Submitted by Darren Smith, Guest Blogger
The City of SeaTac Washington enacted a proposition narrowly approved by voters (77 vote margin among approximately 6,000 total votes) that would, among other issues, raise the minimum wage of hospitality and transportation workers to $15.00 per hour; one of the highest in the United States. The minimum wage for Washington State is $9.32 and the highest among all fifty states. Supporters of the proposition argued the cost of living for those workers is forcing them to live in substandard lifestyles given their working environment and lack of benefits provided in these industries. Opponents argue the law would put an unnecessary burden upon business and force cuts in employees and a disincentive to operate within the city. Much controversy has been generated on all sides.
There are and estimated 1,600 transportation and hospitality workers employed in SeaTac and 4,700 within the Port of Seattle; mainly serving the airport. The ordinance has sparked much controversy on both labor and business interests and could have an affect on other cities throughout the state. A recent superior court decision also has invalidated a significant number of employees working in SeaTac.
The ordinance is SeaTac Municipal Code Chapter 7.45.
SeaTac is located in the vicinity of Seattle-Tacoma International Airport (SEA) south of Seattle. Adjacent to the airport, on International Boulevard, are a large number of hotels, motels, car rental agencies, and long term parking businesses that support travelers. The businesses subject to the ordinance generally are represented in the North American Industry Classification Codes (NAICS) as follows with some exemptions for small motels:
- 485999 All Other Transit and Ground Passenger Transportation
- 488119 Other Airport Operations
- 488190 Other Support Activities for Air Transportation
- 488510 Freight Transportation Arrangement
- 532111 Passenger Car Rental
- 561720 Janitorial Services
- 721110 Hotels and Motels
- 722310 Food Service Contractors
- 722410 Drinking Places
- 722514 Cafeterias, Grill Buffets, and Buffets
- 722515 Snack and Nonalcoholic Beverage Bars
In addition to the wage minimum, adjusted annually for inflation, the ordinance provides a one hour sick and safe leave benefit per forty hours of work with a cash value to be paid at year end. Also there is a provision the employers must offer extra hours to part-time employees before a full time position is created. There are also provisions for employer/employee oversight related to labor relations.
The crux of the proposition was to provide this wage and benefit program both to employees outside the airport and those within the airport. However, recently the Superior Court of Washington for King County struck down the ordinance in part. In BF Foods, LLC, Filo Foods, LLC, et al., v. City of SeaTac, et al., (13-2-25352-6 KNT) Judge Andrea Darvas ruled the ordinance violated Revised Code of Washington 14.08.330 which declared the Port of Seattle which Seattle-Tacoma International is located and a state chartered municipality, had exclusive jurisdiction and the ordinance applying to this area was void declaring: “The Washington State Legislature has clearly and unequivocally stated its intent that municipalities other than the Port of Seattle may not exercise any jurisdiction or control over SeaTac Airport operations, or the laws and rules governing those operations.” Judge Darvas further decreed certain portions of the ordinance relating to employees suffering adverse actions for union activity or retaliation and such was pre-empted by federal labor law and void. Most of the remaining parts were upheld. Supporters of the ordinance promised a direct appeal to the state supreme court.
A few airports have labor rules similar to that of SeaTac. San Jose Airport workers are guaranteed health insurance and a $13.82 hourly wage. Los Angeles International workers receive $10.91 and health benefits.
Organized opponents to the SeaTac ordinance were mostly from businesses. Plaintiffs in the lawsuit included Alaska Airlines which has its main hub at Seattle Tacoma International. In 2005 Alaska Airlines terminated 500 unionized ramp workers and re-hired some as lower wage, non-union workers. Recently, Alaska Airlines spokesman Paul McElroy stated: “Alaska Airlines believes in fair pay and benefits for all workers, and we respect every worker and the job they do…This lawsuit isn’t about $15 an hour. It’s about an initiative that violates state and federal law.”
