Future of living costs unclear with wage increase
Increasing prices, understaffing and the takeover of automation.
These are some of the worries community members have about the state’s recent minimum wage increase to $11. Those optimistic about the change argue it provides a better quality of life to minimum wage earners and are anticipating an increase in local spending.
Initiative 1433 was approved Tuesday, Nov. 8, 2016 in Washington, with 57.42 percent of voters supporting the increase in the hourly minimum wage. The minimum wage is set to increase incrementally until it reaches $13.50 per hour by the beginning of 2020.
The Washington Office of Financial Management predicts that without the initiative, the minimum wage would have risen to only $10.28 per hour by 2020 to adjust for inflation.
“My income will be a little bit more, but it probably won’t be enough to fully compensate for the prices going up.”
Adam Wright, associate professor in economics who studies labor, warns the Washington increase is “unprecedented” in how large it is, but believes significant price increases are unlikely.
Some local student workers remain worried, including Lucia Gomez-Elegido, who works at AB Crepes. She believes that with wage increases, businesses will cut the amount of hours they offer to employees.
“As a small business, it’s drastically impacting us on how many hours people work,” Gomez-Elegido said.
Gomez-Elegido also feels the wage increase will slow small business growth.
“We’re constantly trying to improve our supply with more organic foods, local foods. But as that price goes up, we can’t [afford] that, which is unfortunate because there’s so much potential,” Gomez-Elegido said.
The uncertainty surrounding potential price increases worries Gomez-Elegido, despite economists like Wright predicting little change.
“My income will be a little bit more, but it probably won’t be enough to fully compensate for the prices going up,” Gomez-Elegido said.
Wright said increasing prices could be possible in businesses that lack competition. This especially applies to small businesses for which paying workers is their greatest expense.
“The biggest issue long term is that as people become more expensive as an input to production, machinery or automation looks relatively cheaper,” Wright said.
Automation is inevitable, according to Wright. Wage increases may simply speed up the process.
“I think there will be a short term benefit to most workers working low paying jobs. I think the prices will increase a little bit but not necessarily on par with the new amount they’re making, so they’ll feel a little better off,” said Wright. “But in the long term this could mean the jobs they used to have won’t exist anymore.”
Jack Lamb, CEO and owner of Aslan Brewing Company, which employs a number of Western students, is optimistic about the future. He said all of the Aslan owners voted yes for the initiative.
Lamb’s background is in economics and he believes as minimum wage workers earn more money, they will start to spend more at local businesses like his own.
“We have no plans yet to increase anything in terms of prices, cutting hours or cutting number of employees,” Lamb said. “We’re really going to see and cross our fingers that the economics works out, and equilibrium is found again.”
Lamb said businesses that give employees minimum wage and rely on tips to increase their wages will likely experience a more drastic impact. Due to Aslan’s success and his financial planning, Lamb finds he has room to take risks, which may be more difficult for smaller businesses and those in different sectors.
For Western, implementing the changes has proven challenging. However, human resources and the Student Employment Center have ensured that all employees eligible for the $11 per hour wage are now receiving it.
“Discussions are underway to determine if there is additional funding that can be provided to support this wage increase. The state has not provided additional funding for the work study program,” Barbara Luton, Student Employment Center manager said.
As Western works to incorporate the wage increase, changes have been unclear to many student workers.
McKenzie Rugo, who works for Extended Education at Western, is a student who made more than minimum wage before the increase, raising issues on fairness of wage increases.
Before this year, she made $10.50 per hour, which was around $1 more than minimum wage. Rugo said she is now making the new minimum wage, but said she and her supervisors did not discuss the changes.
Despite this, Rugo welcomes the increase in wage.
“It was really hard to live off of our minimum wage, which is actually high. So I’m pretty pleased that they’re starting to make the change,” Rugo said.
At Aslan, while Lamb noted many employees were making more than minimum wage before this year, he said that there are no plans to make up for this difference. For him, this change is welcome, and he feels his employees will understand it’s about doing what is best for the community.
“That’s the kind of community we’re trying to build here,” Lamb said. “Now we can all live very well and that’s a good thing.”
Western is examining the wage schedule and employee classifications, which can be found on the Student Employment Center website. The classification guidelines scale seeks to organize employees on basis of factors such as difficulty of work, amount of responsibility and training required.
These classifications then inform employers of a minimum and maximum amount student employees may make, giving employers the discretion to award raises within the boundaries. The Student Employment Center said there is not a wage freeze in place, but supervisors must adhere to the wage schedule system for raises.
The wage schedule has been updated to correspond with the wage increase. However, the Student Employment Center said they are continuing to work on determining which model might “best fit going forward.”