Seattle raising minimum wage to $20.76 hurts workers

Seattle’s minimum wage rose to $20.76 an hour on Wednesday, and at least one business has already closed because of it.

Seattle adopted the Minimum Wage Ordinance in June 2014, modifying The city’s municipal code will implement annual increases from January 1, 2016 to January 1, 2025. The law distinguished “Schedule 1” employers, which have more than 500 employees, from “Schedule 2” employers. “, which have 500 or less. Until last Wednesday, the ordinance allowed the second group, but not the first, to meet their compensation requirement through tax-preferential contributions to employees’ health plans rather than direct salary increases. This created an incentive for companies to hire no more than 500 employees.

Counting medical benefits toward the compensation requirement also encouraged employers to pay employees in kind (to the extent feasible). That’s less efficient for everyone: If workers simply received cash, they could spend it on what they valued most: maybe a health care plan, or maybe something else.

The ordinance was presented as a way to reduce income inequality, but a 2021 study by the Evans School of Public Policy and Governance at the University of Washington found That’s not what happened. The study found “no evidence to suggest… that Seattle’s minimum wage reduced the overall level of income inequality among all workers in the city.” In fact, income equality “expanded substantially” from 2014 to 2017.

The latest increase will further exacerbate both income inequality and unemployment. How much does it cost small businesses to hire minimum wage employees? increases between 4 and 20 percent, many will respond by laying off employees or closing entirely. Corina Lukenbach’s Bebop Waffle Shop has already responded to the new rules closing. Don’t be surprised if more follow.