Thu March 13, 2014
'It's Complicated:' A Small Business And Its Employees Struggle With Minimum Wage Debate
The push to raise the minimum wage in Seattle was just a campaign slogan last fall. But now it's on a fast track. Mayor Ed Murray has said that he will propose a minimum wage increase this spring.
But many of the people who would be affected are just starting to assess the costs and benefits.
At The Confectional, a Seattle cheesecake company, the owners and employees are spending a lot of time thinking about what a $15 minimum wage would mean for them.
Destiny Sund and Paul Verano opened the first Confectional in Pike Place Market in 2006. The company sells mini cheesecakes that range in price from $2.75 – $4.50. In the early days, it was just the two of them putting in long hours. After the recession subsided, the company expanded and now has three locations and 11 employees.
According to Sund, the company pays a starting wage of about $10 an hour for people working the counter, and about $12 for bakers. If she boosts everyone’s pay to $15, she estimates that would cost her business more than $40,000 a year just for labor.
“In some cases for us that would mean a 50 percent increase,” Sund said. But the actual cost to the company would be even greater, because payroll taxes would bring that amount to between $17 and $18 an hour.
Sund also sources many of her raw materials from Seattle companies, and she expects those costs to rise as well, as companies in the city raise their prices to compensate for the higher wages they will be paying their employees.
For The Confectional, which has yet to turn a profit, there would be only one way to survive, according to Sund. “For us, it's pretty cut and dry that we would close our Broadway location, and Paul and I would go back to working at Pike Place Market ourselves, and reduce the labor costs there,” she said.
And that would mean laying off six of her 11 employees.
One proposal is to allow an exception for small businesses, but Sund said that really wouldn’t be helpful. “We would still like to retain our employees,” she said. “That’s hard if they can easily go and work for McDonald’s for more pay.”
James Warwood, 23, single-handedly mans the company’s kiosk in Seattle Center.
He is a recent graduate of the University of Montana, where he majored in English literature. “You know, it’s kind of a joke, as an English major, that’s why I’m working in food service,” he said.
Warwood makes $11 an hour plus tips, which are not great in the off-season at Seattle Center, he said.
On the one hand, it’s better than the $7.80 an hour he made in similar jobs back in Montana. But in Seattle, where expenses are higher, it’s tough to pay all the bills and still put a little money away, even though he and his wife work three jobs between them.
Raising the minimum wage “is the right thing to do,” he said.
But he worries about what that will mean for the company and its owners. “It’s going to be really hard for them,” he said. The company is like a family, and “it’s sad that would have to be the outcome for something that is so desperately needed,” he said.
Warwood could be one of the people laid off, but for him, it's not the end of the world. He’s planning to go to graduate school in the fall.
But he thinks the city should come up with some way to ease the pain for small businesses. “It’s very complicated, obviously,” he said. “I’m just glad I don’t have to come up with the answers.”
Warwood thinks the increase in the minimum wage should probably be phased in, otherwise it would be “such a huge jump.”
Heather Hodge doesn't think she will lose her job if the minimum wage rises. She’s 24 years old and the lead baker at The Confectional’s Broadway location, the one that owner Sund said is most likely to close if the minimum wage rises.
Hodge has a degree in pastry arts from the Culinary Institute of America, and she’s also worked as a server, bartender, and personal chef. She already makes about $15 an hour, so an increase in the minimum wage wouldn’t have a big impact on her paycheck. But she believes something needs to be done to help workers.
“I am absolutely in support of the $15 minimum wage,” she said. “I feel like this needs to happen, there is inequality across the country that is growing so vast. I mean, it’s overwhelming.”
With an increase in the minimum wage, Sund said what might happen is that a baker with a culinary degree, like Hodge, might end up making the same wage as someone with little experience working the counter. Sund would have to consider how to compensate those with special training or skills.
Though Hodge is in support of raising the minimum wage, she also worries that small restaurants in particular will be hard-hit by any sharp increase in the minimum wage.
“I do not want to see my favorite restaurants here in Seattle struggle and potentially close because they have to pay their servers $15 plus tips,” she said. “Those servers are already doing quite well, much better than I am.”
Hodge, as well as Sund, supports allowing restaurants to count tips towards the $15 minimum wage. That’s the so-called “tip credit.”
Sund said she agrees with her employees that there is too much income inequality nowadays. She sometimes wonders, with the gap between rich and poor increasing so dramatically, is this how capitalism ends?
“I don’t know how to address that issue, but I am not sure that it’s being addressed by further hurting the middle class. It seems very much to me a little like cannibalism, we are hurting ourselves,” she said.
The city’s political leaders are considering measures that might help ease the strain on small businesses, like phasing in a minimum wage increase, allowing restaurants to include tips in the total wage, and exempting small businesses entirely.
But one group that is pushing for the minimum wage increase, 15 Now, is fighting all of those exceptions. The group has said that they would pursue a ballot measure to avoid certain compromises.
Income Inequality Debate