Minimum wage is increasingly a central political issue across Washington State. Motivated by victories in SeaTac and Seattle, last month the state House passed HB 1355, which would raise Washington’s statewide minimum wage to $12/hour by 2019.
At the March 30th Senate hearing, a panel of legislators gave their perspective on the issue and proposed alternative frameworks for addressing it. Other jurisdictions, such as Tacoma and Spokane are mobilizing for local wage increases, placing pressure on the legislature to deliver an answer. In particular, the restaurant and hospitality industries have been vocal about forging a state-level compromise and avoiding a patchwork of laws throughout the state – cracking the door to a possible deal this legislative session.
While a session deal looks unlikely, the legislative work done to date suggests the shape of the coming debate.
The House Bill
The Democratic-supported HB 1355 passed through the house in a party line vote. It would begin with a $10/hour minimum wage Jan. 1st, 2016, and ratchet up 50-cents per year until reading a statewide $12/hour minimum wage on Jan. 1st, 2019.
Legislative staff prepared a fiscal note on the proposal estimating the impact of such a change on state coffers over the coming biennium (2015-17).
The proposal would cost the Employment Security Department $41.7 million due to increased unemployment compensation payments. OFM predicted another $5.6 million in added costs from increased state employee costs. The largest impact is likely to come from contractors. According to OFM, vendor rate contractors will seek reimbursement for higher costs with a potential range from $70 to $487 million in impact to the general fund over the next biennium.
On the positive side of the ledger, the Department of Social & Health Services estimated $8.8 million in savings via the TANF program from decreased caseloads
Staff evaluated that the overall fiscal impact was currently “indeterminable.” Of the impact areas investigated by staff, the sum net total cost was $505 million at high end and $100 million at the low end.
For localities like SeaTac and Seattle which have wage floors above the statewide minimum, the legislation would not supercede local policy.
The primary sponsor, Rep. Jessyn Farrell (D-46th), said that the bill’s “basic principle” is that any resident who works hard and is lucky enough to be offered a full 40 hours per week “should be able to pay [their] own way.” Rep. Farrell pushed back against the idea that her proposal would increase unemployment, citing case studies from localities that grew jobs while raising wage floors. “We do know,” Farrell said, “that there is modest reduction in poverty and that this money does tend to go back into the local economy.” Poverty and income inequality have been on the rise recently in Washington State. Real median household income has been effectively treading water for decades now.
The companion bill in the Senate (SB 5285) was sponsored by Senators Pramila Jayapal (D-37th) and Mark Miloscia (R-30th). There has been no movement in the Senate on this matter since the March 30th public hearing.
Finding a Middle Ground
SB 6087, sponsored by Democratic Senators Steve Hobbs (44th), Mark Mullet (5th), and Maralyn Chase (32nd), carves out a middle path through this issue.
Their bill would increase minimum wage to $13 an hour by 2020 ($1/hour more than the House bill). Unlike the House bill, it would also include credit to employers for tips, health care benefits, and sick leave. The bill, in short, emphasizes “total compensation” and not just take-home pay. At the hearing, Sen. Hobbs argued that these provisions “provide flexibility for mom-and-pop shops that could suffer under [HB 1355].“
Under SB 6087, municipalities with minimum wages above the state’s would be unaffected. In other words, Sea-Tac and Seattle’s wage requirements would be grandfathered in. Employers in these areas would be barred from claiming “total compensation” credit for tips, sick leave, or health care to count against their local obligations. At the same time, once the bill took effect, localities would be preempted from adopting new minimum wage rates.
During the hearing, Sen. Hobbs referenced the buzz surrounding a potential ballot initiative contest regarding the statewide minimum wage. “I think it’s very dangerous that there’s a potential initiative out there that could go well beyond the $12. I would like to put [SB 6087] out as… a compromise.”
Statewide Minimum Wage at the Ballot Box
The “dangerous possibility” that Sen. Hobbs referenced is the prospective minimum wage ballot initiative campaign being plotted by Seattle venture capitalist Nick Hanauer.
There’s well-placed concern in the business community that polling is favorable to a statewide minimum wage increase. It is likely that the language drafted by initiative sponsors would not include the sort of flexibility for employers that quality legislative deliberation could produce.
In a March 4th tweet, Hanauer posited that “the question for Republican lawmakers in Washington State today is this: $12 now, or $16 in 16?” Whether one agrees with Hanauer’s politics or not, his point is that inaction on minimum wage proposals could result in the least desirable outcome for the business community.
Sen Miloscia’s Proposal
Republican Sen. Mark Miloscia of Federal Way was also on the legislative panel, and he put forward his own proposal: SB 6029.
Unlike the House-approved HB 1355 or “compromise” bill SB 6087, Sen. Miloscia’s proposal would override local authority to raise the minimum wage. Miloscia’s bill indexes future wage increases to both inflation and personal income growth.
Miloscia sees his proposal as a long-term, set-it-and-forget-it solution. On top of the pre-existent inflation adjustment, Miloscia proposal would add a three percent annual increase in every year where Washington’s per capita personal incomes both 1) grew from the previous year, and 2) beat the national average. This would be a one way ratchet on the minimum wage, remaining level during economic contractions.
According to the his calculations, the formula would allow the minimum wage to increase by about 45 cents each year. If it passes, Miloscia told Seattle Times that it could be “the last minimum wage bill we ever have.”
At the Senate hearing, Miloscia argued that the House-approved bill “does not go far enough.” His “performance-based” plan has no cap outside of the state’s own economic performance. Miloscia made bold claims to support his proposal. “We can reduce the size of government a little bit,” he said, “by having increased workforce [participation] and decreased poverty.”
In his proposal, Sen. Miloscia included a B&O tax credit targeting the industries most likely to be affected — “to help them weather the storm.”
Rep. Manweller “Dissenting Voice”
Representative Matt Manweller, who opposed HB 1355 in the House, appeared before the on the legislator panel to offer “the lone dissenting voice.” There was additional oppositional public testimony from stakeholders.
“Today we’re told that if you increase the price of labor, people will buy more of it,” Manweller argued. “That doesn’t make intuitive sense. I think that if this were good for small businesses, they’ll do it without our help.”
Manweller encouraged the Senate to use Senator Hobbs bill as a vehicle “because the title is amenable to negotiation and compromise… [It] at least opens it up to a conversation so that everyone can participate in the process.” In the House, Manweller said that discussion had excluded many “good ideas about teen wages, training wages, fixing CPI problems, and union carve outs… Because the title was so narrow, we weren’t allowed to introduce or debate or even vote on many of those topics.”
The Road Ahead
In her final remarks to the Senate committee, Rep. Farrell explained that the House bill was written so as to be “very narrow” and “focused on workers at very very very bottom of our economic ladder… mainly… service workers, those cleaning offices [and] bagging groceries.” Jobs which Farrell argues “are really place-based” and therefore unlikely to be attracted out-of-state due to a higher minimum wage.
The House-approved bill is unlikely to find passage through the Senate this session. But the issue is likely to only burn brighter in the upcoming 2016 General Election. If a higher minimum wage really does land on the ballot as a citizen’s initiative, the business community could find itself wishing it had helped push a more balanced solution through earlier.