Low-wage workers happy to see raise, but restaurants see trouble

OLYMPIA — Jessica Barragan recently took a minimum-wage job at Wendy's to help make ends meet. The single mother already works one job at the Burger Ranch in Yakima but needed more money to provide for three young sons.

"It's hard to support them on minimum wage," she said. "It would be nice just to have help with the extras."

Barragan, 23, is one of about 80,000 to 90,000 full-time and part-time workers who will receive a 14-cent raise on Tuesday when Washington state's minimum wage, already the highest in the country since 2001, rises to $8.07.

The increase keeps the state 7 cents ahead of California and Massachusetts, which both increase to $8.

The state recalculates the minimum wage each September according to changes in a federal consumer-price index.

The adjustment is required by Initiative 688, approved by state voters in 1998. Opponents to the automatic escalator say it puts pressure on businesses that are struggling, but supporters say the naysayers' fears have not materialized.

"The sky hasn't fallen yet," said Rick Bender, president of the Washington State Labor Council, which pushed the initiative. "It's helped the state's economy. It's helped take a little bit of pressure off. Maybe they only have to work two jobs instead of three."

About 2.5 percent of the state's jobs, or between 80,000 and 90,000 full-time and part-time jobs, pay the minimum wage, according to the state Employment Security Department. It applies to workers in agricultural and nonagricultural occupations alike, though roughly 40 percent are in the restaurant industry.

This year, Congress gave the nation's lowest-paid workers their first raise in a decade, raising the federal minimum wage from $5.15 to $5.85 an hour in July. It will rise to $7.25 an hour in 2009.

Association of Washington Business President Don Brunell said the state's mandatory increases are an extra burden on small businesses already facing high costs for unemployment insurance, workers' compensation, health care and regulations.

"You have a growing gap between the states that are on a federal minimum wage and a state like Washington that has the automatic escalator. The question is, are they going to be able to afford somebody or are they going to mechanize or just not be in the business anymore?"

But a study last year by Washington State University concluded that the yearly increase does little to harm business and benefits the vast majority of low-paid workers.

The WSU study used a computer model allowing researchers to observe the economic impact of just the minimum-wage increase, without other factors. The model showed that Washington's economy absorbed the wage increase with little job loss, while remaining workers made more money. The main industries losing minimum-wage jobs would be agriculture, food service and bars.

But those other factors — including the rising cost of goods — means others may be feeling the pinch as restaurants try to absorb the cost.

Since the state's minimum-wage law took effect, menu prices have been creeping up.

According to a survey conducted by the Washington Restaurant Association, eight years ago, you could get a hamburger, fries and drink at a full-service restaurant for $6.26; now, the average price for that same meal is $14.07. The association says that among the rising costs restaurants face, minimum-wage increases are part of the problem.

"Restaurant owners understand that they can't raise their prices enough for consumers to absorb that all the time," said association spokeswoman Camille St. Onge. "So what do you do? It's hard to pinpoint where a tipping point would be, but good business owners are cognizant we have to do something different."

Ed Schaeffer, co-owner of The Mustard Seed Asian Cafe in Spokane, said the minimum-wage increase will cost $38,000 next year for the restaurant's two locations.

"There's going to be a point where, two more increases, people have to close their doors," he said. "You'll be paying more than what's coming through your doors."

Washington is one of seven states that doesn't allow a tip credit — where tips can count as part of wages toward the minimum wage — something St. Onge hopes the Legislature is willing to consider in the future.

St. Onge said that the average tipped employee making minimum wage plus tips pulls in $20.71 per hour.

"Obviously 43 other states have determined that's a way we can help this industry," she said of the tip credit. "It's critical we remain healthy as an industry. We inject so many jobs into the state. Keeping restaurants open is important."

Noe Castillo has owned El Siete Mares, a seafood restaurant in Yakima, for 18 years. Each year, he raises the prices a little, but not because of rising wages. Rather, it's the rising price of food for his elaborate dishes that burns him.

The restaurant's top sellers: jumbo shrimp stuffed with ham, wrapped in bacon and slathered in hot sauce, and red snapper stuffed with shrimp, abalone, octopus and king crab and covered with rice and melted cheese.

"The minimum wage you can control with your employees. I just sent them home when it's slow. But when you raise the prices on bell peppers and cheese and meat, that's harder to adjust for," he said. "I can't raise the price just about every other month."