What you are not considering with minimum wage initiative 1433

Minimum wage has claimed headlines once again in Washington with I-1433, but this time, there’s a twist – a twist that squeezed out a little truth.

And it couldn’t have happened at a more opportune moment to illustrate why Washington voters should reject I-1433.

A group of I-1433 supporters recently held a press event to encourage voters to pass the initiative that would raise the statewide minimum wage to $13.50 and require that employees receive up to seven days of paid sick leave each year. But as King 5 reports, the crowd got an unexpected bit of truth from one of the business owners in attendance.

Felix Ngoussou, the Lake Chad Café in Seattle’s Central District, told the crowd:

You raise the wage, you have to control costs. I used to have four (employees), but now I have two. At the end of the day, we resolve one problem but we create more problems to come.

Ngoussou did say that I-1433 is a good initiative, but it is incomplete. He argues that it won’t apply to every community.

Maybe you can apply it in Capitol Hill, Bellevue, or Redmond, but you cannot apply it in poor neighborhoods like Tukwila or SeaTac or the Central area.

The cost factor of I-1433

Another angle on this comes from Preston Cooper with The Seattle Times who claims that the wage problem I-1433 addresses only exists for young people. But extend the logic. It exists for everybody.

The Times points out that if you are a young person, you likely have no work history and therefore have difficulty getting that first job. Now, at the federal level, there are rules that allow employers to pay people under 20 less than the minimum wage for the first 90 days of employment, but we cannot take advantage of that in Washington. Younger workers have to get $13.50 an hour.

It’s some factual background, but it misses the mark. Here’s the question that the Times misses in all this: What is the crossover point? What is the magic number when an employer says they can afford you, or they can’t?

If you are in an industry like software, you can probably afford $13.50 an hour. If you are a grocery store or a fast food restaurant, your profit margins are about 1 percent. Labor is the largest cost. Raise the cost of labor and that 1 percent gets chipped away at.

How can businesses make up for that?

The tech factor

Which industries do young people gravitate toward because they can get a start? Well, places like fast food, grocery stores. Under I-1433, they won’t get those jobs anymore.
Who will? Displaced adults who are being displaced by technology.

You have brilliant software executives whose sole job it is to look at these numbers. And they see that someone who stocks shelves at $13.50 an hour can be replaced by a robot at $6 an hour.

This is what happens when you forcefully speed up the progress of technology — when you violate market principles. That’s what this initiative does. It will force people to get creative to get around the largest costs of their business. Whether that’s cutting jobs, or having technology step in.

Don’t vote for this initiative if you value entry-level jobs — and jobs in general — in Washington.