Local businesses have spoken out as well. Han Kim, who manages Hotel Concepts which manages eleven hotels in Washington stated he and his business associates decided to shelve plans to construct a new hotel on land they own in SeaTac. They currently have three in SeaTac. Kim stated “Uncertainty is bad for business, and right now we’re right in that area so we’re just putting everything on hold” The American Car Rental Association estimated five percent of workers’ jobs would be cut along with another five to ten percent who will be replaced by more experienced workers. A manager with Dollar Rental Cars spoke of outsourcing some functions along with cutting staff.
Ramifications and benefits are certain to be brought by this ordinance, some short term and others into the future. A higher standard of living is a simple but important issue to those workers having more of a livable wage and provided benefits for their families. And most would agree with that. But what could be some of the long term issues that might affect those workers, their employees and the community?
Essentially an island of wage disparity has been created in the King County which SeaTac is located. Workers outside the city limits performing the same tasks as covered workers inside are paid sixty percent lower if paid at minimum wage. Moreover, almost an archipelago of islands are within the city itself. Those in other service industries and manufacturing who can work just as hard as transportation and hospitality workers are not given the same wages and benefits in the same city. Workers in the hotel industry who work at smaller locations are exempt from this benefit. Would this be considered equitable? Is it fair for some semi-skilled or low skilled jobs to be paid differently based upon lobbying efforts by some groups and where workers might or might not have union representation?
Businesses in SeaTac are at comparative disadvantage to those a few miles away. With the possibility of sixty percent higher labor costs in industries that are labor intensive and have low margins some SeaTac businesses could be priced out of business. Consumers are also likely to bear the burden of this as costs are transferred to the customer. If businesses depart or do not locate in the city SeaTac can face decreases in taxation. There is also a regulatory cost that can be had if a patchwork of cities enacts differing labor laws and this can negatively affect businesses that have to account for many locations rather than simply relying on state law.
It has been argued that with increasing wages comes increasing quality of services, workers with more earning power buy more goods and services which increases revenue to businesses, government, and other workers.
There are, however, other analogues in Washington where wages differ officially based upon location. One example is Prevailing Wage as defined in Chapter 39.12 RCW and Chapter 296-127 WAC. Essentially certain occupations hired for public works and contractors bidding for projects of the State of Washington must provide minimum wage and benefit levels for workers. Each county has a prevailing wage rate that is assigned for that region, there are underlying rates for trade levels such as journeymen or apprentice for numerous trades and in fact some are even more granular as in the case of commercial divers who receive hourly premiums based upon depth of each dive. See Washington Department of Labor and Industries prevailing wage calculator for details.
It is clear this is new territory in Washington State and other cities might follow suit. But it also represents some challenges that might require time to address.
What do you think?
Sources
Reuters
Fox News
City of SeaTac Municipal Code 7.45
Superior Court of Washington [13-2-25352-6 KNT]
Revised Code of Washington
Washington Administrative Code
The net result of raising a minimum wage is to RAISE it LESS for ALL or LOWER the REAL WAGE for ALL to a GREATER EXTENT. The consequences of interfering with the market by legal force of law is all too clear in Henry Hazlitt’s Economics in One Lesson (1936 & 1972). You must consider ALL THE WORK FORCES EVERYWHERE (or at least in the country), EVERY PERSON AFFECTED, NOW &IN THE FUTURE. There is always a net loss in wages, even if a small group gains more to begin with. ANY legislation to force wages up or prices down backfires in the end if everyone is considered in the long term.
DavidM says: and the idea is that if you are going to make a career of it, you find a path that is not at the bottom.
Easier said than done. I suggest everybody find a path that makes them a professor at a prestigious university and gets them on TV once in a while. Failing that, own a successful business. Failing that, makes them a professional sports star, or movie actor. If all else fails, write a few bestsellers.
The super-majority of people are not born with the mental, physical, financial or personality assets needed to do anything but work for others. That may not be at minimum wage, but it is at the bottom of the command pyramid, and as the norm, should not be considered shameful in the least, and if that is where they reside as adults should not relegate them to a life of poverty either.
