Seattle Minimum Wage Debate: The Pros and Cons

Last month at the McDonald’s annual meeting there were thousands of protesters who gathered at the company’s headquarters to fight for higher wages. They were calling for minimum wage to be raised to $15 per hour. The protesters argued that at their current rate of pay (they receive on average $8 or $ 9 per hour), they cannot pay their bills.

In that same vein there is a bill that has been introduced to raise the federal minimum wage to $10.10 per hour.   And just recently the CEO of McDonald's Don Thompson, said he would support the bill to raise the federal minimum wage from its current rate of $7.25 to $10.10.

The Seattle City Council decided not to wait and see if the federal bill would pass and instead passed its own ordinance which would require all businesses in the city to increase their pay levels up to $15 per hour over the course of three to seven years. It’s estimated that around 100,000 individuals (around 25%) of the Seattle workforce would be positively affected by the pay raise. How quickly a business must raise wages depends on its size according to the ordinance. The changes will be made in phases and will be based on the number of employees a company has on its roster.  According to the provisions of the ordinance, the more employees a company has, the quicker the wages will increase.  The ordinance and ultimately wages will begin increasing April 1, 2015. There is much discussion about increasing the minimum wage.

Here are the top 3 pros and cons regarding the minimum wage increase:

PROS:

• By increasing the minimum wage jobs will be created for Americans because there will be more purchase power.
• Higher minimum wage will decrease turnover and reduce training costs.
• Government expenses for social programs aimed at the poor (such as food stamps, Medicaid) would be reduced.

CONS:

• By increasing the minimum wage, a larger burden is put on small business forcing them to cut employees; increasing unemployment.
• The higher minimum wage could provide an incentive for employers to invest in technology and machinery to increase productivity rather than human resources.
• Prices might be increased to offset higher labor costs.

Whether you like the idea of raising minimum wage or not, the country will certainly be watching how the economy of Seattle fares over the next few years as their minimum wage increases take effect.  There will most likely be many that follow the city of Seattle if they have positive financial outcomes.