With minimum wage rising, can more experienced Whatcom workers expect a raise?
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Effects of minimum wage increase
Voters passed Initiative 1433 in 2016, directing the state to steadily increase minimum wage. The next jump will have a large impact in Whatcom County. We explore those effects in this series, a bonus to subscribers.
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With the state minimum wage set to increase 12.5% starting Jan. 1, local employers are wondering whether they can also afford to give raises to their more experienced workers.
The hourly increase from $12 to $13.50 has employers wondering how to cover the increased expenses in general. For many who are visiting Western Washington University’s Small Business Development Center, one of the biggest concerns is dealing with wage compression, said Director CJ Seitz.
Wage compression is the concept where more experienced workers are no longer compensated as well compared to starting wages for newly hired workers. For example, a business could pay new workers currently at $12 an hour, while a shift manager gets $13.50 an hour. After the minimum wage goes up in January, the new workers and the shift manager might have the same pay.
If wage compression happens in a company, there is concern by employers that the more experienced workers would leave in search of better compensation, Seitz said.
Some business owners visiting the Small Business Development Center are pondering whether to give similar pay increases across the board, Seitz said, but that would usually mean cutting expenses elsewhere or raising prices.
It’s also giving business owners a chance to re-examine how they do things, said Asche Rider, certified business adviser at the Bellingham Small Business Development Center. In the restaurant industry that includes looking at tips. Some local eateries, like Bantam 46, have adjusted menu prices to do away with tips in order to more fairly pay all the employees.
It will take some time to really know what compression does take place, said James McCafferty, director of Western’s Center for Economic and Business Research. With a low unemployment rate, the largest wage pressure is in lower-paying jobs, where higher pay is required to attract workers.
The trends are showing that wages at lower-paying jobs are rising much faster than middle-income jobs nationally, McCafferty said in an email.