DavidM:
“The person in a minimum wage position should be taught to scope out his options. In the construction business, he might like welding and develop a skill through apprenticeship in that area, or he might become a carpenter, an electrician, or a plumber.”
yep, and if they want, they could start a business and be a sub to a larger firm.
You are also right about college, it takes 5-10 years of your best learning years and puts you behind the 8 ball. A a few of my friends who are or were actual millionaires never went to college. I was just starting my business at 35 when they were millionaires. They had 17 years on me. I am convinced that had I started a business at 18, I could have retired at 40 if I had wanted to.
Also your response to Elaines article was right on. Market dictates wage prices except with minimum wage, I wonder what the minimum rate would be if there was no minimum wage law? Employers just tell teenagers all I can pay is minimum wage. Maybe wages would be higher without the law?
Bron wrote: “Employers just tell teenagers all I can pay is minimum wage. Maybe wages would be higher without the law?”
What a brilliant consideration. Some businesses may very well be listening to government about how cheap they can go.
DavidM says: Comments like this one [pdm’s] are flaming and contrary to to the new civility policy of the blog.
I don’t think so. The civility policy is about personal civility, I read it. He isn’t insulting anybody in particular. Free speech is free speech. Are we no longer able to call Nazism a bad thing, lest somebody out there be a Nazi? Are we no longer able to call Racism a hateful attitude, lest somebody be a racist?
I think your comment in trying to suddenly be the police of the blog is bullying.
Tony C wrote: “I don’t think so. The civility policy is about personal civility, I read it.”
In the past, I started to reply to comments like that one by posting some flames toward socialists and liberals, and by bragging about how great and right the Republican Party and the Tea Party was. This eventually led to personal attacks upon me, which led to me making personal attacks right back. In retrospect, I regret my actions. I think I contributed to incivility by doing that.
I am perceiving that stereotyping is a big part of the problem. When I think about racism, for example, it is not really racism that is wrong. What I mean is, it is not recognizing differences between the races that is wrong. What is immoral about what we call racism is first creating a stereotype of people, then denigrating the stereotype, which finally leads to denigrating particular individuals who fall into that stereotype. Perhaps it would be better if we did not create the stereotypes in the first place, or if we did, at least let’s not denigrate an entire class of people based upon it.
In regards to Nazism, I think it would be a more fruitful discussion to discuss the problems with Nazism rather than just using pejorative language about Nazism. Yes, we might have some Nazi embracing skinheads drop in on the blog, and I think it would be more beneficial to discuss issues with them rather than run them off by flaming the Nazi party.
pdm:
on what does he disagree? I am not a republican anyway. I personally like economic and political freedom, something the 2 main political parties in our fine Republic do not embrace and do not understand.
There is a governor out of LA who disagrees with Bron. In fact, he thought it was time for the entire Republican Party to stop being the “party of stupid”.
Dredd:
Sacrifice isnt necessary, just get rid of government control of the economy and things will work out. Government should be the ref, not the players or the owners.
Teji Malik:
“Wrong. I own both franchises and there is no way to do that. I have been suggesting to the both corporations for quite sometime where they can share in paying higher wages with us and we would only have to increase the price of a burger by.07 cents which would not hurt anyone. They have refused to do so. I hope they change their minds as they are making billions through the fees, commissions from the vendors etc. etc.”
Why dont you just pay them more and eat the 7 cents per burger? It is only 7 cents and you make hundreds of thousands per year on those franchises.
You could drive a less expensive car or live in a smaller house couldnt you? So your workers could make a living wage?
Hypothetical: 1-No people should begin a nation unless they can afford to care for all families in that nation. 2-People in that nation should not begin a family unless they can afford to care for themselves and their children. 3-Both (#1 & #2) are lifelong obligations, implicating that nation’s laws, morals, and ethics. 4-All members of society are obligated to take part in those requirements and in that process. 5-Both sacrificing and profiting are involved as necessary to accomplish those requirements (#1 – #4).
Tony C:
Rays the Hell Burger is a good hamburger and costs around $10 bucks. This is a high quality hamburger at the lowest price possible to make a profit
McDonalds sells a burger for $1.00, it is also the highest quality it can be to make a profit. Quality is relative.
