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City of SeaTac Minimum Wage Increased to $15.00. Consequences Could Be Beneficial And Detrimental.

Darren Smith

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:

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

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