beijing, where she covered, among other things, Hong Kong's handover from British to Chinese rule. In 1999, she set up the network's first news bureau in Seattle.

Deborah has also worked as a news anchor for CNN International, and as a fill-in host for the nationally syndicated public radio show “Here and Now.”

Deborah has won numerous awards for her reporting, including the Alfred I. DuPont Silver Baton for coverage of the first Gulf War, and the Overseas Press Club's Lowell Thomas Award for best radio documentary on Cambodia.

More stories by Deborah Wang

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Thanks so much for your wonderful programing and the service it provide to us in this region! Really appreciated your program on minimum wages. Right On! I was disappointed though, that when you were covering Central Co-op, you did not include the TRULY MARVELOUS FACT that not only is minimum wage $15, but employees all get insurance: Medical, Dental, and Visual!! This is important and extraordinary, even for an already extraordinary business.