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Voters in Sea-Tac, Washington, an airport town between Seattle and Tacoma, narrowly approved a measure to increase the minimum wage to $15 and provide paid sick time to certain hospitality and transportation workers associated with the airport and tourism.  The ordinance also ties future minimum wage increases to inflation.  While the ordinance currently faces court challenges that could bar its implementation, if the ordinance goes into effect, Sea-Tac will be the guinea pig allowing the rest of the nation to see the effects of a $15 minimum wage, the highest in the country.

If the experiment in Sea-Tac is a success, other jurisdictions may follow suit.  Sea-Tac is part of a growing trend toward local minimum wages, but several states and the federal government are also considering minimum wage increases.  Sea-Tac may start a domino effect of other $15 minimum wage laws, even before the effects are known.  For example, the Seattle City Council is expected to take up the proposal of a $15 minimum wage in 2014.  Other West Coast cities have notably high minimum wages, with San Francisco’s set to rise from $10.55 to $10.74 on January 1, so there is a strong probability the $15 standard will spread within the region and possibly beyond.

The effects of minimum wage increases are subject to vigorous debate.  While there is no consensus on the economic impacts, business owners fear they will be unable to maintain or increase their staffing levels.  When a minimum wage is adopted on a local level, it is easy for businesses to “vote with their feet” and choose to locate outside city limits.

The Sea-Tac ordinance may also cause particular damage to small businesses that cannot afford to pay $15 an hour.  Even though the ordinance actually exempts small businesses from its coverage, if a worker has the choice to accept employment from a small business for $9.32 per hour (Washington’s 2014 minimum wage) or to perform the same work at a larger business for $15 per hour, the small business will struggle to compete for talent.  Other businesses exempted from the ordinance could face a similar problem.  Of course, for those that do raise their pay, what will happen to their prices?  Will they go up and make the business uncompetitive?  If prices don’t increase, will profitability decrease so that the business will close?  There seems to be no definitive answer, but Sea-Tac may provide one.  Time will tell.

Once a minimum wage is increased, it is virtually unheard of for a legislature to repeal it, regardless of the effects.  Therefore, employers would be wise to keep an eye on such proposals, especially at the local level, and voice their concerns before legislation is passed.  Once it is passed, there is nothing left to do but deal with the effects.

Brody and Associates regularly advises management on complying with the latest local, state, and federal employment laws.  If we can be of assistance in this area, please contact us at info@brodyandassociates.com or 203.965.0560.