It competes with Burger King and Wendy’s so if it is to compete, its dollar hamburger must be of a good quality at that price.
As for Rolls and Rolex, they are high quality items which have bragging rights. However, if they sucked no one would pay the price. People arent stupid.
Geez, these politicians that want to manage the economy sure are cheapskates. C’mon folks, who thinks $15/hour is a living wage? Why not $25/hour? You can bet these politicians are raking in more than 15 bucks an hour.
How about a maximum wage law? Politicians think they can solve the inequality problem by taxing high earners, but it would be much more equitable to impose a maximum wage on them. Why not a $50/hour maximum wage and a $25 minimum wage law?
Why not a minimum/maximum return on investment law that would cover profits, dividends, etc.? Then our all-knowing politicians could enact minimum/maximum price laws for all goods and services to keep things fair.
Politicians have done such a wonderful job of managing the macro economy so far, why not turn the entire economy over to them? I know it is hard to imagine how wonderful this utopia would be as everything is already so great, but that would be democracy in action.
Obviously, the average idiot can’t make decisions about how much they will work for or how much they are willing to spend on their own. But, the average bozo is certainly able to vote for the right people to create a sustainable and fair economy that promotes fairness and the common good, right?
Tom Blanton wrote: “How about a maximum wage law? Politicians think they can solve the inequality problem by taxing high earners, but it would be much more equitable to impose a maximum wage on them. Why not a $50/hour maximum wage and a $25 minimum wage law?”
Very thought provoking. You have given me something new to think about.
AY:
“But for lack of workers, do you really think they’d pay much beyond min wage?”
Thats the whole idea, supply and demand. The more workers, the less they are going to be paid. Supply and demand. The best way to raise wages is to have a growing economy so that labor can sell itself to the highest bidder [employer].
I am not sure why it is the responsibility of business to pay higher wages just because politicians tell them they must. These same politicians are causing our stagnate economy and passing a law to pay people more is not going to do anything if the underlying economic principles are unsound and ineffective.
I wish a Wal Mart worker could make $25/hour and they probably would be if our economy was moving along at $30 trillion per year or more. The many regulations businesses operate under, and I am not saying all regulations are bad, are fettering our economy.
With regards to Washington: at what point is government just telling employers what to pay employees? If this is the case, I believe ALL businesses should be told what to pay employees. With Washington state already paying above a living wage–Government should not have control over businesses. At what point does it stop? I am sure if you take money from ALL businesses to help the unskilled workers out there–the problem could be solved. But I am not sure that would go over well with businesses that have such a high profit margin they can pay well over the minimum wage. Where Washington State fits in with other states from the left leaning Huffington Post.
http://www.huffingtonpost.com/2014/01/02/state-minimum-wage-raise_n_4530757.html?utm_hp_ref=business
DavidM: It isn’t sensible to think that is possible for everybody. What is the proportion of “shift managers” to regular employees? What is the proportion of “store managers” to regular employees? What is the proportion of “regional managers” to “store managers?”
Companies are an hierarchical pyramid for a reason. In particular for managers of unskilled labor, one full time manager can often supervise fifteen to twenty people.
It isn’t sensible to think everybody can become a supervisor with subordinates, or a business owner with employees. The super-majority of people are going to spend their entire work life at the bottom of the command pyramid, namely without having any subordinates.
Tony C wrote: “It isn’t sensible to think that is possible for everybody. What is the proportion of “shift managers” to regular employees? What is the proportion of “store managers” to regular employees? What is the proportion of “regional managers” to “store managers?””
I understand your point, but people eventually find what they like and what they are good at and forge a career down that path.
I was using the example of a fast food restaurant, and the idea is that if you are going to make a career of it, you find a path that is not at the bottom. In the restaurant business, there are other options besides management. You might become an excellent chef, or join a high end restaurant as a server earning high wages and tips. The person in a minimum wage position should be taught to scope out his options. In the construction business, he might like welding and develop a skill through apprenticeship in that area, or he might become a carpenter, an electrician, or a plumber. The point is that there is no reason to keep beating the drum that bottom wage owners are stuck. Teach them to explore their options and move to what pays them better. Teach them self reliance. Blaming businesses as being responsible for creating the situation does not solve the problem.
