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Seattle Mayor Bruce Harrell claims that next year's increased minimum wage will boost the local economy, but the Washington Hospitality Association disagrees.
Starting Jan. 1, 2025, all Seattle employers regardless of size will be required to pay their employees at least $20.76 an hour.
Currently, Seattle’s smaller employers can pay their workers a minimum $17.25 per hour if they pay $2.72 per hour toward medical benefits, or if the employee earns $2.72 per hour in tips. But that is set to expire at the end of this year with no plans from the city to extend that tip credit.
Washington Hospitality Association President and CEO Anthony Anton said Seattle restaurants are already facing the pressures of increased labor costs at a time of thin profit margins.
According to Anton, Washington’s profit margin is now 60% lower than the national average, with the average restaurant running a 1.5% profit margin. Anecdotally, Anton has heard Seattle restaurants have an even tougher profit margin because of the higher labor costs.
Since the pandemic, costs for restaurant customers have continued to increase, while the workforce has decreased. The lack of a tip credit could make this worse.
Harrell previously said that the increase in minimum wage for all employers would be a positive for workers and the local economy. When the King County Council discussed a minimum wage increase for unincorporated parts of the county, County Councilmember Teresa Mosqueda said a higher minimum wage means workers have more money to spend in the local economy.
Anton counters that if that were true, there would have been an increase in business traffic.
The Washington Hospitality Association is now advising businesses to make the changes they need to make, because “no relief is coming.”
“Going deeper and deeper into debt after COVID-19 isn’t the answer,” Anton told The Center Square during a phone interview. “We’re not going to see an improvement in this city and so make the changes they need to stay in business.”
The organization is now focused on sharing ideas for small businesses in Seattle to stay afloat amid the upcoming minimum wage hike.
One way restaurants may adapt to higher labor costs is by cutting staff levels, which are already low. The average Washington restaurant has three fewer employees than the nationwide average, which can result in poorer customer service.
Some restaurants may consider removing tips, but that would impact servers, who make an average of more than $20 an hour in tips in Seattle. Ironically, Seattle customers have pushed backed on the removal of tips in the past, according to Anton.
Last August, Seattle City Councilmember Joy Hollingsworth proposed a bill to extend the city’s $2.72 tip credit, but pulled the legislation just three days after it was initially introduced.
Harrell himself acknowledged the impact that the minimum wage increase will have on small businesses and said his office is committed to addressing many of the pressures businesses are facing.
According to Anton, the Washington Hospitality Association has not heard from the city in any of its attempts to reach out for feedback.
“Unless there is actual action, it’s just words,” he said.