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Seattle restaurant industry caught in the middle of $15 minimum wage debate

April 30, 2014 at 6:12 PM EDT
Seattle’s push to raise the minimum wage to $15 has left owners and workers in the city’s restaurant industry conflicted. Caught between moral pressure on the one hand, and market pressure on the other, many businesses warn that such a hike could cut benefits and raise prices. Economics correspondent Paul Solman reports from Seattle.
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JUDY WOODRUFF: Senate Republicans today successfully blocked a bill that would have gradually raised the federal minimum wage to $10.10 an hour. That would have been a boost from the current minimum of $7.25.

Our economics correspondent Paul Solman has been sampling opinions opinion on raising the minimum wage in Seattle, where it is already higher than the federal limit.

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

PAUL SOLMAN: Third Wednesday of month, homeless cooking day at Seattle’s St. Clouds Restaurant. Volunteers bring fresh produce. Owner John Platt takes care of main course, and together they cook up some 500 restaurant-quality meals for seven area shelters.

JOHN PLATT, Co-Owner, St. Clouds Restaurant, Seattle: I look at the homeless problem, and I do not know what to do about it. But I know they are hungry, so we feed them.

PAUL SOLMAN: So, is liberal John Platt on board with the city’s pending $15 minimum wage?

JOHN PLATT: I can’t even fathom it.

PAUL SOLMAN: Five miles north, in the university district, the original Dick’s Drive-In, a small local chain and Seattle icon founded by Dick Spady in 1954, now run by son Jim and granddaughter Jasmine. Dick is most as famous for its benevolence towards its employees as for its burgers, shakes and fries.

The company starts worker as the $10.25 an hour, and then $10.75 after three months, well above the state’s minimum wage of $9.32, already highest in the nation. It also offers merit raises, bonus pay and:

JIM SPADY, Co-Owner, Dick’s Drive-In Restaurant, Seattle: One hundred percent employer-paid health insurance.

WOMAN: Employer-paid dental.

JIM SPADY: A 401(k) with a 50 percent employer match.

WOMAN: A smoking cessation program.

PAUL SOLMAN: Even a scholarship program, $22,000 over for years. They are staunch supporters of the less advantaged here, but a $15 minimum wage?

WOMAN: You are hurting those very people who are struggling now.

PAUL SOLMAN: Finally, the Palace Kitchen, headquarters of the 14 restaurants employing 800 people owned by multiple James Beard Award winner Tom Douglas, who made headlines when he raised the wage from all of his back-of-the-house workers, from dishwashers to chefs.

TOM DOUGLAS, Co-Owner, Tom Douglas Restaurants: We have been talking and talking for a couple years in our country about trying to somehow respect our profession. And so my wife and I decided to try and kick-start our kitchens to a $15 minimum wage for cooks.

PAUL SOLMAN: So, presumably, Douglas supports the $15 proposal.

TOM DOUGLAS: It makes me nuts.

PAUL SOLMAN: Three progressive businesses in an industry that, get this, employs 10 percent of the U.S. work force, accounts for 50 percent of all Americans working at or below minimum wage, though with waitstaff, below is before tips. And yet they are all conflicted.

JOHN PLATT: It seems like oh, man.

PAUL SOLMAN: That’s because these restaurants, like many businesses, feel whipsawed by market pressure on the one hand, moral pressure on the other.

As someone whose business often doubles as a local relief agency, John Platt seemed the most pained.

JOHN PLATT: I would call it a tax. You want to raise minimum wage, you are going to pay more to go out to eat. So far, so much of the conversation has been about, these people deserve this. But are the people with money in their pockets ready to stand up and say, sure, I just put into my budget another couple thousands a year to go out to eat?  Certainly, the first reaction is going to be, whoa.

PAUL SOLMAN: At Dick’s Drive-In at least, customer opinion was less than definitive.

MAN: Is it time to raise the minimum wage? Yes.

PAUL SOLMAN: So, you will pay a little more for a hamburger, for example?

MAN: Yes, I would.

MAN: I think it’s a bad idea.

PAUL SOLMAN: Why?

MAN: You have to learn a trade or some skills before you expect to get paid a full wage.

PAUL SOLMAN: Would you pay a little more money to have the wage lifted some?

WOMAN: Yes.

MAN: But what jobs are going to get put by the wayside? What is going to happen to the individuals here?

PAUL SOLMAN: Individuals like Anne Stevenson, who has worked at Dick’s for a decade, earning a bachelor’s degree along the way.

ANNE STEVENSON, Employee: I would be probably be swimming in a lot of student loans right now without their help.

PAUL SOLMAN: She now makes $13.50 an hour, isn’t sure she wants a legislated raise.

ANNE STEVENSON: Sure, it would be nice to make $1.50 an hour, but everything is just going to go up to compensate for how much the minimum wage is going to go up.

PAUL SOLMAN: Dick’s owner say a $15 minimum wage would raise their labor costs by $1.5 million, and that, in addition to raising prices, they might have to cut benefits. So the Spady family wants any new minimum wage law to take total compensation into account.

JIM SPADY: For me, a smart minimum wage would take into account benefits. Businesses like ours that are providing scholarships and health insurance, you should get some credit for that when you are looking at how much you are paying your employees.

PAUL SOLMAN: High-end restaurants also want a credit for tips. While most states let restaurants pay waitstaff a sub-minimum wage, as low as $2.15 an hour in some places, assuming tips are the real income source, Washington is one of only eight states that doesn’t.

And, at Palace Kitchen, says Tom Douglas:

TOM DOUGLAS: Waiters already make between their almost $10 minimum wage here and their $30 to $40 an hour in tips. I would say a full-time waiter in a high-price house could easily make $75,000, $80,000 a year.

PAUL SOLMAN: But the minimum wage campaign points to all the waiters and waitresses who scrape by and fears that the exceptions to the law will multiply or be manipulated by employers.

City Councillor Kshama Sawant:

KSHAMA SAWANT, Seattle City Council: One of the things they like to talk about is what they call tip credit, which means that if you are a tipped worker, then your hard-earned tips will count as wages.

(BOOING)

KSHAMA SAWANT: Boo.

PAUL SOLMAN: But for restauranteurs like Tom Douglas, a no-tip credit $15 minimum will force him to raise prices and likely lose profits.

TOM DOUGLAS: I don’t have the margin to just absorb the difference in pay. So, at the end of the day, it’s going to come down to the customer. The customer is going to vote to either go out to eat or not. And that’s just — that’s not one side or the other. That’s just reality. That’s the facts. And so we’re going to find out what happens.

PAUL SOLMAN: Of course, it’s not just the restaurant owners who don’t know the unintended consequences.

LIZ DELANEY, Waitress: It would be amazing if I could earn $15 an hour, plus my tips. That would be great.

PAUL SOLMAN: But, says Liz Delaney, a waitress at a non-James Beard Award-winning establishment:

LIZ DELANEY: My boss might not be able to pay me $15 an hour. And so I could possibly lose my job and then not be able to live.

PAUL SOLMAN: In the end, people on both sides of the cash register are torn with regard to hiking the minimum wage to $15.

JOHN PLATT: There are studies that say it doesn’t depress spending or something like that. We all know we’re speculating when we start going — raising it 60 percent. That’s a wildly different number than has ever happened before. And…

PAUL SOLMAN: You’re scared.

JOHN PLATT: I’m very scared, yes.

PAUL SOLMAN: So are a lot of people in restaurants these days and plenty of other industries in Seattle.

GWEN IFILL: You can read more from restaurant owner John Platt about why he thinks Seattle is being too hasty getting behind a $15 minimum wage. That’s on our Making Sense page.