DavidM, ” I tend to look upon anybody who talks about minimum wage jobs as a career meant to support a family as being a little dim upstairs.” Thank goodness you live in a community where all the kids are above average. unfortunately I live in a place where we have above, average, and below. Are some dim upstairs? perhaps, but it takes all kinds.
Bron says: Unfortunately business is not about providing jobs but about providing a product or service to the consumer at the best quality and lowest price possible while still making a profit.
No, it isn’t. Business is about providing a product (which may be a service) that consumers willingly buy. Not at the best quality, and not at the lowest price possible.
Not at the best quality. Is McDonald’s the “best quality” burger on the planet? Not by a very long shot. Do they use the best quality beef, cheese, or anything at all? No. Is Target the best quality we can find? No. 99% of restaurants do not strive to provide the best quality.
And lowest price? Puhlease, is Rolls Royce worried about getting the right price to consumers? Does Rolex?
Businesses compete on five points. Quality, Service, Price, Guarantee and Prestige; each on a sliding scale. (Service includes convenience, speed, and selection). (Quality can include reliability, or as in some cars, a reputation for superior safety).
The entrepreneurial “eye” can look at a town or area or industry and see some combination of these points that is not being served. New paradigm breaking businesses often find a profitable way to provide one of these points in a way not envisioned before; Amazon provided dramatically new levels of Service and Price. Rolls and Rolex compete on Quality and Prestige.
When a business provides a product, the maximum sales will be at cost. Any increase in price above cost will produce sales. The trick to business is NOT to find the minimum cost; that is already known — The break even cost. The trick is to find the cost that maximizes profit. Every 1% increase in price over cost is going to decrease sales, eventually to zero sales because nobody thinks it is worth that. Somewhere along the way, if the business is viable at all, there is a price that maximizes the profit: A lower price means more sales but less profit because of less margin (and greater overheads in production); a higher price means fewer sales with a greater margin, but still less profit.
One does not minimize price alone, one does not maximize margin alone, one finds the peak of the profit curve. The profit curve rises from zero profit when selling at cost, peaks somewhere, and then heads back toward zero when over-priced.
That curve changes shape depending on both the products and the economic environment, part of the job of a businessman is periodically reading those variables and adjusting prices to maximize profit. (A lack of diligence in this pursuit can kill the company.)
As a result, most businesses (except the “cost is everything” competitors, like Walmart, Target, Costco, Sam’s Club) will turn away cost-sensitive customers, their objective is not to maximize sales. They are pursuing the 65% of the market that considers one or more of the other competitive points more important than price.
For most businesses, it is not their job to provide the lowest price possible, or highest quality possible, it is their job to maximize profit. Or more accurately, find a setting for each of the five competitive points that maximizes their number of sales multiplied by their profit per sale.
While the consequences “could” be beneficial – I submit that they will almost certainly be detrimental. The long winded types should read Frederic Bastiat’s “That Which is Seen, and That Which is Not Seen.” As for me, I may investigate buying property just outside of SeaTac since I expect the value will increase significantly.
Bron,
you may have forgotten that many of the wage and benefit improvements over the years started with individual unions agreeing to fair contracts with employers at the local and regional level. These improvements spread statewide and nationwide. We have to walk before we can run sometimes.
I recently wrote an article about how an increase in the minimum wage rate increases unemployment. You can read it here: http://wp.me/p3N9zD-4e
Robert Boxer wrote: I recently wrote an article about how an increase in the minimum wage rate increases unemployment. You can read it here: http://wp.me/p3N9zD-4e
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Robert, that was an interesting perspective. Thanks for sharing it. The following sentence was especially poignant:
“In the case of mandated minimum wage increases, the primary long-term negative effect is a guaranteed general increase in unemployment and a specific increase in unemployment among those already at the bottom–the black teenager, the unskilled, the uneducated.”