Is the Fight for 15 strangling small business?

March 17, 2014

Opponents of the Fight for 15 in Seattle are counter-attacking with the claim that small businesses would suffer. Leela Yellesetty and Chris Mobley debunk their arguments.

ALL EYES are on Seattle as the biggest local battleground in the fight to raise the minimum wage--and now, the city is embroiled in a confrontation pitting low-wage workers against business interests.

The Fight for 15 movement in Seattle was spearheaded by the actions of low-wage workers and unions taking a stand at local fast food restaurants, among other businesses, followed by the election of socialist Kshama Sawant to the Seattle City Council. Now, activists are looking forward to a ballot-box showdown in November, with various initiatives underway to put a $15 an hour minimum wage referendum on the ballot. New Mayor Ed Murray and the City Council have each convened committees on raising the minimum.

On March 5, more than 600 residents testified in front of the first City Council hearing on the issue, with the overwhelming majority speaking passionately in favor of a living wage. This fits with the results of a recent opinion poll: 68 percent of Seattle residents support a $15 an hour minimum wage with no exceptions, like exemptions for small business or a gradual phase-in of the minimum.

Low-wage workers on strike march for a $15 minimum wage
Low-wage workers on strike march for a $15 minimum wage (Bob Simpson | SW)

But it's clear that the ideological battle has just begun. As one speaker revealed at the hearing, nearly 100 business owners had gathered at a meeting the same day to strategize against a minimum wage hike.

At the hearing and in the media, opponents of increasing the minimum wage are focusing mainly on the impact on small businesses. Sure, goes their argument, multinational corporations like McDonalds and Walmart can easily afford to absorb a minimum wage hike, but for struggling small businesses with already small profit margins, it would mean layoffs, benefit cuts, price increases or even closing altogether.

Small businesses are clearly being used as a wedge--in an effort to win people in Seattle away from their sympathies with the just demand for a living wage, and over to the "unique" and popular small businesses that would supposedly lose out.

Those of us who support a $15 an hour minimum wage with no strings attached need to be prepared to respond to the arguments.

THE FIRST point to make is that the focus on the plight of small business owners means ignoring the plight of the much larger numbers of low-wage workers who are struggling even more to survive. Whether you work at a small or a large business, the cost of living is still the same--and it's increasingly out of reach for large numbers of people.

According to the National Low Income Housing Association, in Washington state in 2013, a worker making the state minimum wage would have to work 81 hours per week, 52 weeks a year, to afford a two-bedroom apartment.

In King County, where Seattle is located, it's even tougher: you need to make $36,480 to be able to afford a one-bedroom apartment. Minimum wage workers--if they're lucky enough to have year-round, full-time hours at the current minimum of $9.39 an hour--make $18,803. As a result, low-wage workers, who make up the majority of service and retail workers in the city's core, are being pushed out of Seattle, even as impending drastic cuts to the King County Metro Transit bus system will make traveling to work more costly and time-consuming.

Though the cost of living continues to rise, the minimum wage has not kept up with either inflation or productivity gains. Taking these into account, Dick Conway, a Seattle-area economist whose clients have ranged from Boeing to the city government, recently estimated that the minimum wage should be $16.82 an hour to adjust for both inflation and productivity gains.

And even that's too little to get by--according to the Living Wage Calculator website, an adult with two children needs to make at least $24.76 an hour to afford to live in the city.

With the poorest one-fifth of Seattle residents making less than $13,000 a year, it's not hard to see that raising the minimum wage to $15 an hour would lift many residents out of poverty. Keeping the minimum below a liveable wage might help some small businesses, but it requires sacrificing the livelihoods of low-wage workers. As The Stranger newspaper's Anna Minard wrote, commenting on the testimony at the hearing:

Terra Plata and Elliott Bay Cafe owner Tamara Murphy called her employees "family" and then seemed to argue against paying them living wages. That sounds crazy. A representative of Dick's said they'd have to raise prices to accommodate a dramatic wage hike--so what? The people around them testified about not being able to afford food and medication and clothing, about their whole tax credit going straight to pay creditors, about struggling to raise healthy kids on a single income. Anyone but a sociopath would pay a quarter more per burger to fix that.

STILL SOME might object that it's not fair for small businesses to be punished the most by this increase. Shouldn't we be supporting small businesses against the Walmarts of the world?

First of all, it's worth pointing out the hypocrisy of opponents of the minimum wage hike--which include representatives of the world's biggest corporations--using small businesses as a shield. They know they can't make the case that their profits will be hurt, so they hide behind small businesses. In reality, big business has done far more damage to small businesses and the people who work for them than an increase of the minimum wage to $15 an hour is likely to do.

Likewise, the politicians who lecture about small businesses are also being hypocritical. They could pass legislation to subsidize small businesses by taxing big businesses. In practice, of course, they do the opposite--as shown by the Washington state legislature's recent $8.7 billion tax-break giveaway to Boeing, the largest corporate subsidy from a state government in U.S. history.

Second, we ought to ask what qualifies as small. Opponents of the Fight for 15 would like to see no wage hike at all. But if one does happen, they want to carve out as many exceptions as possible. One way to do this is to exclude "small" businesses that really aren't so small or struggling.

Take some of the "small" business owners leading the charge against the Fight for 15.

One of the most vocal opponents of raising the minimum wage is local businessman Dave Meinart. "If we're wrong, and we jump the raise too high and too quickly, small businesses close down, and big business fills the gap...[I]t would kill the culture of the [Seattle neighborhood of Capitol Hill]," he recently told a popular neighborhood news blog.

