One employer who would be impacted by passage of the proposed “living wage” ordinance in SeaTac, scheduled to go before voters November 5, says the new mandate would put him out of business.

The ordinance targets certain employers in the hospitality and transportation industries to new “minimum employment standards.”  Hospitality employers include the retail and food service concessionaires at SeaTac airport and hotels with more than 99 rooms.  Transportation employers include car-rental companies with a fleet of more than 100 cars, shuttle services with more than 10 vans or buses and parking lot operators with more than 100 spaces.  Transportation employers also include a comprehensive list of employers with 25 more employees who provide a variety of services to airlines, such as baggage handling, aircraft interior cleaning and facility maintenance services. 

The new “minimum employment standards” include a minimum wage of $15 per hour and paid sick leave for all employees.  It also includes union-esque mandates requiring employers to “promote full-time employment” by offering any additional work hours available to existing part-time employers before hiring additional part-time employees and requiring new airport contractors and concessionaires to hire workers who lose their jobs when old concession contracts expire.  Reflecting the union backing of the proposal, the ordinance even specifies that if the new “successor” contractor or concessionaire does not have enough jobs to hire all of the displaced workers, the jobs available must be awarded based on “seniority.”

Interestingly, the proposed ordinance prohibits any covered employer and employee from negotiating or altering these requirements—unless the employer and employee are union-shop and the negotiating/altering is part of a Collective Bargaining Agreement.  So non-union employers and workers are held to the letter of the ordinance, while unions are free to negotiate with their workers.

Actions have consequences, and there becomes a point at which an employer can no longer remain profitable when forced to pay artificially high wages and benefits. 

In the case of the SeaTac proposal, the wages paid by some employers will increase 63%, from the current state minimum wage of $9.19 per hour to $15.   It is estimated around 6,000 workers will earn the new wage.  That pencils out to $72 million per year in additional wages for employers impacted by the proposal.  Many of these employers will not be able to absorb this dramatic increase.  Nor can they simply pass the cost along to consumers. 

Because the proposed ordinance targets employers of a certain size, their smaller competitors will not have to contend with a 63% increase in payroll.  This means their competitors’ operating costs will not increase, so their prices will not need to increase.   And restaurants located within hotels will similarly be at a competitive disadvantage, because the ordinance does not apply to restaurants outside of hotels.   So a restaurant inside a hotel would be forced to pay its wait staff $15 per hour, while the wait staff in the restaurant next door would continue to earn $9.19 per hour.

And for food vendors in the airport, their concession contract with the Port of Seattle requires them to set their prices in line with non-airport prices. 

As Brett Habernicht, owner of a Quiznos sandwich shop in the airport, explains, he has to match the prices of other Quiznos franchises that operate outside of the airport, regardless of the increased fees he has to pay to do business there.  Habernicht says he pays $14,000 per month to lease space in the airport, compared to the typical $2,500 to $3,000 a Quiznos franchise pays in off-airport locations. 

"The $15 an hour minimum wage would - I'll tell you right now frankly, and I'm not exaggerating - it would put us out of business. It would absolutely put us out of business," says Habernicht. 

Habernicht says his shop isn’t the only that will close if the proposal becomes law.

"If this initiative passes, they are literally going to have to pay people to do business within the Port of Seattle at the airport because there is absolutely no way to make a profit."

The Washington State Lodging Association reported earlier two of its hotel members will close their on-site restaurants, which employ 228 workers, if the new wage becomes law. 

Employers are in business to make a profit, and for many this proposed wage and benefit will be the tipping point.  Earning $15 per hour will be nice, for those workers who still have a job.