Minimum Wage Causes Problems for Small Businesses

December 17, 2013

SeaTac, Washington, is raising the minimum wage to $15 an hour and businesses are going to suffer, says the Wall Street Journal.

  • The SeaTac wage hike represents a 63 percent increase in pay, and it is the highest municipal minimum wage in the country.
  • The state of Washington already has the highest state minimum wage rate in the nation, at $9.19 per hour.

Han Kim is a partner in a SeaTac Holiday Inn Express franchise, along with two other hotels. He estimates that the wage increase for all three businesses will cost an additional $400,000 in labor expenses.

  • The business is already down to so few employees that they cannot eliminate positions, Kim says, and raising his prices is not an option as long as competing hotels keep their prices steady.
  • While Kim planned to build a fourth hotel in SeaTac, those plans are now on hold due to the wage increase.

Small businesses are especially concerned about the wage hike, because they say they have smaller margins than do larger businesses.

  • The new minimum wage applies to hospitality and transportation workers so far. Currently, small businesses with less than 25 employees and airlines are exempt from the new law.
  • Mike Condon, who runs a coffee shop in SeaTac, anticipates difficulty hiring workers. "Employees of my own that are well trained can go over to these jobs at the airport now and make more money than I can possibly pay them. With our margins, I would not be able to match those salaries and stay in business."

SeaTac is not the only place in the country interested in a minimum wage increase. Recently, fast food workers protested across the country for a $15 wage.

Source: Sarah E. Needleman and Daniel Lippman, "Businesses Stung by $15-an-Hour Pay," Wall Street Journal, December 12, 2013.

 

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