Sea-Tac’s $15 Minimum Wage – What Does It Mean If It Succeeds?

On Election Day, there were two measures to raise minimum wages.  New Jersey voters agreed to boost their state’s to $8.25, one dollar above the federal rate.  The other increase was rather larger.  The Washington city of Sea-Tac had a proposition to lift theirs, for 6,300 workers connected with Seattle-Tacoma International Airport, to $15.00.  The success of that proposition is still unknown, with votes still being tallied and a recount all but certain afterwards.

Washington already has the highest minimum wage of any state, at $9.19.  Those favoring a higher level for Sea-Tac airport, restaurant, and rental-car workers, the scope of the ballot proposition, have cited the stimulus effect of higher pay and an end to workers’ poverty.  The change, as with that already passed in New Jersey, would also include cost-of-living increases. 

The nature of the city is different from most others.  Sea-Tac was incorporated in 1989 from four small communities, which had grown because of the airport.  Its other large employers include the headquarters of Alaska Airlines and Horizon Air, offices of 80 of the Fortune 1000, and a federal detention center.  Sea-Tac’s jobs, about 40,000, make it a place where almost one and a half times as many work as live.   Median income of residents is around $29,000, close to what, at the new minimum wage, the lowest full-time income would be.  

Consistent with my previous posts, I oppose any minimum wage increases.  Workers whose jobs are worth less to their employers than the new pay level will lose them, sooner or later.  Instead of reducing inequality, such forced raises create more of it, between those working and those not.  Such a change costs positions at a point when the country is short almost 20 million of them.  Demand for even the lowest-paying jobs is already high enough.  And, even in the limited Sea-Tac scope, not every employer is a multibillion-dollar corporation – one story cited in the recent press was that of an immigrant and lifelong small-business owner, who had recently bought a hotel near the Seattle airport and has since been forced to put plans to hire more workers on hold.  

So why might this effort be happening in Sea-Tac?  The scope of the amendment makes that clear.  The jobs that would benefit not only center around the airport, but serve travelers from elsewhere.  Locals rarely rent cars or get hotel rooms, and they use airport restaurants less often than those just passing through.  In Central Florida, a strong vacation area with low local taxes, the easiest new revenue sources to get voter approval have been those targeted at tourists, such as hotel and rental-car add-ons.  It is tempting for any area to pay its expenses this way, but can also backfire as outside people become aware of it.  

In effect, Sea-Tac may be trying out a new tourist tax.  Seattle-Tacoma International Airport had 33.2 million passengers last year, vastly more than those living near it, and like others they actually spend more, per person, on airport-related services than on the flights themselves.  The change may well be successful; prices will go up, but if typical fast airport meals move from, say, $6 to $8, little pleasure-traveler revenue and almost no business-traveler income will be lost.  Rental cars already vary in price two-to-one or more from city to city, and Seattle’s going higher will be only a small factor as well. 

The worst disadvantage can be seen in other recent articles.  There has also been a movement to greatly raise the minimum wage in Seattle, a large city without such a high share of captive customers.  An NBC News piece even said that the Sea-Tac proposition may “set the national tone” as well.  Some poor-quality objections, such as the higher pay being “inflationary,” may do more damage than good, but the real problem could be if the airport area maintains its number of jobs and observers say that a higher minimum would, therefore, do well elsewhere.  The actual outcome for too many small businesses would be closer to what one Seattle seafood market owner expected if $15 per hour became the law there – jobs cut, prices up 5% to 10%, and, with price-sensitive customers, a possible loss of sales.  Cities where most business is done with locals will always have different considerations.

It would be great if people could all be paid more.  But there is no free lunch.  We will keep our eyes on how Sea-Tac fares, if the measure passes into law, but we should not be fooled into extrapolating its results inappropriately.  In the meantime, too many people want to work to justify forcing businesses to pay those already with jobs more than they, or their customers, can bear.