Mayor Ed Murray Proposes $13.25 an Hour Minimum Wage. Seven Years from Now.

I haven’t seen the details but it sure sounds like the minimum wage proposal Mayor Ed Murray is sending to the Seattle City Council is much along the lines of the crappy one leaked late last week: $15 in three years for large businesses (more than 500 employees), four years for those that provide health care benefits. But small businesses don’t get to $15 for seven years, with some sort of five-year total compensation scheme on top! And the minimum wage isn’t indexed to inflation until $15 is reached.

To be clear: $15 seven years from now is actually only $13.25 in today’s dollars.

Is that a helluva lot better than today’s $9.32 an hour Washington State minimum wage? Sure. Is it $15 an hour? No. It’s just not. So if Ed and his cohorts want to celebrate getting us to a $13.25 minimum wage over seven years, have at it. But don’t call it $15. Because it’s not.

All that said, I’m just watching the Seattle Channel live stream. The proposal may appear better or worse, once I read the details. More later.

UPDATE: So, I’ve finally had a chance to take a look at the mayor’s press release (I couldn’t make it to the conference) with it’s complicated four-tier schedule, and something leapt out at me right a way. Take a look for yourself. Catch the anomaly?

Minimum Wage Schedule

An estimated 2.40 percent CPI? Really? That seems overly optimistic (depending on your view of inflation). I’ve been using a relatively conservative 1.75 percent CPI estimate in all my calculations, and even that overestimates inflation by today’s standards. The Federal Reserve has a 2 percent target, but we’ve been holding steady at about 1.5 percent inflation the past couple years. The Federal Reserve Bank of Cleveland recently forecast a 1.87 percent 10-year average CPI. So estimating 2.4 percent strikes me as an exercise in massaging the numbers in order to present a more worker-friendly 10-year outcome.

In case you’re wondering, Schedule A is for big businesses that don’t provide benefits, Schedule B is for big businesses that do provide benefits, while Schedules C & D are for small businesses (less than 500 employees). Haven’t quite wrapped my mind around how the total compensation works. More on that later.

But the gist is, to get to $18.13 in 2025, you have to estimate average annual inflation rates of 2.4 percent starting in 2018. That’s a huge assumption. At today’s 1.5 percent rate, we’d only get to $16.90 by 2025. That’s a big difference.

I’ll have a more thorough analysis later, from both a policy and political perspective. But at first glance, I can’t help but feel a tad disappointed.

Comments

  1. 1

    Theophrastus spews:

    the council will ‘resolve’ the matter by settling on some screwy average between Murray and Sawant.

    (the best one can hope for from seattle politics being to establish as nearly equal stereo output of shouted insults from both sides)

  2. 2

    Roger Rabbit spews:

    Mayor Murray looks more like a weak-kneed, promise-breaking, sellout politician with every passing day. What’s he running for, governor of South Carolina?

  3. 3

    Roger Rabbit spews:

    I suspect the 15Now! folks won’t stand for this and will push their own initiative if this is the best the city can come up with.

  4. 4

    Roger Rabbit spews:

    Rents could double in seven years. Meanwhile, Seattle’s low-wage workers can’t wait for a raise. They can’t afford in-city rent right now.

  5. 5

    Roger Rabbit spews:

    Cheapshot Bob (aka Travis Bicker) tell us small businesses can’t afford to pay higher wages and would have to lay off workers. (Hmmm, how would they stay in business without workers?) But if Seattle’s high cost of living and low wages drive these workers out of the city because they can’t afford to live here, won’t those jobs be lost anyway? And won’t small businesses be forced to close for lack of necessary labor?

    If you raise the minimum wage, then all businesses have to bear the higher labor cost, and none has a competitive advantage against the others because of this added cost. They can raise prices to cover this cost, and customers will pay it because no business will be able to offer below-market prices based on lower-cost labor.

    But if you don’t raise the minimum wage, businesses that try to retain workers by raising wages to a livable level will be underpriced by those who don’t. The former will be driven out of business by price competition, and the latter will go out of business when they can’t hire workers. Everybody loses.

    It’s not realistic to think businesses can get labor for less than it costs workers to live. That’s just not going to happen. Either wage rates are raised to a livable level, or low-wage workers will leave the city because they can’t afford to stay here. Ultimately, living costs dictate minimum wage rates; it has to be that way. Trying to do otherwise is like trying to repeal the law of gravity.

  6. 6

    Roger Rabbit spews:

    So let’s review. Seattle rents are skyrocketing. Metro is about to drastically cut back bus service to the outlying ‘burbs where rents are a little lower, which will cut off in-city workers from lower-rent areas. And local businesses don’t want to pay more than $9.35/hr. (and wouldn’t pay that much if they weren’t forced to). How does anyone expect to fill low-wage jobs under these conditions? If $9.35/hr. is all they can make, workers will move to other Washington cities where rents are lower. They’ll have no choice.

  7. 7

    TerraceHusky spews:

    I certainly understand Goldy’s disappointment. A 7-year phase-in is too long. I’d prefer no more than 4 or 5 years for the longest phase-in. And I have no idea how Schedule C is supposed to work. I was hoping this plan would be no more than 2 schedules (one for large, one for small).

