Monday, November 20, 2017
Business

Minimum-wage hike is big step for Seattle businesses

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Seattle Times

SEATTLE — All eyes are on Seattle as it moves toward a $15 minimum wage, the highest of any major city nationwide. On June 2, the City Council unanimously passed an ordinance requiring employers to pay at least $15 an hour in the next three to seven years, representing a 61 percent increase over the state's current minimum of $9.32. Whether Seattle's $15-an-hour mandate proves successful largely depends on how employers react. While it's early, many already are factoring in the higher wage costs as they plan for the future. Will they lay off workers or raise prices? Cut benefits and workers' hours? Or maybe they're confident that workers with more money to spend on local goods and services will boost their bottom lines? Here's how these three businesses are preparing for a $15 minimum wage.

Holiday Inn Express, North Seattle

Ron Oh stood before the City Council on a recent Monday afternoon to share the story of his family's improbable journey from North Korea more than 60 years ago.

He described how his father, John, fled to South Korea as a young boy with three brothers just before the Korean War, then came to the Pacific Northwest to attend the University of Oregon on a full-ride scholarship.

"The way to become rich is to put all your eggs in one basket and then watch that basket," Oh said at City Hall, quoting Andrew Carnegie. "This is our basket, and the eggs are the lives of my entire extended family. We are watching that basket carefully."

The family's 102-room Holiday Inn Express employs 28 people. Yet because it's considered a large business and does not provide health insurance, it must begin paying a $15 minimum in three years. Businesses with fewer than 500 employees nationwide, by contrast, have up to seven years to phase in the increase.

Oh, 41, has joined a lawsuit filed in U.S. District Court in Seattle by the International Franchise Association and other franchisees to try to strike down the ordinance, calling it discriminatory and unconstitutional.

In 2005, his Holiday Inn Express recorded its first annual profit of $38,000 and has stayed in the black since then, despite a 20 percent drop in business during the Great Recession.

Oh, the general manager, says 2013 was a record year, with a profit of $600,000 and revenue of $2.9 million.

He says his 20 nonmanagerial employees make, on average, $10.25 an hour, plus tips. Paying everyone at least $11, as he must do next April, will add an estimated $80,000 to his annual labor costs. In 2017, when he's to pay $15, his costs will increase by $250,000 above current levels, he said.

The hotel spent about $580,000 last year on labor, followed by $300,000 in franchise fees and $160,000 in reservation fees. It also has about $4.2 million in outstanding debt, Oh said.

He plans to raise room rates and reduce workers' hours to pay for the wage increase.

"We'll do our best to become more efficient," he said. "Rooms have to be cleaned faster, and if people underperform, instead of working with them more, we're going to have to let them go."

He says he promotes managers from within and works with local colleges to train new employees.

"Would I still mentor and hire interns? I would," he said. "But could I explain it to my family, the owners, why I'm spending time to train people when I could hire someone who's fully trained and ready to go? It's a tough question."

Glant Pacific Cos.

At his family's scrap yard just south of downtown Seattle, Ryan Glant proudly points to about 350,000 pounds of aluminum shavings piled high beneath a bright June sun.

The shavings soon will be crushed to make large bales of aluminum and shipped worldwide for the production of aerospace parts and other goods.

"It's easy to forget these types of businesses are around Seattle," he said.

His great-grandfather Jules Glant, a Latvian immigrant, founded Pacific Iron & Metal in 1917, buying and reselling scrap metal for a tidy profit.

During World War II, the company also accumulated discarded fabric items and sold them to thrifty homemakers who turned them into quilts, blankets and clothing. Since then, the rag business has evolved into a regional chain of five Pacific Fabrics & Crafts stores, including two in Seattle.

A third family business, Seattle's Doorhouse, sells building materials, such as doors and windows, at a store near the scrap yard.

In all, Glant Pacific Cos. employ about 160 people, half of whom work in Seattle. The mainstay recycling business boasts an average employee tenure of more than 10 years and provides a range of benefits, including medical insurance, profit sharing and flexible work schedules, Glant said. "All of our full-time hourly employees make more than minimum wage, and more than half make more than $15," not counting overtime pay, he said. "We've always taken care of our employees well before the government mandated it."

He's not sure what they'll do under Seattle's $15 wage plan, but here are some questions they're starting to think about: Will store employees in the nearby cities of Bellevue, Bremerton and Everett, Wash., also expect a raise? What about employees who already make $15? Will they get a bump to maintain pay scales?

"We have no idea how our employees are going to react," Glant said.

Marty K Facilities Maintenance

Consuelo Gomez apologizes before sitting down to talk. She has only a few minutes before she must be on the move again. Work won't wait.

As co-owner of Marty K, a commercial property maintenance firm out of Belle­vue, Wash., Gomez said she's on pace to have a profitable business by 2016, based on annual sales growth of 10 percent.

That she must pay a $15 minimum wage five years from now in Seattle, where she employs 10 to 15 people, does not seem to concern her. In fact, she plans to offer the same wage to all 50 employees companywide.

Gomez, 42, was born in Medford, Ore., to immigrant parents from Mexico.

"I grew up in the fields. We sort of followed the fruit through California, Oregon and Washington," she said. "I did that until I was 12. After that, I worked in the janitorial field and did housekeeping. Luckily, I got my GED, went to college and wound up in the business world."

She started Marty K with a business partner in 2009, providing janitorial, landscaping and other services at corporate buildings throughout the area.

She figures about a third of her staff makes between $10 and $10.75 an hour, while 45 percent are at $11 to $14, and the rest earn $15 or more. About 55 percent of her workforce is full time. She does not offer health insurance.

Seattle's new wage plan requires her to pay an $11 minimum starting next April, then a dollar more each year up to $15 in 2019, with subsequent increases tied to inflation.

She said she's "ahead of the game already" because most employees make at least $11, and the five-year phase-in gives her time to generate enough new business to pay for higher wages.

Despite the challenges, Gomez supports Seattle's move toward $15.

"I do believe people need to make more money," she said. "Could you live on $9.32?"

 
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