Minimum Wage Limbo Keeps Small Business Owners Up At Night

May 22, 2014

Jody Hall, owner of Cupcake Royale, was an early supporter of the mayor's plan to raise the minimum wage to $15. Now she is having serious second thoughts.
Jody Hall, owner of Cupcake Royale, was an early supporter of the mayor's plan to raise the minimum wage to $15. Now she is having serious second thoughts.
Credit KUOW Photo/Deborah Wang

As the Seattle City Council continues to debate a plan to phase in a $15 minimum wage, and as minimum wage advocates gather signatures to put an even stronger measure on the November ballot, businesses in the city are finding themselves in an uncomfortable position: in limbo.

Many businesses report putting off hiring, expansion or investment decisions until the outcome of the minimum wage debate is clear.

“People are just scared and they don’t know what’s going to happen,” said Angela Stowell, who co-owns 10 restaurants in the city. “They’re paralyzed by the uncertainty.”

No New Toy Store

For Seattle resident Hazel Roos, that means delaying a decision to open a new business in the city.

Roos is the owner of Paint Away, a pottery painting and glass fusing studio in Redmond.

Last year, Roos began planning to open a second business, closer to her home in Seattle. As the mother of three young kids, she thought there would be a market for a specialty toy store in her section of town. 

She created a business plan, was preapproved for a loan and had started looking for a location. She had hoped to open by this summer. “Now I see how fortuitous that was that I didn’t,” Roos said.  

Hazel Roos, owner of Paint Away in Redmond, had planned to open a specialty toy store near her home in Seattle. Those plans are now on hold.
Hazel Roos, owner of Paint Away in Redmond, had planned to open a specialty toy store near her home in Seattle. Those plans are now on hold.
Credit KUOW Photo/Deborah Wang

While she was busy searching for locations, Roos said she was not paying attention to what was happening politically in the city. It wasn’t until earlier this year she realized the city’s elected officials were serious about raising the minimum wage in Seattle to $15 an hour. “I did remember panic coming over me. I’m like, what are people talking about?” she said.

Roos’ business plan called for hiring two to three employees who would be making close to the current minimum wage. As a retailer, she expected margins would be extremely tight, since her main competition would be the online market.

An increase to $15 an hour “is not viable for a lot of small businesses. It just isn’t,” she said.

So Roos stopped scouting for locations, and she shelved her business plan. Even though she plans to take it up again next year, she “probably would not move forward with it. It’s just too risky," she said.

Restaurant Expansion On The Back Burner

That’s a sentiment you hear over and over again from owners of small businesses in Seattle.

Angela Stowell and her husband, chef Ethan Stowell, employ about 225 people in 10 neighborhood restaurants, including Anchovies and Olives, How to Cook A Wolf and Staple And Fancy.

Stowell said she and her husband had been in negotiations to open two new restaurants, one downtown and one in South Lake Union. Those plans are now on hold.

“Now we are having to draw back and say, ‘Well, can we actually do that? Should we be signing leases and proceeding with development?’ And I think right now, we don’t know,” she said.

The same is true for Dave Montoure, who owns West Five in West Seattle. Earlier this year, Montoure had been in discussions to open two new restaurants in the neighborhood. He had even signed letters of intent with developers.

Now those letters are in a drawer. He said there is no way to write a business plan for a new venture with the wage issue up in the air.

“It’s disheartening,” Montoure said. “I really want to be able to provide a good service here in my community, and it seems the powers that be here in Seattle make it very challenging for the small independent business owner to compete.”

Ethan and Angela Stowell own 10 neighborhood restaurants in Seattle. They have decided not to move forward on two new restaurants because of uncertainty over the minimum wage.
Ethan and Angela Stowell own 10 neighborhood restaurants in Seattle. They have decided not to move forward on two new restaurants because of uncertainty over the minimum wage.
Credit KUOW Photo/Deborah Wang

Serious Second Thoughts?

The sense of uncertainty extends even to those who have been public supporters of the mayor’s minimum wage plan.

Jody Hall owns Cupcake Royale, a collection of seven neighborhood coffee shops that sell artisan cupcakes and ice cream. She employs about 100 people.

Hall is a well-known advocate for progressive causes, like paid sick leave. She offers her employees health insurance and 401(k) contributions. She was an early supporter of the Mayor Ed Murray’s plan to reach a $15 minimum wage within two years, with a seven-year phase in for small businesses. 

Even though I signed support for a seven-year phase in with the mayor, this is keeping me up at night like nothing ever has.

But after publicly endorsing his efforts, she is having serious second thoughts. “I really have a hard time,” Hall said. “Even though I signed support for a seven-year phase in with the mayor, this is keeping me up at night like nothing ever has.”

Hall has several reservations about the plan Murray sent to the council.

It requires any business with more than 500 employees to reach $15 an hour within three years. Small businesses would get a seven-year phase in. Under the plan’s definition, local businesses like Pagliacci’s or Tom Douglas Restaurants would be considered in the same category as Target or McDonald’s, which Hall considers grossly unfair.

The plan allows restaurants to include some tips in the minimum wage, but that tip credit will be phased out. Restaurant owners are fighting to make that tip credit permanent.

Hall also worries about the size of the wage increase and that Seattle is going it alone.  

“There is no example, ever, where one city would be more than double the national minimum wage,” she said.

But Hall’s biggest issue is the possibility that an even more aggressive minimum wage package will succeed at the polls. The group 15Now is collecting signatures for a charter amendment. It would require big businesses to pay $15 an hour immediately, with a three-year phase-in for small businesses, like Hall’s, and no tip credit.

That would be devastating to her business, according to Hall. She guesses that half of her locations would close and about 50 people would lose their jobs.

Hall had been planning to open a new commissary kitchen in the city this year. She was looking at a space and getting ready to sign a letter of intent. But until it’s clear which minimum wage plan becomes law, she will not be making any big hiring or investment decisions, Hall said.

“I just felt that I don’t want to invest in more expense at this point, to kind of hold it and see what happens.” Hall said she will look at the idea again after the November election.

Until then, if she considers any new locations, they will be outside the city limits.