How a $15 Minimum Wage Would Make Everyone Richer
Set Aside Arguments About Fairness and Social Justice for a Moment—a $15 Minimum Wage Would Be Great for Business
This editorial is the first in a series. Next week, restaurant owner Dave Meinert and 15 Now activist Jess Spear debate “total compensation”—including the question of whether a restaurant worker’s tips should count toward their pay.
In case you've been asleep since November, Seattle is at the epicenter of a national debate about the crisis of inequality. Much of the debate here has centered on the costs and benefits of a $15 minimum wage, how fast to get to $15, or why $15 and not some other number.
As members of the advisory committee that will be offering recommendations to the mayor next month, we know there'll be policy options aplenty. We're hearing from all sides about the trade-offs and consequences.
But we want to be very clear: $15 isn't just about $15. It's about recognizing what actually makes this city so special—and making a conscious effort to nurture it.
Though there are cities in America bigger than Seattle, no city can match our combination of economic dynamism and civic engagement. While we have plenty of successful capitalists in Seattle, this isn't a town like Dallas or New York that worships the super-wealthy and believes in trickle-down economics.
People here recognize that prosperity and community emerge from the middle out, not the top down. That we're connected in an ecosystem. That we're all better off when we're all better off. It's why so many companies here treat their workers better than the market says they have to. Compare Costco to Walmart. Or Starbucks to McDonald's. Or Tom Douglas restaurants to Olive Garden.
This "Cascadian" form of capitalism works—for everyone, not just for capitalists. And we believe that raising Seattle's minimum wage to $15 in a speedy, simplified, and practical way will make our city more competitive and bring giant benefits, both economic and civic.
Let's start with the economics. Most champions of a higher minimum wage base their arguments on fairness and social justice. They're right. But we want to offer another argument: It would be great for business.
The fundamental law of capitalism is that when workers have more money, businesses have more customers. Raising the minimum wage shifts money in the economy to those with the highest propensity to spend, increasing sales for businesses, which in turn leads to hiring, and more sales.
Because the current minimum wage in Washington is $9.32, some people think $15 would be an exorbitant leap. But if the minimum wage were enough to support one childless worker in King County, by even very conservative estimates, it would be more than $16. If it had tracked productivity gains since 1968, it would be $21.70. And if it had tracked the wages of the top 1 percent, it would be $28.
These aren't teen jobs, by the way. The average age of a fast-food worker is 28. And minimum-wage jobs aren't confined to a small corner of the economy. By 2040, it is estimated that 48 percent of all American jobs will be low-wage service jobs.
Trickle-down advocates would have you believe that a $15 minimum wage makes Seattle less competitive. We disagree. Yes, there may be businesses that today depend on paying workers near-poverty wages that will need to change their ways—or leave. But making Seattle the highest-minimum-wage city in America gives businesses a more secure and growing base of customers, and from that base, this city becomes a better place to be an entrepreneur and innovator.
The argument against a minimum-wage hike treats workers simply as costs to be cut, in order to push prices ever lower. This is the Walmart bargain. But here's the thing: No matter how low Walmart's prices get, its workers still can't afford to live on Walmart wages. Walmart made $27 billion in profit last year. And its workers are among the nation's largest group of food-stamp recipients, a program best understood as a taxpayer subsidy of Walmart's profits. This is an arrangement as inefficient as it is immoral.
The Walmart model (which, by the way, is prevalent across the poor, unhealthy, dole-dependent states of the former Confederacy) is a race to the bottom. What we need is a race to the top, in which higher wages generate more demand, in turn generating more hiring and higher wages. This is middle-out economics. It's Cascadian capitalism. And it's a whole lot better for you than trickle-down Confederate capitalism.
We think public policies should advantage locally owned small businesses over quick-serve national chains that are economically extractive and culturally dilutive (what neighborhood was ever enriched by the arrival of a McDonald's?). Local small businesses should get a longer phase-in period for any wage hike, for instance. But even if it takes longer, they eventually should be held to the same simple standard: Someone who works full-time in Seattle should be able to live in Seattle.
People who oppose an increase in the minimum wage often point to "unintended consequences." And there are real costs to any change. We know that. We don't think $15 should happen overnight, and we think certain sectors like small businesses and nonprofits should get more time to get there.
But the term "unintended consequences" implies that all consequences must be negative. That's just not true. There will be unforeseen positive consequences, too, as most studies show: business benefits like higher worker satisfaction and productivity, lower turnover and absenteeism. And those positives cancel out the negatives. Minimum-wage increases have no net negative effect on employment—and a definite positive effect on community health.
Which brings us to the civic dimension of what $15 is really about.
Consider the 12th Man phenomenon that unified our city. Some outsiders assume that the success of the Seahawks generated this incredible wave of popular solidarity. But they got it backward. It's our spirit of mutuality and common cause—stronger here than in most big American cities, according to national reports—that powered the fans who powered the Hawks.
Even as Seattle has become dramatically wealthier in the last generation, we haven't wanted to become San Francisco. We haven't adopted the hyperindividualistic mantra of "every man for himself." Seattle is less prone than Texas to divide the world into makers and takers. We volunteer more, we participate more, and we link up to solve local problems more regularly than citizens in other cities do.
But we're also, undeniably, becoming a more unequal community—in incomes and in opportunity. The danger we have to face is that economic inequality always begets political inequality, which always begets more economic inequality. Low-wage workers stuck on a path to poverty are not only weak customers, they're also anemic taxpayers, absent citizens, and inattentive neighbors.
To put it in the affirmative, we have a chance now with $15 to make Seattle as civically robust as it already is economically. We have a chance to set off a virtuous cycle in which economic participation begets civic participation. True prosperity doesn't trickle down from above, and neither does great citizenship. Both are middle-out phenomena.
When workers earn a wage that they can survive on in Seattle, they can help their kids with homework and keep them out of trouble, look out for neighbors, join community groups. And as we saw during the successful SeaTac $15 campaign, they can participate more meaningfully in self-government. They can see themselves as participants, not spectators. They can speak out on issues and organize others. They can assume their views will be heard.
And all this recirculates into our economy. Better citizens make better customers, and better customers make better neighbors, in an endless virtuous circle. This is how Seattle has thrived. And it's how we'll win in the future. The rest of the country has run a 30-year trickle-down experiment, and the result has been an economy and a politics rigged for the very richest. The people who benefit most from that arrangement are desperate for us to believe this is the only way an economy can work. Screw that, and them. At the end of the day, $15 isn't about just rejecting that approach. It's about replacing it.
Nick Hanauer (@NickHanauer) is an entrepreneur and investor at Second Avenue Partners. Eric Liu (@ericpliu) is founder and CEO of Citizen University. They are the coauthors of The Gardens of Democracy.