Minimum wage debate pits small business survival against workers needed pay

The collision is coming. Seattle City Councilmember Joy Hollingsworth renewed the battle over minimum wage by introducing a new proposal Tuesday.

“I am trying to find a solution that works for everyone to protect small businesses and so workers can have jobs and make a minimum wage as well,” the District 3 member told The Seattle Times. Hollingsworth wants to extend tip credits, possibly permanently, that would be counted as part of the minimum wage.

The minimum wage hit the $20 milestone in 2024 for the city’s largest employers, small businesses with 500 or fewer employees faced a minimum wage of $17.25 an hour, unless they contributed to their employees’ medical benefits or the employees earned sufficient tips.

But the tip credit is ending at the end of the year and struggling small businesses say they may not be able to survive.

As the credit for tips and benefits for companies with fewer than 500 employees nears its expiration, industry advocates warned of a steep wage hike that could threaten the survival of small restaurants and bars. They argued that wages could surge nearly $3 an hour, a daunting prospect for establishments still licking their wounds from the pandemic’s onslaught.

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Hollingsworth’s legislation sought to make the tip credit permanent for small businesses, adjusting the inflation increase rate for them differently than for large companies. It also proposed allowing employers to count commissions and bonuses toward total wages.

Sawant, now on the outside looking in, lambasted the proposal as a betrayal of the landmark law she had fought for, a law that had lifted countless workers from poverty, particularly benefiting women and people of color.

“We’re talking about things that I thought we settled years ago,” KIRO Newsradio host Gee Scott said on “Seattle’s Morning News” (SMN). “I think being a small business owner is really difficult and tough, but stick to the plan.”

Gee said that even with the new minimum wage, it’s difficult to survive in Seattle.

“I think it should be on the business owner to make it work,” David Burbank, SMN producer, said. He said workers need a consistent paycheck and to know what they are making.

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The city council staff’s analysis painted a stark picture: “Due to higher than usual inflation resulting from the COVID-19 pandemic, the gap between the large and small employer minimum wages grew farther apart in recent years, making the transition to a single minimum wage a more significant change than anticipated.”

It was clear that without intervention, some small employers may face a crisis.

The credit’s origins traced back to the political chess game of 2014, when the city embraced a new higher wage law, tying the minimum wage to the inflation rate in the Consumer Price Index for the Seattle Tacoma Bellevue area. This law, championed by then-District 3 leader Kshama Sawant, aimed to uplift workers through phased pay rate increases, with different scales for large and small employers.

As The Seattle Times reported, the bill’s introduction was imminent, with the council racing against time to enact the change before the fall’s budget process commenced. The question is: Would this proposal be the salve for struggling businesses or a step back for hard-won worker rights?

Bill Kaczaraba is a content editor at MyNorthwest. You can read his stories here. Follow Bill on X, formerly known as Twitter, here and email him here.