The new year means another wage hike for Seattle workers and some workers have finally hit the $15 goal of the phased-in plan. For 2017, employees of businesses with more than 500 workers who don’t pay toward medical benefits now must earn at least $15 per hour, a $2 raise from 2016. While most Capitol Hill small business owners don’t have to worry yet about a Starbucks-level minimum wage, they’re still navigating yet another year of raises in the city’s multi-year phase-in process.
“Our fear is pricing people out of the neighborhood,” Meinert said. “… We don’t want to keep raising prices, but we have to.”
While other large employers who put dollars toward their workers’ medical benefits will be paying $13.50 per hour, a $1 increase from 2016, workers at small businesses — those with 500 or fewer employees — are now guaranteed $13 per hour, up $1 from 2016. Employers will either hit that by paying $13 per hour or by paying $11 hourly and either at least $2 per hour toward medical benefits or ensuring their employees get at least $2 hourly in tips.
In a half hour, the minimum wage rises across the state. In Seattle, tens of thousands of workers reach $15/hour. Happy New Year! pic.twitter.com/NdXZdxVdSJ
— Working Washington (@workingwa) January 1, 2017
That tip credit toward the $15 wage is scheduled to end by 2025. A small number of Seattle restaurants have already moved away from tips to service charges in part because of the rising minimum wage.
Some restaurant owners such as David Meinert, who is part of the ownership at a large family of businesses including Lost Lake Cafe, Comet Tavern, Grim’s and Big Mario’s, have regrets about how Seattle’s wage hike is being phased in.
You can put Meinert in the camp with owners who think it ultimately would have been better if the city had gone immediately to $15, but with a “sensible tip credit” so restaurants wouldn’t have to add service charges.
Meinert said he knows of servers working in restaurants with service changes looking for work at tip places because they can earn more. Meinert said he has also had to cut hours for his employees to afford the increased wages — some are working two jobs now.
With the law in place, Meinert said he is moving forward with the increases as they come. Patrons can expect price increases on menu items again in 2017, although he said they didn’t seem to notice last year.
Rich Fox, co-owner of Rhein Haus and Poquitos, has increased prices as well. Because the 2017 wage increase is similar to the 2016 increase, Fox said changes this coming year will be similar to last year.
Fox said he’s not “pushing the envelope” on any items, so customers don’t notice the increases.
The biggest impact to prices Meinert predicts will come when the tip credit — that $2 difference for small business owners — goes away. Once employees are all at $15, Meinert said his establishments will move to a service charge.
Employees at Fox’s restaurants are also tipped.
“Our staff overwhelmingly does not want us to go to a service charge,” he said. “We’re going to manage the increases as best as we can without having to go to that.”
With some employers hitting the $15 mark in 2017, Fox said it’s likely small businesses will be watching to see how the larger employers adapt to determine what changes they will have to make in the coming years.
In 2015 all of chef Renee Erickson’s endeavors, including Capitol Hill’s trio — Bar Melusine, Bateau, and General Porpoise — made the transition from tips to service charges. The change, partner Jeremy Price said, was in part because of the minimum wage increase.
Before Seattle’s ordinance went into effect, they also brought employees up to $15 or higher.
“We didn’t have a ton of employees making less than $15 when the ordinance began its roll out, and we made the decision to bring everyone to $15, if not more,” Price told CHS.
So servers at any of Erickson’s establishments, for instance, earn $15.50 plus the service charge. The company also offers health benefits and 401k plans.
Even if the minimum wage wasn’t increasing, Price said the restaurants would have made the transition to service charges eventually. The main driver behind the decision was creation of a workplace that attracts the best employees to make the best food and drink.
Cities and towns and states have stepped up and raised the minimum wage to $15. It’s about time that Congress does the same for all workers.
