Don C. Brunell: Cumulative Costs Drive Employer Decisions

The $15 minimum wage is an example of elected officials with tunnel vision passing sweeping legislation while ignoring the cumulative impacts of all of the other government mandates on employers.

They only zero-in on the costs and benefits of a single issue, such as the $15 an hour wage, when they ought to focus on all of the taxes, fees, regulations and laws.

Seattle’s ordinance took effect on April 1, 2015. It directs businesses with fewer than 500 employees to pay the $15 an hour wage starting in 2021. Employers with 500 or more employees (either in Seattle or nationally) will reach that level in three years.

The University of Washington is charged with only studying the ordinance impacts on Seattle’s businesses, workers and the overall economy.

Earlier this spring, UW researchers determined it had a minimal effect; however, they learned through employer surveys to anticipate businesses increasing prices for goods and services.

Meanwhile, some restaurants are already adding surcharges to their tabs. In Seattle, Sanford’s restaurants added a 2.55 percent “living wage surcharge” which goes to the house as a way to offset the costs of the city’s minimum wage hike.

If minimum wage expansion was not enough, earlier this month Mayor Ed Murray and the council unanimously passed the “secure scheduling” ordinance. It required two weeks advanced notice of workers’ schedules, a minimum of 10 hours between shifts and employers paying workers if schedules are changed after they are posted. That is called "predictability pay."

It is an administrative nightmare and would apply to quick food services, such as fast food and coffee shops, and retail employers with 500 or more workers worldwide. It tags full-service restaurants with more than 500 employees and 40 establishments.

The combined impact of both city ordinances should be studied by UW.

It is not just Seattle impacted by the minimum wage, at the state level, voters are asked to approve I-1433. If approved, it would step-up the state’s hourly minimum wage from $9.47 to $13.50 by 2020. It also requires employers to provide paid sick leave starting in 2018.

Seattle adopted its paid sick leave law in 2011. Workers in companies with 5 to 249 employees accrue a minimum of one hour of paid sick and “safe time” for every 40 hours worked. Workers in companies with 250 or more employees accumulate a minimum of one hour for every 30 hours worked.

The point is our elected officials need to quit looking at issues in isolation. They must consider the impacts of all of the other federal, state and local taxes, fees and regulations to see the true picture of what they are doing to employers and job opportunities.

It is total costs of doing business which drives hiring and investment decisions. If it doesn’t “pencil out” in Seattle, San Francisco or Los Angeles (all cities which adopted the $15 minimum wage), there is no way to stay in business there. The same applies to states such as Washington.

The unintended consequences of the current approach are reduced work hours, fewer jobs, business closures or relocations and an acceleration in the pace of automation.

Recently, Forrester Research reported new artificial intelligence systems and robots have replaced six percent of all U.S. jobs in the last five years.

Robots are penetrating restaurants as well. According to retired McDonald’s USA CEO Ed Rensi, it is “cheaper to buy a $35,000 robotic arm than it is to hire an employee who is inefficient making $15 an hour bagging french fries.”

Unfortunately, the reality in this highly competitive world is costs drive employer decisions.

(Don C. Brunell is a business analyst, writer and columnist. He retired as president of the Association of Washington Business and now lives in Vancouver. He can be contacted at theBrunells@msn.com.)