Seattle, Let’s Talk Minimum Wage (For Real)
Hey Seattle, we need to talk.
Small independent restaurant owner here. I love this city. I love owning a small business. I love creating a positive business environment where we support our team with livable wages and benefits (to the best of our ability).
What I don’t love is how a lot of people in this city seem to confuse the tech boom billionaire class with the thousands of small, independent businesses that struggle every day. I also don’t love people getting angry and threatening when we try to point out a ticking time bomb that will devastate small businesses like ours unless the City Council addresses a few flaws in our minimum wage ordinance.
Instead of engaging in a thoughtful debate, I’ve watched dozens of people hurl insults and threats at elected officials, myself, and fellow small business owners. This is no way to have a debate about an urgent issue that is going to decimate our city’s small entrepreneurs.
Recently I’ve spoken publicly at the Seattle City Council about urgent adjustments needed to Seattle’s Minimum Wage Ordinance to address an upcoming financial “cliff” for small, independent restaurant owners. For expressing my personal opinion, I’ve been labeled by dozens of members of the labor movement as vile, disgusting, greedy, and a variety of other words not fit to repeat here.
Sadly, what’s being left out of all the yelling are any facts. It’s not possible to condense all the factors that got us to today in a 60 second comment to the Seattle City Council. But what can be said in 60 seconds is a lot of scaremongering and vitriolic rhetoric which makes what’s actually being proposed sound insidious and disgraceful.
To try and address this, here are the points we’re actually trying to make.
What are we actually taking about?
First, let’s get clear about what the proposal at City Hall does not do:
· It doesn’t lower the minimum wage. The minimum wage would still increase in 2025 for inflation. Everyone is still getting a raise next year (likely close to $21/hour).
· It doesn’t repeal the minimum wage ordinance.
· It doesn’t renege on the agreement made 10 years ago. It does adjust for the post-COVID reality of inflation (see below)
· It doesn’t create a “sub-minimum wage”. More on that below.
So what does it actually do?
The proposal continues to allow small businesses to count tips or health insurance towards a portion of the minimum wage (a very small portion). In 2024, small employers can count a whopping $2.72/hour of tips towards meeting the minimum wage (the difference between $19.97/hour and $17.25/hour). This total compensation credit is set to expire at the end of this year. The proposal simply removes the sunset for small businesses and continues increasing the minimum wage by inflation every year.
That’s it. Nothing is being taken away, no one’s pay is being cut, and everyone is still getting a raise next year (and the following year, and the following year, etc.). The grand goals of the $15 NOW campaign are still being met — the minimum wage is still indexed to inflation every year.
If you don’t believe me, go ahead and read it yourself. It’s a mere 4 pages (shorter than this blog post).
Why is this so important and why is it only coming up now?
3 reasons:
1. Assumptions made (by all sides) when the original ordinance was negotiated
2. COVID-19
3. The worst inflation spike in our nation since the Carter Administration (that’s from the 1970s for all those under 40)
If you go back to 2014, a fundamental assumption made by both labor and business groups was that inflation would keep its recent historical average of around 2%. In fact, the official projections announced by Mayor Murray’s office that were agreed to by all sides (including the labor movement), pegged inflation at 2.40% for the entire 10 years.
At the time, this was a very reasonable assumption. Inflation had been steady for the last 30 years. So when the 2 wage rates were set, the assumption was that by 2025, the two would be very close to each other and this would be a painless transition.
Reality, of course, had its own ideas.
Here are a couple of charts showing the projected versus actual minimum wage rates that were expected to happen versus what has actually happened.
For the first few years, the assumptions hold true, and the rates for large employers match the projections. But then in 2023, with inflation running at nearly 10%, the base minimum wage begins to spike higher, increasing the gap between small and large employers instead of shrinking as expected.
What has small business owners like me freaking out is the red line. That’s the jump we’re expected to make next year, when what was agreed to was the dotted orange line.
To make it even starker, look at it in terms of percentage increase year over year.
That circled point at the end is what is freaking every small restaurant owner out. That’s a 20% increase in required wages for small businesses. No industry or business has ever faced a 20% increase in wages in a single year. To put this number in context:
· It’s the largest wage increase in Washington State history
· It exceeds the “historic” union contracts won by the UAW with the big 3 car makers (25% over 4 years). And that’s for companies that were publishing record profits (unlike most small restaurants which are still straddled with hundreds of thousands of dollars in COVID debt)
To put it simply, this is a death blow to the majority of small, independent restaurants and other businesses that utilize this credit today. We agreed to a 6%-ish increase, not 20+%.
This is why this problem is only coming up now. The inflation spike only happened in the last 2 years, meaning it wasn’t clear the scope of this scheduled increase until the official inflation rates for 2024 were announced in November, 2023. We haven’t been planning this for years, the picture only became clear recently.
The Opposing View
At the council meeting (and in the rallying pages from Workers Strike Back and Action Network) several talking points were repeated almost verbatim by members of the labor movement. Sadly, none of them are accurate and most are misleading.
“This is a permanent sub-minimum wage”
Let’s get this out of the way upfront.
There is one minimum wage in Seattle. In 2024, it is $19.97 an hour.
Period. Full stop.
If you work in Seattle, you are guaranteed to earn a minimum of $19.97/hour in compensation. Small businesses are not exempt from this, and people aren’t paid less than this regardless of how big or small your employer may be.
The only difference is how you get to this amount. As part of the “grand compromise” in 2014, small businesses were allowed to use a “total compensation” credit that allowed to pay a slightly smaller amount in hourly wages as long as the employee earns at least the full amount in either tips or health benefits. This credit also used to apply to large businesses but ended in 2019.
