“We Want to Pay Well, but…” for-Profit and Non-Profit Employers Implement Seattle's $15 Minimum Wage Ordinance

Background and Purpose: In 2014 the City of Seattle passed into law an ordinance mandating a substantial increase in the city minimum wage. Seattle wage floors will increase gradually over the next several years to become the highest in the nation. As of January 1 2017, large employers have to pay many workers $15 per hour; all private sector employers must pay an inflation-adjusted version of this level by 2021.

As a tool to possibly reduce earnings inequality and symbolically acknowledge the dignity of all work, wage mandates represent an important area of current social justice work. However, employers may offset higher wages through hiring fewer workers, reducing workers’ hours through shorter or more variable shifts, increasing the pace of work, or eliminating other benefits such as paid leave.  

This paper reports on findings from a multi-method university-based team project which examines how the Seattle wage mandates affects workers, employers, and the economy as a whole. We pay particular attention impacts on nonprofit organizations and immigrant or minority business owners, many of whom may be more vulnerable than the general population to economic changes.

Methods:  The multi-method paper employs survey data collected via phone and web from 507 randomly-selected for-profit employers and 101 non-profit employers; in-person plus phone semi-structured interviews with 58 non-profit and for-profit employers; and administrative data from the State of Washington Unemployment Insurance system. Data analysis follows standard statistical, econometric and qualitative data approaches. (Note: some results are embargoed until City of Seattle approval in Summer 2017, full results will be available by the conference. Please do not quote or reference results herein)

Results: The majority of Seattle employers surveyed (92.1%) were aware of the Ordinance at the time it took effect, yet some were unclear about specific requirements; awareness and understanding increased over time. Employers most commonly reported responding or planning to respond to the Ordinance by raising wages for Seattle employees, raising prices on goods and services, and increasing wages for employees earning between $11-$15/hour.  Over the first two years of implementation, the percentage of employers who report reducing total employment or workers’ hours grew with about one in ten (10.8%) of employers reporting reducing hours.  Nonprofits and small employers reported having to increase wages faster than required by the mandate in order to stay competitive in the labor market. In interviews, employers reported other strategies including changing their prices or product mix and controlling costs; some small business owners worked more hours themselves.

Implications:  Minimum wage mandates effectively raise wages but also modestly reduce overall employment.  Discussion will focus on the tradeoffs involved in this approach.