While advocates of increasing the minimum wage claim it is a win-win for employers (because people will have more money to spend) and employees (who will earn a higher wage), the reality is much different.
Increasing the minimum wage comes with undeniable trade-offs.
King 5 reports that workers at Icon Grill in downtown Seattle will lose paid vacation time to mitigate the increased labor costs of Seattle’s new $15 minimum wage. All employees will now only earn one week of paid vacation time; before Seattle’s new minimum wage law went into effect on April 1, some long-time employees of the restaurant received four weeks of paid vacation per year.
The restaurant may also be forced to increase prices to make up for the wage hike. They aren’t alone—Ivar’s just announced it will increase menu prices by 21%. Part of that increase includes a 17% service charge that will be passed to employees in lieu of tips.
Other restaurants say they may hire fewer servers and rely instead on tablets at tablets for customers.
According to the restaurant industry, the profit margins for restaurants are a lean 4%. So the proprietor of a restaurant in Seattle that brings in $700,000 takes home just $28,000 per year. A government mandate forcing those restaurant owners to increase wages also forces them to make tough decisions.
The manager of Icon Grill wonders why he has to make those tough decisions when his servers already earn high wages when their tips are included:
Why do I need to pay them $15? Why do I need to pay them $10? They’re already making $32.”
Of course, it isn’t just restaurants that are being forced to make tough decisions to deal with Seattle’s new minimum wage. Seattle-based Cascade Designs, which makes outdoor equipment, says the city’s new wage mandate is one of the reasons it will move 100 of its “less specialized” jobs to Nevada. The homegrown company says Seattle has become “too expensive” and hopes that by moving those low-skilled manufacturing jobs to a state with lower business costs they will be able to grow the business and keep their manufacturing jobs in the U.S. Many of their competitors use cheap labor from overseas.
Would employees at Icon Grill rather earn a lower minimum wage but receive more paid vacation time? Would employees at Cascade Designs rather work for a wage less than $15 than have their job relocated to Nevada? The answers to those questions don't matter, because Seattle's $15 minimum wage law gives employers and workers no choice in the matter.
