Will businesses leave Seattle with a minimum wage hike?

The $15/now people have filed a city ballot measure to increase the minimum wage to $15/hour:

  • On Jan 1, 2015, the minimum wage for workers at big businesses will be raised to $15/hour and raised each year to adjust for inflation.
  • For small- and medium-sized businesses and non-profit organizations, the minimum wage will be phased in over three years starting with $11/hour on Jan 1, 2015.
  • Small- and medium-sized businesses are defined as having fewer than 250 Full Time Equivalents, the standard set by Seattle’s Paid Sick Leave Ordinance.
  • No training wages, no lower wages for tipped workers, and no “total compensation.”
  • Increased worker protections against wage and tip theft.
$15/now protest, via theurbanist.org
$15/now protest, via theurbanist.org

I was thinking more about this. One of the most common complaints and cautions I hear is that businesses will leave the city if this passes. It’s a fiction and myth that all businesses CAN move. Will a small business that does not have a geographical dependence on a dense urban customer base move?

Maybe. Let’s say a light manufacturing or light non-retail commercial business. If they operate today in West Seattle or Ballard or wherever but could trivially operate in, say, Renton? Or Kent? Or any other outlying small towns? AND without being in jeopardy from losing veteran staff who may actually be the lifeblood of the business? Remember, some businesses are only as strong as their staff. In those cases — sure, they can bail, if no one has a problem with their much longer commute perhaps relative to where they were and other external costs from such a move.

Anything bigger than that probably already pays close to $15/hour already if not more. Remember, too, that the bigger a business is the more difficult it may be for them to move due to reliance on other factors, and that they’re also able to more easily absorb cost changes like this in many cases.

But for businesses that rely upon instant and immediate access to a dense core of foot traffic or population, which is the bulk of the businesses that will be affected by the $15/now movement? Where will the small businesses near Pike Place Market, the Alaska Junction, or any other dense area in the city find comparable action outside of Seattle? We’re a captive market and the biggest one for 800 miles.

That’s just something to think about specific to the claim that “small businesses will flee” Seattle. Where is the small restaurant on Pike and Pine going to even possibly come close to the size of a customer base they enjoy where they are today, in a city ‘nearby’? Downtown Portland? Salt Lake City? Everything else aside, don’t believe that one line of argument for a moment.

My friend Ian, who has training as an economist, made a good point about this on Facebook:

Some won’t flee, they’ll close. Others will expand and employ more people as a result. The net impact on employment will likely be so small as to be lost in the statistical noise.

Whatever happens now is probably inevitable: 68% of Seattle residents support the minimum wage increasing.

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  • Sherpa1

    The 68% you quote also shows how many people in Seattle have absolutely no clue of what it takes to start and run a small business. Small businesses, the mom and pop shops, won’t flee, they’ll close, and the 68% will wring their hands remembering the good old days. And that’s how a city loses it’s charm.

  • Nickels

    If the business doesn’t close or move they certainly will raise the cost of their good or service to the public. Only an idiot would think the added expense will come out of the business owner’s pocket (profit). People open a business to make money. Not to give people jobs. An employee has a job because the owner makes more money after the expense of paying the employee than they would without the employee. Read that as making more money for the owner. The only reason to be in business.

  • ImmigrantVeteran

    If given the chance, an ignorant and lazy populace would surely vote to make themselves instant bilionaires so, the popularity of the law has very little to do with its practicality. I would venture that 95% of adults have never covered a weekly payroll. Therefore, the 68% support for this law is hardly impressive.

    In my career in the US based service industry providing BPO for myriad industries, I have covered over $100,000,000.00 in payroll. If I were in Seattle, I would be forced to move. I compete with low cost off-shore providers and larger companies in other states. Our average wage is $11.20 per hour for our service and data agents. These are entry level jobs that may lead to higher paying positions. Many of our clients would simply go offshore or to another state. The extra couple hundred thousand dollars per year we would be forced to charge just for the privilege of being in Seattle would be rejected. If one ever wonders why their calls are answered by people in India or the Phillipines, wage differences are the only answer.

    Seattle is simply following the same well-worn path laid by Detroit. Detroit had a seemingly endless stream of manufacturing revenue. Seattle has a seemingly endless stream of IT revenue. Eventually, it all follows the path of least resistance / lowest cost. It’s going to be a shame to watch Seattle go down this path. (Cue the liberal elite who think they’re smarter than that…).

    Higher labor costs in an increasingly global economy simply means fewer jobs. Period.