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How much does it really cost to live in a city like Seattle?

April 22, 2014 at 6:40 PM EDT
In Seattle, there is a growing push to raise the minimum wage 62 percent to $15 an hour, which the University of Washington has calculated as the minimum cost of living for an adult with one child. But would the benefits of the wage hike actually outweigh the costs? Economics correspondent Paul Solman reports.

GWEN IFILL: The battle over raising the minimum wage may be at a stalemate in Washington, D.C., right now, but, in Washington State, the fight is still under way.

Our economics reporter, Paul Solman, has the next in his series of stories on that subject, this one on just how much it really costs to live in a city like Seattle.

It’s part of his ongoing reporting Making Sense of financial news.

PAUL SOLMAN: In Seattle this spring, rallies to raise the minimum wage, but not to the $10.10 being debated nationally. Here, they’re talking about $15 an hour citywide, 62 percent higher than this year’s inflation index state minimum wage of $9.32, already highest in the nation.

PHILIP LOCKER, Socialist Alternative Party: Wall Street and big business crashed the economy. They got bailed out. They’re making record profits. But working people are faced with what? Poverty wages, low wages, McJobs, student debt. What’s our future?

PAUL SOLMAN: Philip Locker helped run Kshama Sawant’s surprise election to the Seattle City Council last fall on a $15 minimum wage platform.

The mayor and seven of the other eight council members now support the proposal of their unapologetically socialist colleague, a Mumbai-born economist who donates two-thirds of her $120,000-a-year salary to what she calls social justice causes.

KSHAMA SAWANT, Seattle City Council: A real class struggle like the fight that we’re seeing in Seattle will energize and empower workers, raise their confidence and morale.

Socialism, after the fall of the Soviet Union, China becoming a purely capitalist country, Hugo having not succeeded? Socialism, really?

KSHAMA SAWANT: The only reason you’re talking to me is because an out-and-out socialist got elected in a major city in the United States with nearly 95,000 votes. There’s no stigma. Time for working people to lose the shackles off here and march ahead.

PAUL SOLMAN: But why exactly $15? Well, that’s what University of Washington researchers have found is the self-sufficiency wage in Seattle for an adult with one child, the bare minimum, that is, for survival without public or private help.

Union leader David Rolf co-chairs the mayor’s minimum wage committee.

DAVID ROLF, Co-Chair, Seattle Income Inequality Advisory Committee: There is a lot anger in our community about what’s happened to wages in — not just recently, but over 40 years in America, that we have seen essentially economic growth since the late 1970s that has been unaccompanied by any wage growth for the bottom 90 percent of income earners.

PAUL SOLMAN: That’s in stark contrast of wage growth all Americans saw from the 1940s through the 1970s. If paychecks had kept pace with economic growth, says researcher Lori Pfingst.

LORI PFINGST, Washington State Budget & Policy Center: The minimum wage today would be anywhere from $15 to $22 an hour, depending upon how you measure it.

PAUL SOLMAN: After college, I drove a cab — this was 1970 — at $3 an hour, including tips. That’s somewhere between $18 and $45 an hour today, according to the authoritative Web site Measuring Worth, more than many college grads make now.

KAILYN NICHOLSON, Minimum Wage Activist: Some of us work full-time, but get paid $10 an hour. Some of us get paid more than $10, but only get to work 25 hours a week. And either way, it’s really hard to make ends meet.

PAUL SOLMAN: Kailyn Nicholson, B.A. from the University of Washington, works in child care, serving the kids of low-wage workers.

KAILYN NICHOLSON: I have a third-grader who makes dinner for his two younger brothers every night because his mom is still at work. And these are people who are receiving all the federal benefits that they’re eligible for, and the parents are still working two jobs, and just never getting ahead, never getting ahead.

And what really breaks my heart is, you know, I’m trying to motivate the kids to work hard and do well in school and get good grades, promising them that there’s a better life waiting for them if they do that, but I don’t know that there is.

