Labor’s Minimum Wage Mayhem

Jul 11, 2014 - 9:45am

Executive Director, Labor Policy

800 x 533 Seattle by Mike Kane for Bloomberg.jpg

Employers are sleepless over minimum wage increase
Photo: Mike Kane/Bloomberg

Crossposted from the Workforce Freedom Initiative

Labor unions and their worker center allies have garnered a fair amount of attention in recent months, with made-for-media protests against large retailers and fast food companies in a quest for inflated wages and benefits. In addition to harassing employers, organized labor also has set about pressuring various local governments run by sympathetic politicians to impose artificially high minimum wage rates. Just last month, Seattle acquiesced to these demands and became the first major city to implement a $15/hour minimum wage. 

The tale of Seattle’s whopping 60% minimum wage hike reportedly had its roots in Mayor Ed Murray’s determination to increase the rate one way or another, albeit under pressure from labor groups. With the support of the city council, as well as the $15 minimum wage precedent set by the nearby airport town of SeaTac, Murray all but strong-armed his own task force of business and union leaders to broker a deal, which they did at the end of April. The city council adopted the proposal unanimously on June 2.

As written, the law implements staggered increases through a convoluted schedule based on an employer’s purported size, whether they provide health benefits to employees, and whether their employees receive tips. Employers with 500 workers or more will pay $15 an hour by 2017, but if they provide health insurance, they will have one additional year to comply. Smaller businesses will have until 2021 if their employees are not tipped, while businesses with tipped employees must ensure that workers’ pay, including tips, total $15 an hour by 2019. By 2025, all employers will pay the same minimum wage.

However, at the behest of the Service Employees International Union (SEIU), which was part of Mayor Murray’s task force, the law misclassifies small businesses, such as franchises, as large employers when the parent company has 500 or more employees nationwide.

This facet of the law could spell disaster for mom-and-pop shops unequipped for the sticker shock that will come, and it is willfully ignorant of the reality of the franchise system. By assuming small employers affiliated with a national chain are, in fact, large employers themselves, the law conflates two very disparate pieces of the franchise business model, which seems to be part of labor’s endgame. Not surprisingly, this prompted an almost-immediate legal challenge to the wage law.  

Meanwhile, a coalition of Seattle businesses dubbed Forward Seattle has spearheaded a grassroots ballot initiative to let voters decide whether to implement the new minimum wage statute. That effort cleared a major hurdle on July 7, when Forward Seattle submitted approximately 19,500 signatures to repeal the law.

Although the battle is still brewing, unions and their allies seem intent on pressing other cities to pass similar laws. The minimum wage debate doesn’t appear to be going anywhere in Washington, D.C., but it’s certainly heating up in the rest of the country.

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About the Author

Executive Director, Labor Policy