State's minimum wage rises to $8.55 an hour

Pagliacci Pizza will begin paying its delivery drivers and food servers nearly 50 cents an hour more today as part of a mandatory adjustment for minimum-wage workers in Washington state. While that might not sound like much, it adds up when you consider that Pagliacci employs 600 people at 21 locations throughout the Seattle area.

Co-owner Matt Galvin estimates the minimum-wage increase will add at least $100,000 to Pagliacci's 2009 payroll costs.

"Our business model is predicated on the fact that the minimum wage will continue to rise and be the highest in the nation," Galvin said, explaining that he takes it into account when setting prices and evaluating other costs annually.

"I can complain about it, but it is what it is. As long as our business holds up, we'll be OK," he added.

An increase in Washington state's minimum wage no doubt pleases thousands of workers who will see their pay go up to $8.55 an hour — the highest in the United States. That's 48 cents an hour more than they had been making, representing their single biggest pay raise in nine years.

But will the increase ultimately hurt minimum-wage workers?

Some business groups say yes, noting that by forcing employers to pay more for busboys, waitresses and cashiers, it raises the likelihood that they'll make do with fewer of those types of workers.

It's an old argument with new significance as joblessness throughout the state worsens amid a deep and prolonged recession.

"As the minimum wage rises, particularly in a bad economy, you end up with fewer jobs," said Don Brunell, president of the Association of Washington Business, which counts 6,500 private-sector employers among its members.

Previously at $8.07, the state's minimum wage now is at $8.55 an hour because of an initiative that voters approved in 1998 to adjust the rate upward each year based on inflation. State law allows 14- and 15-year-olds to be paid 85 percent of the minimum wage, or $7.27.

Groups like Brunell's aren't trying to block today's minimum-wage increase — it's automatic — but they do hope to persuade state lawmakers to consider proposed changes, such as an extension of the 85 percent rule to workers under 18. Otherwise, they say, an increase in the minimum wage makes it more difficult for teenagers to persuade employers to give them their first jobs.

"A minimum-wage job was never meant to sustain a family," Brunell said. "It was either an entry-level job or a secondary job to supplement income."

Marilyn Watkins, policy director for the Seattle-based Economic Opportunity Institute, counters that the minimum wage should be enough to keep workers out of poverty, especially those working 40 hours a week or more. If left up to businesses, she said, the minimum wage would languish "at a low level, losing ground to inflation year after year. People who work in minimum-wage jobs don't have a lot of bargaining power," she said.

The new rate represents an annual paycheck of $17,784 for full-time, minimum-wage workers, a 5.9 percent increase from last year. It's pegged to the federal Consumer Price Index, which rose 5.9 percent during the 12 months that ended Aug. 31.

About 2.5 percent of the state's work force, roughly 57,000 workers, earned the minimum wage in 2007, the most recent year for which data from the Employment Security Department is available. Restaurants, retailers and farms are the primary employers of minimum-wage workers.

The Washington Restaurant Association calculates that an eatery with 12 full-time employees will spend $11,980 more on payroll this year, excluding taxes, because of the minimum-wage increase. "Bad timing," says Anthony Anton, the association's president and CEO.

It's not that restaurants want to deprive employees of decent wages, he said, it's that they're struggling to manage their costs amid slumping consumer demand and rising food prices. He says the pay increase could be the tipping point for restaurants considering automating some of their functions, causing more job losses. "It's not a freebie," he said.

But Watkins says minimum-wage workers typically spend all of their earnings, meaning their additional pay will circulate back into the economy.

"Workers with $1,000 more in their pockets to spend will only have a positive impact for local businesses," Watkins said, referring to this year's total increase for someone working 40 hours a week, the full 52 weeks.

"Clearly, we're in a recession," she added. "But cutting the real wages of people who are doing some of the toughest jobs out there isn't the appropriate response."

Amy Martinez: 206-464-2923 or amartinez@seattletimes.com