When Seattle began raising its minimum wage five years ago, local burger joint Dick’s Drive-In experienced an unintended effect.
Its employees opted to work fewer hours as their wages rose, a tall order in a tight labor market.
“We thought with higher wages it would be easier to get people to take more hours, but it’s been the opposite,” said Jasmine Donovan, president of Dick’s.
She added that the company has had to raise prices for the first time in its history because of the cost of labor alone, whereas in the past, food costs drove such hikes.
Businesses like Dick’s have seen their costs go up.
Dick’s pays above minimum wage, with some locations starting workers at $17 and $18 an hour, and most workers are students in their 20s.
Benefits like 401(k) plans and health insurance are also available to workers regardless of the number of hours worked.
Overall, implications for businesses and workers alike have been nuanced. While there are benefits for workers who saw higher pay,
others may have seen fewer hours. Some businesses flourished, while
others struggled in the face of greater regulation and intense competition in the city’s hot economy.
Studies of the effects of the Seattle wage hike have had different findings: A 2017 University of Washington study found that
while wages went up, hours worked declined, resulting in less pay for low-wage workers.
Matthew Dillon, owner of Sitka & Spruce, says that he believes the minimum wage should be much higher than $15 an hour, which is why he also pays workers above that threshold. But when his lease came up, the James Beard Award-winning chef
decided it was time to close his doors after more than a decade in business, serving the restaurant’s
last dinner on New Year’s Eve. Passing off costs to consumers in an environment where his rent was $16,000 per month including taxes and fees, and where both food and labor costs are also on the rise,
felt unsustainable.
“Wages are going up, the price of food is going up, [and] my property taxes that I have to pay the landlord are going up. My rent is going up for my staff, or staff that was here feels like, ‘Well I can’t be in the city anymore,
so you have to find someone to replace me,’” he said.
www.cnbc.com
