At Mt. Tabor Brewing Company’s pub in Felida, 10 of the 21 workers are getting a raise effective Jan. 1. They’ll see their hourly rate bumped from $12 to $13.50, thanks to Initiative 433, passed by Washington voters in 2016.
Mt. Tabor is just one of more than 260 restaurants or grocery stores in Clark County having to adapt the new wage increases. Although the law applies to all businesses, the food-service industry and retail stores are likely going to be hit harder, according to Scott Bailey, regional economist for the state Employment Security Department.
Eric Surface opened Mt. Tabor in Portland in 2010 and expanded first to a tiny brewpub in downtown Vancouver before opening the full-service Felida location, 3600 N.W. 119th St., in 2017. Now Surface and other entrepreneurs are looking at how to absorb the greater labor costs. One possibility is to scale back workers’ hours.
“It will feel like people will make more money,” he said, speaking of the industry in general. “Everybody will start scaling back hours, and the next thing you know, you’re making the same amount of money.”
And not only will direct labor costs increase, so will overhead costs as suppliers pass on their increased labor costs.
For example, Mt. Tabor makes its own sausages. Not only will Surface have to pay more to the employees who make the sausage, he’s also anticipating he will pay more for the spices, the ground meat and the casings.
In addition to farmers passing along higher labor costs, so do wholesalers and distributors.
“By the time we get it to you, we’ve had four price increases on the item,” he said.
Those prices are usually passed on to the customer, unfortunately, he said.
“We only raise it when vendors increase it for us,” he said.
But it’s a balancing act: Mt. Tabor is trying to cut back in ways that won’t affect the quality of food, and price, that customers expect, Surface said.
“We’re going to do the best we can for everyone,” Surface said.
Bailey said he doesn’t see the minimum wage increase leading to a big change in consumer prices. Most research on how the wage increases will affect the job market points to a minimal impact, but it’s still uncertain, Bailey said.
“There’s been a lot of research trying to suss out what the impact is on jobs,” he said. “The jury’s still out.”
More increases coming
The minimum wage hikes aren’t over. As part of I-433, the Department of Labor & Industries is required to make cost-of-living minimum wage increases continuing beyond 2021. Those increases are based on the consumer price index.
Supporters of the initiative, which also included paid-sick-leave requirements, said that the initiative “would boost the income of more than 730,000 low-wage workers, lifting families out of poverty and growing the economy. When workers have more money to spend, they spend it at local businesses.”
“Initiative 1433 will inject nearly $2.5 billion into local economies. This demand, in turn, creates more good-paying jobs. That’s why every state that raised the minimum wage in 2014 saw faster job growth than those that left wages stagnant. Put simply, this initiative helps businesses, workers, and families across Washington thrive,” according to a voters’ pamphlet statement offered by supporters.
Joey Chmiko, the owner of Nonavo Pizza in downtown Vancouver, said the wage increases are likely going to cause him to raise prices. He avoided a price increase last year, when minimum wage went up 50 cents, to $12 per hour.
“We haven’t raised our prices since we opened,” he said. “I’m not looking at it as a giant impact.”
Chmiko said the minimum wage increases also affect higher-paid, more experienced employees, who used to make more money than “some kid coming out of high school with no experience.” Now that gap is narrowing, or business owners will have to raise wages for experienced employees.
Chmiko said he’s dealing with the added increases like any other expense, but, like any business, labor has always been the greatest expense.
Burgerville is another food service business preparing for the hikes. The company, which has locations in Portland and Vancouver, said it took out a $3 million loan in anticipation of minimum wage increases in both states. Oregon’s minimum wage in the Portland metro area is $12.50 per hour, rising to $13.25 on July 1, 2020.
The restaurant chain is under long-running contract negotiations with a union representing employees at five of the chain’s 41 locations. But Burgerville said the pre-emptive wage increases were not a result of negotiations.
Twilight Pizza in Camas is finding business much harder with the upcoming expenses. Twilight Pizza owner Morgan McColum last week posted the business she owns with her husband for sale, citing a number of reasons including family health issues, but one reason is due to Washington’s minimum wage increases — which was $7.93 in 2007.
“That’s amount’s almost doubled,” she said. “That’s got us pretty freaked out.”