Is Seattle’s Minimum Wage Being Passed on to Consumers?

Last week, voters in Washington state approved a statewide hike in the minimum wage to $13.50 an hour by the year 2020.  The current minimum wage of $9.47 an hour would jump to $11.00 an hour on January 1 and would incrementally increase thereafter.  Voters also approved mandatory paid sick leave for employees.  In areas where the minimum wage is higher, such as Seattle and SeaTac, the local wage laws would apply.  SeaTac, which is a 10-square mile area that is home to the Seattle-Tacoma airport, has had a higher minimum wage of $15.00 an hour since 2014.  Seattle’s $15 minimum wage hike went into effect in April of last year.  Have these minimum wage hikes had an effect on employment and industry in the area?  Let’s take a look at some numbers for King county, where SeaTac and Seattle are located (industry-specific data were not available specifically for the two areas) :

  • According to the Bureau of Labor Statistics, the average weekly wage for food service employees, who are morelikely to earn minimum wage, increased from $395 in 2013 to $477 in 2016.
  • However, while the number of food and beverage establishments increased from 2014 to 2015, they decreased in 2016  – from 5,550 to 5,479.
  • In leisure and hospitality, another service industry where employees are more likely to earn the minimum wage, average weekly wages increased from $454 to $503.
  • However, leisure and hospitality establishments did not experience a decline from 2014 to 2016.

Based on a snapshot of data, it appears that the Seattle area minimum wage may have had a negative impact on some statistics, but not others.  Since the restaurant industry is highly competitive, it is difficult to ascertain whether food service establishment closures were due to minimum wage hikes or simply to competition.  Anecdotal evidence suggests that some restaurant operators closed in anticipation of the minimum wage in Seattle last year but it doesn’t appear to be widespread.

But there are some other data worth noting.  The Consumer Price Index for the Seattle-Tacoma-Bremerton MSA shows that from October 2015 to October 2016, “food away from home” increased 3.6 points, while “food at home” decreased almost 2 points.  From October 2014 to October 2015, “food away from home” increased 2.6 points, and “food at home” increased 1.6 points.  Thus it’s possible that restaurants have simply passed on minimum wage increases to their customers.  This begs the question, if statewide minimum wage increase is reflected in higher prices for foods and services, doesn’t it defeat the purpose of increasing the minimum wage in the first place?

 

 

 

 

Comments (2)

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  1. Joe Barnett says:

    I wonder what prices at Starbucks are like in Seattle, versus the rest of the country. If the price is too high, people will make coffee at home, for a fraction of the cost. Even Millennials.

  2. RandPaulwasRight says:

    Hiking the minimum wage favors family-owned restaurants, because parents don’t have to pay their kids, right

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