An economic stimulus?

Restaurateur Bret Chatalas didn’t choose Madison Park; it chose him when he bought his first restaurant there in 1992.

Now, Chatalas has five Cactus restaurants in Seattle, Bellevue and Kirkland, with 300 employees. In Madison Park (4220 E. Madison St.), he has about 45 employees. The approximately 30 front-of-house employees — wait staff, hosts and busboys — make minimum wage. In the back, employees, even dishwashers, start at $12 per hour and go up as they climb the ranks from line cooks to chefs.

The proposed $15 minimum wage would likely mean raising food prices by 25 to 30 percent, Chatalas estimated.

“We’ve always taken a strong position that restaurant work is really hard work and a living wage is really important,” he said, noting his kitchen staff also gets paid vacation and sick leave. “The best outcome would be to leave minimum wage alone and let business people make their own decisions.” 

Other compensation

The $15 minimum-wage movement has gained traction in Seattle as the cornerstone of Seattle City Councilmember Kshama Sawant’s campaign and Mayor Ed Murray’s promise to raise city-government minimum wage as one of his first moves in office. Murray created the Income Inequality Advisory Committee (IIAC) last December. The committee delivered its recommendations on raising the minimum wage to Murray in April.

Robert Plotnick, professor of public affairs at the University of Washington, was one of the three authors of the mayor’s commissioned report analyzing how a minimum-wage increase would affect Seattle. The report took existing population data and determined one-quarter of Seattle’s workforce would get a raise to $15.

Plotnick said for some small businesses, the effect won’t be as big because their competitors will all face the same wage increase. Still, some businesses may look to relocate, he said.

“What happens to a small business depends on its competitive position,” he said. “There’s no quick answer; it’s very subtle.”

Even though the front-of-house staff at Cactus is paid Washington’s minimum wage at $9.32 per hour, in reality, they make between $20 and $40 per hour with tips, Chatalas said; 20 percent of Cactus’ sales is tip revenue that’s distributed to those who work in the front of the restaurant.

In the back of the house, a $3 raise for his dishwasher who currently makes $12 per hour would mean the other employees would get a bump in pay, too.

“The impact would be great to the restaurant business if they went through with no recognition for total compensation,” he said.

Chatalas doesn’t think the City of Seattle should ignore tips and other verifiable forms of compensation. Doing so will force some places to close or lay employees off and prices everywhere will raise.

“I think it’s catastrophic the way they’re talking about it,” he said.

Also, Cactus has a history of making charitable donations to support the community, something Chatalas doesn’t think he’ll be able to do if wages go to $15.

Just down the street from Cactus, John Sheard owns Red Wagon, Cookin’ and Park Bench. The eight employees between his three stores all make $15 per hour or more already. Because of that, Sheard doesn’t see a $15 minimum wage affecting him as much as other businesses.

But he does say his prices still will go up. His vendors will likely raise their prices to adjust for the new wage. “So all the prices on the backside are going to go up and then my prices are going to have to go up,” he said. Prices will raise everywhere, he speculated.

Sheard is for a higher minimum wage because he wants people to be able to make more money. He recognizes, though, that not every business can afford to pay their employees $15 per hour, “and that’s going to hurt them.

“Some people that can’t afford it could have to cut people, and I think that’s going to hurt,” he said. “The owners, they’re going to try to slash and make due.”

In the neighborhood, Sheard sees it having the biggest potential impact on restaurants and their owners. He’s not sure what the effect will be for local retailers like himself, but he does think prices will raise everywhere.

Controlling the discussion

This is all uncharted territory until the Seattle City Council makes a decision and implements it, Chatalas said. With the breadth of possible outcomes, he’s waiting to see how he’ll need to adjust.

The wage increase would affect restaurant and hotel industries the most, Plotnick’s study found. The restaurant industry is overwhelmingly small business and operates on small margins, said panelist Anthony Anton, president and CEO of the Washington Restaurant Association at a Fremont Chamber of Commerce event in March. Restaurants are traditionally places where young people and those without higher education start out in dishwasher and waiter positions, to build up their finances and experience.

“If we went straight to $15, we’re going to take away the first rung of the ladder and people are never going to move up,” Anton said.

Chatalas is all for moving the bottom line up. But he says the economy still needs those lower-paying jobs for first-time employees and high school kids.

“I’m all for being able to bring the working class’ wages up in a way that makes sense,” he said. “People work really hard, and they deserve to make a good wage.”

Capitol Hill Chamber of Commerce executive director Michael Wells, who represented the small-business voice on the IIAC and at the Fremont event, said he sees the main negotiation points as youths and training wage, phasing-in options and defining total compensation. When talking about minimum wage, there is a lot of discussion about what should be counted as the wage and whether benefits like 401(K), health care and tips should count, too.

Chatalas thinks everyone’s goals can be accomplished with higher wages, if decision makers are “honest” about what a wage is and includes tips in that calculation. It would be better for this to be handled at the state or county level, Chatalas said.

He’s asked different city leaders why tips aren’t being considered, and “the only thing I’ve heard including tips is that some employers might cheat” the system, he said. “That’s just nonsense — there’s dishonest people all over the place,” he said. “That’s not a very good excuse.”

The reason the minimum-wage discussion has moved so quickly is that city leaders are hoping to avoid a ballot initiative this fall, Wells said. The 15 Now movement recently applied to put $15 minimum-wage measure on the ballot, if its members don’t like what the city decides.

“If it goes on the ballot, we have no control over the language,” Wells said.

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