Seattle Workers Appear to Win the Fight for $15

Source: http://www.flickr.com/photos/wonderlane/

Source: http://www.flickr.com/photos/wonderlane/

In a major victory for labor groups and low wage workers, Seattle Mayor Ed Murray announced his plan to raise the minimum wage to $15 per hour, the highest level in the nation. The announcement comes after months of debate and deliberation, brought to the forefront by Seattle City Council member Kshama Sawant. Sawant won her seat on the City Council running as a socialist, championing workers’ rights and putting pressure on businesses to pay their workers a living wage. Along with Murray, business leaders, and labor group heads, a plan was reached to phase in a wage hike of nearly 60 percent to minimum wage earners.

The plan works by raising wages gradually over the next several years, with different levels for small and big businesses. After wages reach the $15 level, they will then be tied to inflation and go up every year. Washington state already has the highest minimum wage in the country at $9.32 per hour, and the blowback from businesses large and small alike is sure to be palpable.

What does it mean for low wage and unskilled workers in Seattle? For the city’s working poor, it means that thousands will be lifted out of poverty, or at least be far better off than before. While the cost of living has skyrocketed, along with rent, food, and transportation costs, wages have remained stagnant, as has been well-documented. The number of people receiving aid in the form of public assistance should drop, and tax payers will no longer be on the hook to subsidize the labor costs for businesses.

On the other hand, there are some definite drawbacks as well. With a huge increase in labor costs, businesses are going to take countermeasures. This will happen in the way of workforce reduction, cut benefits, and possibly moving out of the city limits all together. It could ring as a troubling development for the city’s unskilled and migrant workers, who may lose any prospect of getting hired at all. Of course, there is evidence that minimum wage increases don’t necessarily lead to massive layoffs, but there will definitely be some concessions made by the business community to offset the increased costs to their operation.

While the announcement is still fresh, it does put Seattle in the spotlight as a leader for worker’s rights and the fight for a living wage. According to Seattle Business Magazine, there are roughly 100,000 people in the city that currently make less than $15 per hour. Those 100,000 people have now become lab rats in the next great American experiment on wage increases. Businesses like Amazon (NASDAQ:AMZN), who mainly employ skilled workers who make more than the newly proposed minimum, would likely remain unaffected. Other cities, like Portland, Oregon, are already beginning to look at big increases of their own on the heels of Mayor Murray’s announcement.

How could what’s happening in the Pacific northwest ripple across the country? Right now, the answer is unclear. A recent bill put forth by Democrats to raise the federal minimum wage level to $10.10 was shot down by Republicans, and there is a vocal minority who are calling to eradicate the minimum wage completely. While those calling for eradication seem to be on the fringe, there is a sizable portion of the population who are against raising wages for the lowest earners, many who would benefit from it themselves.

President Obama cites that the current minimum wage has lost a significant amount of purchasing power over the past few decades, and that raising it will give a helping hand to millions. “This will help families. It will give businesses customers with more money to spend. It doesn’t involve any new bureaucratic program. So join the rest of the country. Say yes. Give America a raise,” he said.

Two of the biggest targets of groups looking to raise are McDonald’s (NYSE:MCD) and Wal-Mart (NYSE:WMT), two of the country’s biggest employers that reap massive profits and tend to pay its workforce low wages. While large numbers of employees for both are on public assistance, huge companies are actively pushing labor costs onto the public at large by offering such low pay. Large corporations like Wal-Mart do operate on thin margins, and an increase in labor costs threaten those margins.

Business groups like the National Retail Federation have also publicly come out against a federally mandated increase in wages. Calling the effort an “anti-job tax,” the NRF said that while efforts to raise the minimum wage are noble, they could not come at a worse time. “NRF believes that this is the “least opportune moment” to mandate a federal wage increase on employers with small and large businesses alike already confronting the myriad workforce challenges associated with the implementation of the Affordable Care Act,” the NRF said in a statement.

On the other end of the spectrum, companies like Costco (NASDAQ:COST) are renowned for offering its employees fantastic compensation packages, and building a strong, successful corporation simultaneously. Costco CEO and President Craig Jelinek has been a public supporter of an across-the-board minimum wage increase, and has said that paying employees more-than-average has helped his business grow. “Instead of minimizing wages, we know it’s a lot more profitable in the long-term to minimize employee turnover and maximize employee productivity, commitment, and loyalty. We support efforts to increase the federal minimum wage,” Jelinek said in a statement.

Another supporter of a minimum wage boost is Starbucks (NASDAQ:SBUX) CEO Howard Schultz. Starbucks is based in Seattle, right at ground zero of the minimum wage push. The company that spends more on their employees’ healthcare than it does on coffee would be one of the biggest employers hit with big increases in labor costs. However, Schultz told CNBC that an increase in wages comes with a downside. “We’ve got to be very careful what we wish for because some employers, and there could be a lot of them, will be scared away from hiring new people or creating incremental hours for part-time people as a result of that wage going up,” he said.

With Seattle’s plan to drastically increase the minimum wage and a national dialogue already engaged,  most of the country will have to sit back and wait to see what happens. Will Seattle be abandoned by businesses looking to dodge high labor costs? Or will it attract a new influx of hurting workers, and in the process herald in a new era of economic success for business and workers alike? While both sides have valid reasons to believe the proposal will succeed or fail, the fact is that inequality and the minimum wage are already on the minds of many across the country.

For the America’s working poor, that in itself is a victory.

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