Minimum wage: Seattle approves $15/hour, will other cities follow?

The Seattle City Council voted for a $15/hour minimum. With the battle for a federal minimum wage of $10.10 stalled in Washington, states and cities have been acting on their own in a kind of fiscal federalism. 

With Seattle enacting the nation’s first $15-an-hour minimum wage Monday, the election-year political fight over income inequality and an increasingly stagnant middle class is becoming more and more a case of “all politics is local.”

Last week, a special committee of the Seattle City Council unanimously approved a proposal to become the first governing body in the country to enact into law a $15-an-hour minimum wage, which the full council approved Monday, also unanimously.

The new city-wide ordinance requires larger city businesses to start paying employees at least $15 per hour by 2017, with smaller businesses having up to seven years to reach a level that is more than twice the federal minimum of $7.25. The new Seattle minimum wage also represents a 60 percent increase from the current Washington state minimum wage of $9.32 an hour – already the highest state minimum in the nation.

But the $15 milestone has special meaning for a movement of fast-food workers, who for more than a year have been conducting a series of noisy one-day walk-offs in cities across the nation, which many have called a “fight for 15” – an hourly full-time wage that would be enough to lift a family of five above the federal definition of poverty.

It is also significantly more than the federal minimum hourly wage of $10.10 proposed by Democratic lawmakers and the Obama administration, who have made the issue a centerpiece of their midterm election strategy. Polls indicate that up to 73 percent of Americans support such an increase, according to a Pew Research survey in March.

But as resolute Republican opposition has stalled efforts to boost the federal minimum wage, states and cities have been acting on their own in a kind of fiscal federalism to raise the bar on wages – including a number of big cities and municipalities seeking to reach a $15 local minimum wage.

“Coast to coast, cities are pushing to make the minimum wage a city-wide $15 minimum living wage,” says Jack Temple, policy analyst with the National Employment Law Project, a New York-based employment-policy advocacy group that has supported the striking fast-food workers. “Seattle is leading the way, they’ll be the first to cross the finish line, but they’re really leading an increasingly growing pack of cities that aren't’ far behind.”

Last week, Chicago lawmakers also proposed boosting the city minimum wage to $15 an hour, while hundreds of hotel workers and their supporters in Providence, R.I. packed the City Hall chambers for another boisterous display of support for a proposed city ordinance that would set a $15-an-hour minimum wage.

“I think Providence is one of the first examples of a city that was inspired by Seattle,” says Mr. Temple. “So when politicians see that politically it’s possible now to pass $15 an hour city-wide, we’re seeing even smaller cities now crop up and reach for the same thing.”

In April advocate groups in San Francisco filed the paperwork for a ballot initiative to require most businesses to pay $15 an hour by 2017, and earlier this year, Los Angeles lawmakers proposed increasing hotel worker wages to $15.37 an hour, since more than 40 percent of the industry’s workers live below the poverty line.

Such moves by cities and municipalities are being undertaken even as 22 states and the District of Columbia already have minimum wage thresholds above the federal requirement. Seven states, including Maryland, Michigan, and West Virginia, have already enacted increases so far in 2014.

“This has always been very politically popular – not just this time around, but every time around,” says Douglas Holtz-Eakin, president of the American Action Forum and a long-time critic of efforts to raise the minimum wage. “People like me, economists, suggest that maybe this isn’t a smart thing to do, but the average person thinks this is just dandy.”

But supporters contend that when low-wage earners have more money to spend – with a full living wage, rather than simply a higher minimum wage – they stimulate local economies. In addition, they say, a happy worker is a more productive worker.

“When people spend money, it creates businesses – people produce things,” said Seattle Mayor Ed Murray to Bloomberg News. The Seattle mayor, who took office in January, quickly set up a 25-member Income Inequality Advisory Committee, comprised of local business and labor leaders.

“But [money] doesn’t come out of thin air – it has to come from someone,” says Mr. Holtz-Eakin, a former director of the Congressional Budget Office. “So if you raise the minimum wage at your McDonalds and at your Burger King, those are largely low-income customer bases who are going to pay higher prices now. And so we’re going to take the money from one poor person and give it to another, and that’s not something that’s particularly stimulative.”

But cities like Chicago are now setting up advisory committees similar to Mayor Murray’s in Seattle. Chicago Mayor Rahm Emanuel last week named a number of labor and business leaders to work with select city officials to provide recommendations for raising the minimum wage to $15.

 “It’s just a terrible time to be hitting the low-skilled population with anything like a speed bump to getting hired, but you’ll learn something from it,” says Holtz-Eakin. “If states and localities want to do it on their own, this is one of the benefits of fiscal federalism. You can sit and see how well they did, and it will be fodder for future arguments.”