Seattle’s minimum wage increased to $20.76 per hour on Wednesday, and at least one business has already closed because of it.
Seattle adopted the Minimum Wage Ordinance in June 2014, amending the city’s municipal code to implement yearly increases from January 1, 2016, through January 1, 2025. The law distinguished “Schedule 1” employers, which have more than 500 employees, from “Schedule 2” employers, which have 500 or fewer. Until last Wednesday, the ordinance allowed the second group, but not the first, to meet its compensation requirement through tax-preferred contributions to employee medical plans rather than direct wage increases. This created an incentive for firms not to hire more than 500 employees.
Counting medical benefits toward the compensation requirement also encouraged employers to pay employees in-kind (to the extent that that’s feasible). That is less efficient for everyone: If workers just got cash instead, they could spend it on whatever they value most highly—maybe a health care plan, or maybe something else.