Minimum wage increase will drive all costs up

MOSES LAKE — The fact is, everyone could use a little more money. But the debate on whether Initiative 1433 is going to do more harm than good is only starting to heat up.

Minimum wage increases in 20 states began as of the first of the year, which is a shift that will lift pay for millions of individuals and shed light on a long-running debate about whether mandated pay increases at the bottom do more harm or good for workers.

The measure would require Washington state employers to pay employees age 18 or older at least $11 an hour starting, effective Jan. 1, and $11.50 in 2018, $12 in 2019 and $13.50 in 2020, with subsequent annual adjustments for inflation.

Back in November, Carlo Caldirola-Davis, campaign manager with Raise Up Washington, the group behind Initiative 1433, declared victory, with this statement:

“When voters filled in their ballots, they were clear — in Washington state, we want an economy that works for everyone, not just those at the top. Hundreds of thousands of Washington workers and families are getting a raise, and more than 1 million workers will finally be able to earn paid sick and safe leave.”

Businesses and business owners in the Columbia Basin say the increase in minimum wage will drive up prices all the way around and could actually lead to loss of jobs instead of helping those intended to be helped by the voters.

One local Subway shop in Moses Lake posted a sign near its cash register stating “Beginning Jan. 1, our prices will reflect the increase in minimum wages.”

“It’s a horrible piece of legislation. People didn’t understand the whole picture, and now it will cost everybody more,” said Moses Lake Chamber of Commerce Executive Director Debbie Doran-Martinez, who is also the executive chairman of the Washington Chamber of Commerce.

“Business owners are going to have to increase the cost of their products to keep up, and the people that the voters were trying to help are going to have to work three jobs instead of two because everything is going to be more expensive.”

The initiative was backed by labor unions and worker advocates who say the state’s current minimum wage isn’t enough to live on, and a boost would mean workers have more to spend. They also argue that many workers don’t have access to paid sick leave, posing a public-health problem.

Columbia Basin businesses say that while Seattle’s booming economy can support a high minimum wage, the rest of the state isn’t faring as well. Boosting the minimum wage here will lead to higher prices and cuts in jobs or work hours.

“There’s going to be a ripple effect all throughout downtown with the impact on the cost of goods,” Doran-Martinez said. “Let’s just use Sue’s Boutique for example. That’s an owner-operated boutique. The handbags she buys from somebody in Seattle that’s paying an increased wage will now cost her more. So that purse she used to bring in and sell for $20 bucks, now costs $25. Cost of goods is going to go up across the board, which is irrelevant as to whether that establishment has to pay minimum wage employees or not.”

Red Door Cafe and store co-owner Jan Thacker said she will have to increase prices to keep up with escalating costs and wage increases.

“I’ve been talking to other business owners downtown and it’s going to put an additional strain on everyone,” she said. “We all try to support our local businesses, but everybody has expenses outside of salaries. If you look at the storefronts, there’s been a number of different shops go out of business. It’s not just the minimum-wage employees. If you give them a raise, then you have to give the supervisors a raise because they’re managing people.”

According to a 2014 study from the nonpartisan Congressional Budget Office, raising the federal minimum wage to $10.10 an hour reduced the job creation by 500,000 over two years. At the same time, the report estimated that the increase in the federal minimum wage would raise the pay of 16.5 million workers who kept their jobs.

Some restaurant owners may consider reducing portion sizes or charging for side dishes that were once included in the price of a meal to absorb the increase Melissa Fleischut, president of the New York State Restaurant Association, told the New York Times.

"I'm sure prices will go up where they can, but restaurants want to avoid sticker shock," she said. "They're going to have to get creative."

If employers cannot stay in business while paying their staff more, they will either hire fewer people or give their workers fewer hours. As a result, even if wages per hour increase, workers' total earnings could decline.

"If people are paying more for a meal at a local restaurant, are they going to want to tip the same amount they paid for service from the wait staff?" Doran-Martinez said.

The Wall Street Journal reported, the American Action Forum, a right-leaning think tank. “The people who end up losing their jobs are the most vulnerable in the labor market.”

AAF estimates that nearly 300,000 fewer jobs will be created during the next five years in four states — Arizona, Colorado, Maine, Washington — where voters approved phased minimum-wage increases to at least $12 an hour in November.

It’s not just the restaurant, food service or hospitality industries that will be affected. Businesses that use seasonal help will have to either reduce staff or increase prices, or both, Doran-Martinez said. Border cities and communities, like Tri-Cities or Pullman, are vulnerable when customers drive to Idaho or Oregon rather than shop locally.

The ripple effect has yet to be determined, but the next few months will tell just how hard the Columbia Basin economy will be hit.