Confused By $15 Minimum Wage? We Break It Down

Seattle starts phasing in a higher minimum wage on April 1 this year. The key term here is "phasing in." Everyone receiving the minimum wage won’t immediately get $15 an hour.

KUOW’s Deborah Wang sat down with Ross Reynolds to explain.

Reynolds: Where is the confusion around raising the minimum wage in Seattle?

Wang: The law is confusing. There are multiple distinctions between big employers, small employers, employers that provide health insurance and those where workers get tips.

I spoke with Carina Bull, one of Seattle’s point people on the new law, and she says I’m not the only having a tough time with it.

“I do have people call me and ask, ‘OK so minimum wage is $15 on April 1, right?’” Bull said. “I immediately qualify that, no, that’s going to happen in three years or even longer than that; seven years depending on the size of the employer.”

Reynolds: Will any workers get a raise to $15 an hour on April 1?

Wang: No.

If you work for a big company, like Target or Best Buy, and you are making the minimum wage, then on April 1 of this year, your pay will go up to $11 an hour. That will be the new minimum wage for any company that has more than 500 employees.

If you work for a smaller company, fewer than 500 employees, it gets more complicated.

If you don't get tips, and your company doesn't pay for your health insurance, then you will be paid the same as employees in big companies -- $11 an hour.

Said Bull: “For both big and small businesses, it’s relatively straightforward: On April 1, all businesses are responsible for paying $11 an hour.

“It’s just that for the smaller businesses, they have a couple different ways of getting there. They can pay the $11 flat rate, or they can pay $10 an hour in a base wage and get to that $11 through tips or the money they pay through a health care plan.”

Reynolds: People earning minimum wage who are working for companies with fewer than 500 employees, they'll all get a different wage depending on how much they earn in tips?

Wang: Yes.

Reynolds: What does minimum compensation mean?

Wang: It’s a term the city is using to basically give a break to small businesses.

They wanted to allow small businesses to count other kinds of compensation – like tips and medical benefits – in that new wage rate.

But it makes the calculation complicated.

Reynolds: Then what?

Wang: If you work for a big business, you will make $13 an hour next January and $15 an hour in January 2017.

If the company pays for your health insurance, they have one extra year to get to $15 an hour — that will be Jan 2018.

Now, for small businesses, the minimum wage rises more slowly and hits $15 an hour by 2021. That’s in six years. The minimum compensation formula applies to small businesses until then, so actual rates will be all over the map.

Reynolds: Will workers at small businesses forever be making less than their counterparts?

Wang: No. In the year 2025, all of this equalizes.

And in the year 2025, that’s 10 years from now, the minimum wage for Seattle will be more than $18 an hour – almost double the minimum wage today.

Reynolds: How will the city educate people about all this?

Wang: They are working on that now, putting together a new website and a mobile app, so you will be able to figure out on your phone what your rate will be in any given pay period. They've got $1 million for outreach.

The first year of the law is all about making sure people understand how it works, before any kind of enforcement takes place, because they understand that there is going to be a pretty big learning curve.

Reynolds: What are you hearing out there about the rollout?

Wang: A number of people have told me that they are not making big business decisions now in anticipation of the higher minimum wage. They want to see how it will affect their bottom lines.

But they are looking at the possibility of price increases, and there is talk of service charges. I'm sure that some businesses close to the 500 employee limit might be looking at head count right now. But not one of the business owners I have spoken with have said they are ready to roll anything out just yet.

This essay was lightly edited and condensed for the Web.