An analysis completed Thursday is the first to show what exactly might happen to the collective payroll of Tacoma businesses if either $12 or $15 becomes the minimum wage.
The report, conducted using reliable statistics provided by businesses, contains findings for both sides to love and hate.
Opponents of the $15 minimum wage have said that it amounts to an almost 60 percent increase in wages overnight. While technically true when measured from the current minimum wage of $9.47, the data show no industry would face that radical of an increase. The largest jump would be a 17 percent increase in payroll for hotels, restaurants and bars.
Still, $15 opponents say, asking a restaurant to absorb a 17 percent increase in wages overnight is nuts. In turn, the group in favor of the $15 minimum wage points out that raising the city’s wage floor to $15 will not have “an impact on the economy as a whole.” The total payroll of all Tacoma businesses would rise just 2.6 percent if their measure is adopted, the report shows.
“That’s where the discussion (has been): Is the Tacoma economy too fragile for what’s being phrased as a drastic change?” said Vince Kueter, spokesman for 15 Now Tacoma. “I think this shows it’s not a drastic change, and Tacoma can handle it.”
Supporters of the alternative $12 minimum wage measure don’t agree. The collective payroll proves nothing about what will happen to businesses if the wage raises rapidly, said Tom Pierson, CEO of the Tacoma-Pierce County Chamber.
“You don’t look at it that way,” he said. “You look at each business.”
Tacomans face two questions on the Nov. 3 ballot about the city’s minimum wage. The first is whether to raise it or not; the second is by how much to raise it: $15, which goes into effect immediately for almost all businesses, or $12 phased in over two years.
15 Now Tacoma requested the analysis from the state Employment Security Department in August. The group wanted to determine the measurable effect on payroll at the $15 wage.
Scott Bailey, a regional economist for the state, completed parts of that analysis early this week. 15 Now Tacoma shared it with The News Tribune. The paper then requested the analysis directly and asked for additional information that included the $12 wage floor.
Bailey emphasized that the Employment Security Department has no opinion on either wage initiative. “We are happy to provide data to anyone in the public who has questions,” he said via email.
To determine possible effects on jobs and payroll of businesses in Tacoma, Bailey used information provided to the state every three months, when businesses pay their unemployment taxes. Businesses report how many employees they have, what they earn and how many hours they work. Using that data for all of 2014, Bailey was able to analyze potential effects on “roughly 90 percent or more” of the jobs in Tacoma.
Federal jobs aren’t included, nor are home health care jobs, nannies and other private household employees, railroad staff and some jobs at religious schools and institutions.
Bailey’s analysis showed if $12 was in effect during 2014, the collective payroll of all Tacoma businesses would have risen 0.7 percent, or $35.6 million. 15 Now Tacoma says that calls into question whether the $12 measure would have any effect on workers.
“The reason that there’s barely any impact (with $12) is because $12 doesn’t do anything,” Kueter said. “It doesn’t bridge the living-expense gap and doesn’t make much of an improvement for low-wage workers.”
The co-founder of $12 for Tacoma, Kevin Hayes, said the measure is a compromise and would indeed affect both employees and businesses, including nonprofits.
“We say yes it will” have an effect, Hayes said. “Even just one small business is a precious business.”
Kueter pointed to data in the report that shows small businesses are doing well by their workers.
“In Tacoma, most employers were very small,” the report said — almost half of the businesses averaged fewer than five jobs in 2014. The analysis also notes people working for those small employers were more likely than others to earn more than $15 an hour.
“It’s primarily large employers who have low-income payrolls,” Kueter said. “Local small employers are, for the most part, already paying a living wage.”
Hotels, restaurants and bars in Tacoma will be the businesses most affected by any increase in the city’s minimum wage, the data show. Whether the minimum wage rose to $12 or $15, that sector would face the largest percentage increase in payroll: 17 percent under $15 and 5.7 percent under $12. Retail trade would the second most affected.
Kueter said it makes sense that the biggest cash donors to the $12 campaign are restaurants or their advocates.
The analysis shows that for almost all businesses in the accommodations and food service sector — 95 percent — more than one-third of their jobs were below $15. Kueter says that shows those businesses are underpaying their workers. They’re large employers and “we think they should pay more.”
Hayes of $12 for Tacoma said restaurants are small local businesses, too. Many employees of restaurants make more than $15 when tips are included, he said. Neither measure on the ballot accounts for tips, nor does the state analysis.
Pierson and Hayes said a $12 wage floor phased in over two years is simply a more reasonable approach. Approving a $15 minimum wage that would go into effect before the end of the year sends a terrible signal, Hayes said.
“We know it’s expensive to do business here, and (a high minimum wage is) just one more reason that potential employers might want to not set foot here,” he said.
Pierson said raising the minimum wage alone won’t raise people out of poverty, though he said it’s clear Tacomans do want a higher wage floor. The community must look at poverty holistically, he said.
“We need to make a generational change, not a monthly change,” Pierson said.
HIGHLIGHTS FROM THE REPORT ON TACOMA
4,170 employers in 2014
98,767 average monthly employment (both full- and part-time jobs)
$4.916 billion payroll
2,032 employers averaged below five jobs
IF $12 HAD BEEN IN EFFECT IN 2014
▪ Accommodations and food services payroll increase: 5.7 percent, or $9.3 million
▪ Retail trade payroll increase: 2.9 percent, or $9.1 million
▪ Construction, information services, banking, professional services, corporate offices, and state and local government payroll increase: 0.1 percent or less
IF $15 HAD BEEN IN EFFECT IN 2014
▪ Accommodations and food services payroll increase: 17.2 percent, or $28.2 million
▪ Retail trade payroll increase: 9.7 percent, or $30.1 million
▪ Construction, information services, banking, professional services, corporate offices, and state and local government payroll increase: 1 percent or less
Source: Analysis of state data by regional economist Scott Bailey