— Bernie Sanders (@BernieSanders) December 31, 2016
Researchers from the University of Washington released an early analysis of the impact of Seattle’s gradual march to a universal $15 minimum wage in April 2016. The report — the first in a series of several commissioned by the council in tandem with their passing of the original wage hike ordinance — showed that, aside from a roughly 7% price increase in Seattle’s restaurant industry, there hasn’t been runaway cross-industry price inflation like some critics predicted.
The report surveyed 567 Seattle businesses — the majority had less than 500 employees, the city’s definition of ‘small business’ — and 55 employees between the months of January 2015 and May 2015. During that period, the ordinance raised hourly wages to eleven dollars for non-tipped workers and ten for those receiving tips or medical benefits. And while the report didn’t find substantial price inflation (a look at grocery store, gasoline, and retail prices showed no noticeable increase), in addition to the recorded uptick in restaurant prices, a majority of employers surveyed said that they have or plan to raise their prices in order to accommodate the new labor costs.
While Seattle is blazing a trail to a $15 minimum wage, in November, Washington voters approved to incrementally increase the minimum wage across the state to $13.50. On January 1st the wage increased from $9.47 to $11.
In 2018, the state wage will increase to $11.50 and employers will also be required to provide paid sick time. In 2019 the minimum wage will be $12, and it will reach its $13.50 goal in 2020.
At a forum on state initiatives ahead of the election, Teresa Mosqueda, political and strategic campaign director with the Washington State Labor Council, said a study of the six largest cities in the state showed a wage boost is needed. The study used 2014 data found the average wage required to support one person was about $13.61.
Along with Seattle, Tacoma and SeaTac have hiked their minimum wages. The local rates will apply as long as they are higher than the state’s wage.
To be fair, your point that critics predicted runa at price increases is untrue. Most business people in Seattle supported raising the minimum wage, as long as it was phased in and accounted for total compensation with a tip credit. The Seattle law does this, so we aren’t seeing steep price increases. If we would have gone to $15 immediately with no tip credit, critics predicted a 20% price increase at restaurants, which sit turns out, might be low since in the first year of a 5 year phase in, there was a 7% increase. Which is very substantial given the overall inflation rate is under 2%
It was inevitable that this legislation, which is extremely complicated and must be a nightmare for business owners to comply with, would have some negative consequences, and Dave Meinert’s comments confirm this….price increases, loss of employees, decreased hours. It’s not all roses.
Sort of like Obamacare in that sense? Not perfect but better than doing nothing. “Perfect is the enemy of good”.
Data would be citywide changes in hours, employment, etc. If other businesses are doing fine, well… not specific to Meinert, but as we’ve seen with other exits from the Hill, the $15 minimum wage is a nice boogyman for businesses that could be struggling for reasons that may or may not be related to wage-related costs, or their owners are using it as a nice opportunity to raise prices and maintain or increase profits. It used to be higher rent that was the problem. Or was it construction? Or woo girls and tech bros?
If businesses can’t afford to pay their employees, perhaps they should be rethinking their business models.
People will still not be renting any apartment in Seattle on $15 an hour wages and small businesses will end up with yet another hardship. All that glitters is not gold in our progressive utopia.
It should be worth noting that at least one major Seattle restaurateur who moved to the service charge model has no plans to increase the hourly wage of now commission-earning front of house staff. And there’s no requirement to, either. Tips were not considered wages (ridiculously) but commission is. Therefore with commission everyone should already be making at least $15/hr now. Thanks to this loophole, however, wages will remain stagnant at these establishments compared to other restaurant competitors. In theory it’s “$15 NOW” but in reality it’s “$15 NEVER.” Anticipate a major talent vacuum as more time passes and FOH folks come to the realization that their earning potential is decreasing compared to their other industry compatriots.
Is there any data yet on what the change to a service charge has done to the income of the servers at those restaurants? The prediction was that, as their tips disappeared, their total income would decrease, even if their wages have increased.
It would also be interesting to know if the income of still-tipped workers, in those places without a service charge, has been affected by the legislation. Are people tipping somewhat less now, knowing that servers have an increased wage?