WOMAN: Business is outraged that workers are demanding $15.

PAUL SOLMAN: Well, this being progressive Seattle, we found little outrage among business owners, but at a city council hearing, plenty of concern.

WOMAN: We will have to reduce our hours.

WOMAN: There will be 20 to 30 percent fewer entry-level jobs.

WOMAN: Many people that own their businesses are going to have to shut down.

MAN: Yes, I’m for paying people more.

PAUL SOLMAN: Even some of the workers were skeptics.

MAN: But if it’s going to cost me my job, oh, hell no.

PAUL SOLMAN: Again, researcher Lori Pfingst:

LORI PFINGST: Overwhelmingly, of the hundreds of studies that have been done — and they have been done on real world examples from around the country — there’s no impact on employment when you modestly increase the minimum wage.

PAUL SOLMAN: But this is a significant increase.

LORI PFINGST: That’s right. What we don’t know from the literature, because this hasn’t been tried before, is what happens when you do that.

PAUL SOLMAN: But we do know, as econ 101 teaches, that if the cost of labor rises and, therefore, so do prices, some customers will bolt.

JULIE HYATT, Global Fulfillment: I’m going to have a hard time competing and getting work here in here if I have to pay $15 an hour.

PAUL SOLMAN: Especially when the competition is in low-wage climes like Mexico or China, says Julie Hyatt, who owns Global Fulfillment, a company that assembles printed material, much of it by hand.

JULIE HYATT: We would lose work now because we’re already not the cheapest. Being in Seattle makes us more expensive just to start.

NICK HANAUER, Second Avenue Partners: I’m in the manufacturing business. I understand that, the sort of visceral fear that some of them feel about this change.

PAUL SOLMAN: Seattle multimillionaire investor and entrepreneur Nick Hanauer is a leader of the $15 wage movement, but he still helps run his family’s pillow company.

NICK HANAUER: And, indeed, we have factories where we do not pay workers $15. If my competitors pay $10 and we pay $15, we will surely go out of business. A great challenge we face in the city of raising the minimum wage to $15 is precisely that dynamic.

PAUL SOLMAN: But, look, says Hanauer, every economic decision involves tradeoffs. It boils down to weighing the costs against the benefits.

And in this case:

NICK HANAUER: The benefits overwhelm the costs. When worker compensation goes up, everyone benefits, right, because those workers both go buy more stuff and need less services from taxpayers.

PAUL SOLMAN: Or, as Seattle writer David Goldstein puts it:

DAVID GOLDSTEIN: Some people are winners, and some people are losers. What you want is a policy that raises as many people up as possible.

PAUL SOLMAN: But what about the losers, asks Julie Hyatt?

Julie Hyatt: There are people now that are making minimum wage who may have a criminal background. They may not have a GED. Where are they going to go?

PAUL SOLMAN: Worst-case, they wind up even more dependent on government services, or nonprofits like the Downtown Emergency Services Center, a third of whose 520 employees make near the current minimum wage.

A $15 minimum wage would cost the center well over $1 million, says director Bill Hobson.

BILL HOBSON, Downtown Emergency Services Center: Which in an organization such as this one would invariably be translated into reductions in service. There will be more disabled homeless people on the street cycling in and out of jails, out of hospital emergency departments.

PAUL SOLMAN: And yet, in the end, Hobson supports $15 an hour because the benefits outweigh the costs, he thinks.

KSHAMA SAWANT: Big business, all industries, with no exceptions, will pay $15 an hour on January 1, 2015, to all its workers.


PAUL SOLMAN: Well, not so fast.

Even socialist Sawant now seems willing to offer small businesses and nonprofits a three-year phase-in. So will the $15 minimum wage happen here?

DAVID GOLDSTEIN: That’s not a number you can back down from anymore. Whether it survives at the ballot after the business community spends a few million dollars to try to defeat it, that’s another question.

PAUL SOLMAN: We will keep you posted.