SeaTac’s Proposition 1 Would Harm the Workers it is Supposed to Help

By Erin Shannon, Director of Small Business

Voters in the City of SeaTac will soon vote on Proposition 1, the controversial initiative that would impose a super-high minimum wage rule on businesses at Sea-Tac International Airport, and on businesses that rely on the airport, such as nearby hotels, car rentals and parking lots.

Unprecedented in scope, Proposition 1 would burden certain non-union employers with a series of labor mandates, including a $15.00 per hour super minimum wage and mandatory paid sick leave rules. If it becomes law, Proposition 1 would also force union-style requirements dictating how employers hire employees and how many hours they may work. Ironically, union executives drafted the measure to exempt themselves from its mandates.

Supporters of Proposition 1 say it would raise wages for 6,300 targeted workers, increasing spending and injecting more money throughout the region. They dismiss concerns over the increased cost of doing business in the City, arguing employers could easily absorb the increases by raising prices on consumers. It may sound easy, but the reality would be much different.

While it sounds generous to vote for a super-high minimum wage, it is not cost-free; someone has to pay for it. The money would come immediately from employers, later from consumers, and eventually from the very workers the measure is supposed to help.

Employers with workers earning the state’s minimum wage of $9.19 per hour would see their labor costs increase 63%. Supporters admit the targeted workers already receive an average wage of $11.03 (not counting tips). A forced increase to $15.00 per hour would be a still-staggering 36% increase, or $52 million a year, in the cost of doing business in SeaTac.

So the money supporters claim would be injected into the local economy is not free, it would be extracted from the 72 businesses estimated to be impacted by the new law. The average cost increase would be $722,500 per covered employer, per year.

Supporters say these employers would simply need to increase their prices to pay the super-high mandated wage. That may work out on paper, but it doesn't translate in the real world.

The initiative is written to unfairly target some businesses, but not others, and it provides a special exemption for union businesses. That means Proposition 1 would give unions and some businesses a market advantage over others.

Also, businesses at the airport must charge the same prices they charge elsewhere, so air travelers don’t get gouged. The owner of a Quiznos sandwich shop at the airport says that rule means he could not absorb higher costs and he would have to shut his business down if it passes.

Proponents further claim the increase in earnings and spending would result in more revenue for local governments.

But they conveniently forget the added cost to the City of SeaTac, which would be responsible for monitoring, investigating and enforcing a new law that supporters admit is only meant for about 20% of SeaTac residents. The costs associated with administering the new law would be borne by everyone in SeaTac, while just a fraction of SeaTac residents would get a wage hike. Perhaps surrounding local governments would enjoy increased revenue when their residents who work in SeaTac come home and spend their new wages, because only the businesses and government of SeaTac paying would be paying the tab.

Proposition 1 is unfair because unionized businesses would be exempt. Unions would be allowed to avoid the costly mandates through collective bargaining. Non-union employers and workers would feel the full force of the law.

Proposition 1 is bad policy for many reasons, but the bottom line is whenever government imposes a higher cost of doing business, employers are forced to raise prices or take other mitigating steps. It is not reasonable to believe 72 employers will simply absorb this huge increase without loss of business and jobs.

Proposition 1 means employers may lay off employees or reduce work hours; cut benefits; award lower pay increases to workers earning more than the minimum wage; cancel expansion plans; relocate to bordering cities; or simply go out of business.

All these actions, in some form, ultimately harm the workers Proposition 1 is supposed to help, as is happening in other cities that have passed similar measures.

Erin Shannon is director of the Center for Small Business at the Washington Policy Center, a Seattle-based, nonpartisan think tank that promotes public policy based on free-market principles. This op-ed piece is based on Shannon’s study, “Citizens’ Guide to Proposition 1,” which is available at washingtonpolicy.org.

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