    Still, I’m pleased that the CPI price adjustments begin after 3 years instead of 7 years (that would hugely erode the real value of the $15/hr, as you’ve stated before).

    The $18.13 bottom line is a cute trick to inflate the perceived end value of the proposal. But their estimate of the future CPI doesn’t make much difference to me. The fact is if Goldy is right, and inflation is between 1 and 2 percent per year for the next decade (looking very likely), the Seattle minimum wage will keep pace just the same. If that’s $16.90/hr in 2025, so be it. In the end, the Advisory Committee’s unusually high CPI estimate is just a PR stunt, and doesn’t reflect upon the actual substance of the proposal, for better or for worse.

  8. 8

    Ekim spews:

    5. Roger Rabbit spews:

    Cheapshot Bob (aka Travis Bicker) tell us small businesses can’t afford to pay higher wages and would have to lay off workers. (Hmmm, how would they stay in business without workers?)

    Better yet, how would they stay in business without customers. I’m willing to boycott businesses who stiff their help. They probably have other unsavory practices as well.

  9. 9

    Roger Rabbit spews:

    @8 My point was the layoff argument is specious, because nobody can run a business without workers. Absent a city minimum wage, an employee who demands a raise above the state minimum is easy to replace, so the employer can readily refuse; but with a city minimum in place, the employer either pays up or has no workers (and therefore no business).

    Republicans, employers, and others who oppose minimum wage laws often argue the “market” should determine what a person’s work is “worth.” Although this argument has a certain superficial appeal, it’s flat wrong. Bargaining power, not “worth,” determines worker pay. A job can be hard, dirty, dangerous, demanding, and require skills, yet not pay what the work is “worth” (by any reasonable measure) because of the relative bargaining advantages of employer and employee in the marketplace. And the market is anything but a level playing field. It usually favors employers, and business goes to great lengths and expense to stack it against workers. That’s why workers need legal protection in the form of minimum standards for pay, hours, and working conditions.

    The “free market,” back in the bad old days when we had one, resulted in child labor, company towns, high injury rates, and other abuses that ultimately had to be corrected by governmental intervention because market forces didn’t. This historical reality blows the “free market” argument right out of the water.

    If the “free market” worked to set wage rates at appropriate levels, employers wouldn’t have needed the guns of National Guard troops to make coal miners go back to work a century ago. If employers were willing to let “market forces” determine wages, they wouldn’t have pushed for laws making unions illegal or enforced workplace policies that made revealing your pay rate to a co-worker a firing offense. Workers need legal protection for their bargaining rights because employers will do everything they can to undercut those rights.

    Minimum wage laws aren’t just for the protection of workers who are at a disadvantage in the marketplace. They also protect society as a whole. When jobs don’t pay a living wage, the rest of us have to fill the gap by paying taxes for public benefit programs. Such a situation, in effect, requires taxpayers to subsidize the labor costs of business owners who already enjoy extraordinary tax privileges and other benefits nobody else gets.

    Most of all, exercising government’s right to regulate the economy is what prevents us from becoming a feudal society in which the many are captive serfs of a few. When employers complain that government shouldn’t have the power to make them pay workers more, the only proper answer is that society has every right to tell employers they have no right to pay less; and it is in society’s broad interest to do so.

  10. 10

    Comrade Lenin spews:

    No fan of Murray (or any lib) but this plan sounds a hell of a lot better than Kshawarma Saiwantfreestuff’s instant candy land plan.

  11. 11

    Roger Rabbit spews:

    @10 Only a Cheap Labor Conservative could argue with a straight face that a $15 wage is “free stuff.”

  12. 12

    Roger Rabbit spews:

    I repeat, Murray is a quisling and a sellout. $15 seven years from now is not “$15 Now.” And if Labor settles for that, you can bet that employers will spend the next 7 years trying to get it repealed, further delayed, or further watered down. This plan isn’t a victory; it’s a defeat, and a foot in the down for further defeats. It’s an Anschluss in that it concedes victory to the opponent without a shot being fired.

  13. 14

    you gott be kidding spews:

    @9 My point was the layoff argument is specious, because nobody can run a business without workers.

    But businesses can run them with fewer workers. Just today one of my friends who owns 3 restaurants, mid-level service places focused around the bar. He discussed with me the idea of hand held ordering/credit card processing terminals. This cuts your front of house labor (where 85% of the wage gains go) as you need fewer waiters, and more just a food runner & a busser. Or has no one seen an ordering machine/credit card processor @ a McDonlads? I haven’t seen the hand held machines here in Seattle restaurants, but they were the norm in Canada when I visited a couple weeks ago. The other crappy thing is as the tip credit gets phased out it will depress & stagnate kitchen wages. As tipped employees take more & more of the labor budget there will be less & less for the kitchen. You know who works in the kitchen in most restaurants? It is minorities that is who, and now the income disparity between tipped employees & kitchen staff gets bigger, as kitchen wages get suppressed & stagnated.

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