This “total compensation” credit (often also called “tip credit”) was designed to recognize that tipped employees often earn well above the minimum wage. Since tips are declared income (both employee and employer pay taxes on it), it made sense to count some portion of it towards the minimum.
So the “lower” minimum wage was just how much a small business must pay in pure wages. But (and this is critical), if an employee doesn’t earn enough in tips to make the full minimum wage, the employer must pay the difference.
In conclusion, there is no “2 tier” wage structure in Seattle. Everyone makes at least $19.97/hour today, and everyone will make a higher wage next year.
“They’ve had ten years to get ready for this”
This argument is so vague and generic it’s infuriating that people say it.
First, most of the small businesses that are in operation today didn’t exist ten years ago. Over 70% of small businesses fail within 10 years.
Second, we’re not huge companies like Starbucks or Boeing with giant teams of lobbyists who are looking 5+ years ahead. Most small business owners are lucky if they can look 3 months ahead, so there’s been no “planning”.
Most Seattle small business owners couldn’t even tell you what the minimum wage will be next year.
I have personally reached out to over 40 small bar and restaurant owners in the past several months to inform people of this issue. Out of all those owners, only one was even aware this issue was coming up. Everyone else had no idea this minimum wage cliff was rapidly approaching. When I explained what would happen, their immediate reactions were shock, followed by panic.
Not because we don’t want to pay people a fair wage, but no one could possibly budget for a 20% overnight increase. No business model could survive it. (A challenge I threw down at the council meeting: I dare you to balance the city budget with an across-the-board 20% raise in city wages.)
Let’s go back to this chart, because it makes our point so clearly:
This was not what was negotiated 10 years ago. The dashed line was the negotiated amount. So the argument that we’ve had 10 years to prepare for this is absurd and false.
“Employees shouldn’t have to depend on tips to make a living”
I’m not here to debate tipping culture in the US, and honestly it’s not relevant to this particular issue. If you don’t receive tips, you aren’t affected by this proposal anyway. If you do receive tips, you must still earn enough to meet the full minimum wage regardless.
If you want to understand why tipping is still so ingrained in restaurant business models, please read my post from 2020 about why tipping is so hard to get rid of. You’ll likely be surprised by the answer.
The fact is that most restaurant employees earn more with tips than they would without. Similar to how sales teams earn most of their pay through commissions, using tips towards wages allows small businesses to offer better competitive total pay that they can offer as a flat wage. Tipped income allows small restaurants to share the wealth when it’s busy without putting the financial health of the overall business at risk. With the recent legal clarification allowing tip pools (finalized in 2020), this has allowed restaurants to share part of tips to kitchen staff, helping reduce the inequities between front and back of house that have existed for decades.
If you eliminate tipping as a means of supplementing wages, the only businesses remaining will be large chains with the financial capital and operational efficiency to afford to pay the combined wage + tip amount that restaurant workers earn today. Plus they employ fewer people because they can afford to invest in automation that eliminates jobs.
Our staff earns between $25-$45 per hour through a combination of wages + tips. There is no way I could afford to offer that amount in compensation as just base wages.
What are we fighting about?
Companies like Google, Amazon, and Microsoft made billions during COVID as employees worked from home and people moved online. On the other side, restaurants and other small retailers shut down, laid off staff, and fought for grants and loans to scrape by and make it through, hoping for better days ahead. We aren’t hoarding billions in profits for ourselves. We’re looking under the couch for spare change! We’re serious when we say we’re still digging out from COVID, as it will take most restaurants multiple years to pay off the debt we accrued to get through COVID.
I promise you the vast majority of small business owners care deeply about the well-being of our employees. We know Seattle is an expensive place to live — we live here too! We understand the cost of everything has gone up — we’re paying for it too!
At the end of the day, I am still perplexed as to why the labor movement is so vehemently against our request to count tips towards the minimum wage? As I’ve explained, we’re not fighting to lower the minimum wage, we want to keep it! And we want it to keep going up every year!
Keep in mind, in 2014 everyone expected the minimum wage to be $18.13/hour by now. Labor movement: You’ve already won! At $19.97 hour the minimum wage is already 10% higher than you thought it would be! Why are you pushing for even more when you’ve already done better than you expected?
But I think some people prefer to rally others through fear and misinformation rather than have a tough conversation that says “Yeah, it’s not what we wanted, but we can see how the situation has changed from 10 years ago. We are earning more than we expected, and to demand even more seems unreasonable.”
All we’re saying is that the assumptions that formed the foundation of the “great agreement” in 2014 ended up being horribly, horribly off. That’s nobody’s fault, but we shouldn’t put our heads in the sand and avoid the reality we’re now facing.
And I implore those who are yelling more from emotion than from a solid understanding of the facts; please dial down the rhetoric. It’s not useful to scream and shout when each and every one of us is just trying to survive.
I hope this post has provided some needed clarity (and calm) to put our actual request to the Seattle City Council in a better light. We can obviously disagree as to the right approach, but hopefully we can all agree that no one in 2014 expected us to be where we are today. And I sincerely hope that those who are fighting for workers understand we aren’t trying to take anything away.
We simply want to make sure we can still be here in 2025. Otherwise the empty storefronts and boarded up windows of downtown Seattle today are going to spread across the entire city, devastating neighborhoods, eliminating jobs, and putting Seattle into a very negative economic loop.
Charlie Anthe is a co-owner of Moshi Moshi Sushi & Izakaya in Seattle, WA. He is also the current President of the Seattle Restaurant Alliance. The views expressed here are his own.
