Will Seattle’s pay increase hurt or hinder?

Seattle will be raising its legal minimum wage within the city to $15 per hour. It’s a whopping six-dollar hike from the current Washington state minimum wage (already highest in the country, at $9.32), and over twice the federal minimum of $7.25. Historically, even accounting for inflation, there has never been a minimum wage that high.

The mandatory pay increase is expected to affect larger companies by roughly 2017, and then all businesses, as early as 2021. While this sounds awesome on paper, I just can’t get past the issues that loom behind this decision. I would love to believe that only good can come from this wage hike and that other states could follow this model, but I’m not sure that’s happening. It’s hard to accurately predict the outcome of such an unprecedented event, but there are still some economic issues that can’t be ignored.

If everything went smoothly, this could be a huge benefit to the working class in Seattle. Hundreds of employees with minimum wage jobs could rest a little easier with what would now be a living wage (for the most part). Students could better afford school and living arrangements, which also would increase the overall education level of the city. And Seattle’s 102,000 workers (noted in a Think Progress article) who currently earn less than $15 would have more money than ever with which to bolster the city’s economy.

But, what about the people who already get that kind of pay? Does every varying level of pay get increased to balance out the higher minimum wage? Apparently, Seattle’s wage floor will be increasing 2.4 percent annually, which should alleviate worries of those with higher-paying jobs.

One of the greatest potential issues with this raise is that many businesses will take a huge financial hit from such a sizable increase in payroll cost. And one of the only ways they can make up the difference is to pass that on to consumers, by raising their prices. So, if stores and companies raise their prices to make up for the new minimum wage, won’t that just render everything as superfluous?

Actually, the new wage scale could make things worse. Tourism would definitely see a downward turn if the people who work in Seattle are the only ones who can truly afford whatever inflated prices are sure to follow suit.

Also, businesses won’t just raise prices, but will look to streamline their workforce. This would mean cutting jobs, or adding automation via technology. Self-checkouts have been increasing in popularity at grocery and general stores, and fast food chains have been experimenting with automation in Europe. So, not only would jobs be lost, but the jobs that remain might be harder to get. With such a high minimum wage, employers are going to be far more strict and scrutinizing of whom they hire – requiring the right education, plenty of work experience, no brushes with the law, etc.

All of this would make the working class job environment more hostile and competitive than it already is. Larger companies could undoubtedly afford this and still prosper, but smaller business would be financially ravaged.

I understand that Seattle is doing pretty well for itself. The city has one of the most stable and booming economies in America. For many observers, that alone illustrates that the Seattle City Council knows what it is doing.

Despite my quibbles with the wage hike, I can’t help but admire this rather ballsy move on Seattle’s part. Like I said, its has one of the best economies in the country, so it’s brave of the city to experiment in such an extreme fashion. I hope I’m wrong, because I love Seattle and hope this in some way works out for the place.

However, with the possibility of wounded small businesses and big corporations that can’t imagine losing dollars or profits, there could instead be fewer working-class jobs that become harder to obtain – and, don’t forget, higher prices for all.

Worst-case scenario: This plan hurts the ones it’s trying to help.