Seattle, Washington has taken the first step in its plan to gradually raise its minimum wage to $15 per hour. Starting today, businesses with more than 500 employees are required to pay them at least $11 per hour (up from the Washington State minimum of $9.47 per hour), and smaller businesses are required to pay at least $10 per hour.
The city will continue to raise the minimum wage until all workers in the city earn $15 per hour on January 1, 2017–which will be more than twice the current federal U.S. minimum wage of $7.25 per hour.
The $15 per hour rate was chosen based on living costs in Seattle, which the $7.25 federal minimum wage ($15,080 per year at the standard 40-hour workweek) far from provides. Even by conservative estimates, $16 per hour would be the minimum to make ends meet in Seattle, according to the city’s alternative weekly magazine The Stranger.
As expected, the motion to raise the city’s minimum wage drew controversy: A Seattle right-wing think tank, for instance, drew out the tired trope that raising the wage would result in restaurant closures. That was proven false, says Forbes. Elsewhere, raising the minimum wage is gaining traction as a smart strategy to improve quality of life and spending power. Businesses that try the unconventional practice of boosting wages above the minimum see benefits, its proponents argue: Turnover drops and employees work harder at their jobs, professor of MIT’s Sloan School of Management Zeynep Ton recently told Fast Company:
Using what she called this “good jobs strategy,” these companies often achieved a “virtuous cycle” of higher customer satisfaction, better employee retention, and other long-term results that increased profits and made up for higher wages. According to Ton’s research, the convenience store chain QuikTrip saves money with its far lower full-time employee turnover compared to other top companies in the industry (13% vs. 59% at the time). In another example, she found that Costco’s sales per employee were almost double Walmart-owned Sam’s Club’s. Last year, employees of the New England grocery store chain Market Basket proved perhaps the most dramatic example of her management theory: They loved their CEO so much, they walked off their jobs to save his (and many loyal customers followed them out the door).
Ton also pointed out that this strategy isn’t easy: The Container Store, for instance, faced backlash from shareholders for spending too much on its workforce.
This debate–whether a higher minimum wage is good or bad for business–is part of what makes Seattle’s effort interesting. If Seattle can prove that the wage hike brings more winners than losers, the rest of the country will take note.
[via The Guardian]