Local business groups, owners of both small and sizable businesses, and District residents have indicated support for an increased
D.C. minimum wage. A hike in the current $8.25 per hour, one dollar higher than the federal minimum and already among one of the higher rates in the country, is not in question.
What is at stake is whether an increase will be reasonable and responsible. On that score, the first of two required D.C. Council votes on Tuesday afternoon unanimously approving a super-minimum wage hike fails.
The legislation, advanced by lead sponsor Vincent Orange, provides for a three-year phase-in beginning with a hike to $9.50 in July of next year, adding one dollar in two subsequent annual increases to reach $11.50 per hour on July 1, 2016. The rate would then stabilize, increasing commensurate to the consumer price index.
To the overwhelming relief of tipped workers, the Council preserved the current applicable wage system specifying an employer-paid $2.77 per hour base pay and requirement that any differential in base-plus-tips and the minimum be guaranteed by employers in the rare instances that combined wages do not exceed it.
Employees earning tips had worried that an increased base pay would reduce customer tipping and cause significant reductions in income. Tipped workers were also concerned that bars and restaurants would be forced to reduce both staffing and hours to accommodate the extraordinary costs of a higher base pay.
Surprising to most, only approximately 4,000 of 745,000 employees at District businesses are paid the minimum wage. This modest 0.05 percent increases by an estimated 3,000 paid below the proposed rate when implemented, according to Council Chair Phil Mendelson.
Contrary to public perception, few of these are bar and restaurant workers, where wages above the proposed level are commonplace. Fast food outlets, some national retail corporations and local community small businesses are thought to employ most of the small number earning less than $11.50 per hour.
D.C. Mayor Vincent Gray reaffirmed his support for a minimum wage increase in a letter to the Council immediately prior to the vote, smartly supporting a staged increase to a sensible $10 rate with no automatic trigger in subsequent years. Gray had also previously requested the Council support his plan for an immediate three-month study of the scope and impact of an increase to best determine a rational amount without deleterious effects.
Council members, however, weren’t interested in facts or figures – despite Gray’s pledge to provide them with data as acquired. Understanding implications would not require implementation delay.
Instead, Council members are intent on forging ahead in an all-too-familiar act-hastily worry-about-it-later manner, offering mutual self-congratulation for preliminarily approving the nation’s highest rate.
Absent negatives at specific wage levels, mandating a much higher so-called “living wage” would be possible. Undisputed, however, are counterproductive rates causing economic harm.
The math is no mystery. If a small business employs 10 full-time workers, the annual payroll increase from the current rate to $11.50 an hour is $71,500 in annual base costs alone. For many owners, that exceeds profitability and their salary. Available solutions are reducing the number of employees or, to maintain staffing flexibility, reducing hours – or both.
For some retailers and fast food franchisees, customer service automation is increasingly attractive. Ask CVS about self-scanned checkout, or the 7,000 McDonald’s locations in Europe already utilizing ordering and payment kiosks.
Blithely increasing the minimum wage too high and too fast causes low-skill employment to stagnate or suffer reductions – in a city graduating only 59 percent of high school students and with high adult unemployment.
No one should be surprised that a Council comprised of those with no practical private sector experience, real-world business operation or responsibility for meeting payrolls would place smug satisfaction ahead of those in need.
The working poor and unemployed low-skill workers who desperately need smart leadership from elected officials will pay the price for this foolishly cavalier behavior.