Meinart, who sits on the mayor's committee on the minimum wage increase, went on to claim that a $15 minimum would be a "doomsday" scenario for small businesses such as his. But according to a business profile at the Seattle 100 website, Meinart's financial interests aren't so small:

Dave is a force around town with his hands in nearly every line of business. He's the proud new owner of The 5 Point Café, an iconic dive bar that just celebrated its 80th anniversary. He also owns a boutique travel agency, a record label, an artist management company (where he manages Blue Scholars, Common Market, Hey Marseilles, and Fences) and is currently birthing Big Mario's New York Style Pizza on Capitol Hill. He's also the founder and co-owner of the Capitol Hill Block Party.

Meinart recently added Lost Lake, a trendy restaurant modeled as a classic diner, but with overpriced entrees and signature cocktails, to his business portfolio.

Then there's Angela Stowell, CFO and co-owner of Ethan Stowell Restaurants. At the City Council hearing, she bemoaned how her local company wouldn't "be able to expand" if the minimum wage increased. Ethan Stowell Restaurants owns nine upscale restaurants, a trendy pizza shop and Lasagna Foods, a brand of expensive pasta distributed to boutique grocers throughout the Pacific Northwest.

Far from the classic "mom and pop" business owners that they would like to be portrayed as, Meinart and the Stowells are major players in the Seattle business community.

Last month, Seattle Times columnist Danny Westneat interviewed restaurateur John Platt, who didn't claim to be on the verge of bankruptcy, but bemoaned the fact that his St. Clouds restaurant would have to increase menu prices--pushing the cost of pan-roasted duck from $32 to more than $40. But could dinner-goers at Platt's restaurant really not afford the duck?

For those catering to not quite so posh a crowd, it might also be pointed out that increasing wages for the lowest-paid workers is an effective way to increase demand--because unlike the wealthy who can sit on their hoards of money, the working poor spend it right away, by necessity.

IN FACT, the supposedly dire consequences of raising the minimum wage have never been borne out in experience. Washington state already has the highest minimum wage in the country--and currently the highest job creation rate, according to no less a neoliberal authority than Study after study shows the same--not only has raising the minimum wage not led to significant job losses or price increases, but in many cases, the outcome is the opposite.

Despite the lack of evidence, however, the same tired arguments get dusted off and repeated ad nauseum every time there is a proposal to raise the minimum wage. Then again, the very same complaints were raised by opponents of a paid sick leave ordinance--it passed the City Council last year, and we still haven't seen an economic meltdown--not to mention equal pay for women or child labor laws.

Karl Marx made some relevant points about this debate 150 years ago--in two speeches that were collected in the pamphlet Value, Price and Profit. Marx pointed out that even by the logic of free market itself, businesses can't just pass on increased labor costs in the form of higher prices--because of the reality of capitalist competition. To put it simply, if one burger joint tries to pass on all the costs of a wage hike to their customers, they will lose customers to a burger joint that doesn't raise prices, or doesn't raise them as much.

So if businesses can't simply pass on higher costs to their customers, where does the money come from to pay higher wages? The answer is: Profits. This is the real reason employers, large and small, are so opposed to an increase of the minimum wage.

The heart of Marxist economics is the labor theory of value--the understanding that workers are ultimately the source of all value, but they are only paid back a fraction of the value they create. The surplus value above and beyond what they are paid goes to the bosses. Therefore, the higher the wages, the lower the profits, and vice versa.

The ratio between wages and profits isn't a fixed one, Marx contended, but one that fluctuates based on the outcome of class struggle. This struggle is built into the very fabric of capitalism. Right now, the balance is tilted radically in favor of employers. The profits of U.S. corporations account for a larger share of national income than at any time in more than 60 years--while wages account for a smaller share than at any time in almost as long.

This is important for understanding the role of small businesses in the Fight for 15 debate. No matter how small the business, and no matter how kind or enlightened the owner, all must obey the rules of capitalist competition. They are pressured by the dynamic of the system to keep labor costs down, in order to keep profits up.

WHEN LOW-wage workers make their demand for a living wage, they know the main enemy is the mega-corporations that run restaurant chains and giant retail stores. Small business owners are caught in the middle, navigating pressures from big business that want to dominate them from above, and workers who want better wages and conditions below.

Small business owners don't benefit from a system of capitalist competition that gives the big fish all the advantages against the small fry. But in the short term, because they depend on profiting off their workers in order to survive, small business owners as a group won't be an ally of workers against the multinationals.

Thus, catering to the needs of small business only plays into the hands of opponents of the Fight for 15--who will use the opportunity to make the whole debate about them, rather than about workers who desperately need a living wage now, regardless of the size of the company or business they work for. This is why we should oppose small business exemptions in our demands for $15 now.

We want to bring together the widest coalition of forces who support the minimum wage increase to $15, and that will include people who want to support small businesses and campaign for subsidies for them. In the course of organizing together, we should have out these debates, in the hopes of persuading more people of our case.

Because there is something else behind the bosses' opposition to an increased minimum wage in Seattle. Not only are they afraid of us eating into their profits. Even more worrisome for them is that if we win, it will give people confidence to ask for even more.

And why shouldn't we? This struggle is about asserting the fact that our hard work makes businesses--large and small--run every day. We're worth far more than $15 an hour--but that would be a good start.

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