If there was one thing in the minimum wage debate that everybody seemed to agree upon, it's that a 61 percent hike in Seattle's minimum wage from $9.32 an hour to $15 an hour would be unprecedented. Except, we were all wrong.
While researching the history of the minimum wage, I stumbled on Initiative 518, approved in November, 1988, by a whopping 77 percent of Washington voters:
Shall the state minimum wage increase from $2.30 to $3.85 (January 1, 1989) and then to $4.25 (January 1, 1990) and include agricultural workers?
That represents a stunning 85 percent increase in the state minimum wage over two years, a far more precipitous hike than the three-year, 61 percent increase the city council is likely to approve.
To be clear, most of Washington's minimum wage workers enjoyed a substantially less dramatic hike in income. By 1988, Washington's state minimum wage had been allowed to lag far behind the then federal minimum wage of $3.35 an hour. So most of our state's minimum wage workers saw a 27 percent increase in wages from $3.35 to $4.25.
But tipped employees (like restaurant workers) were different.
In 1966, Congress created a "tip credit," allowing employers to pay a subminimum wage to tipped employees—originally 50 percent of the base minimum wage. But federal law also permits states to create their own higher minimum wage standards. When the federal minimum wage is higher than the state's, the federal wage prevails; when the state minimum wage is higher than the federal, the state's wage takes precedence.
There is no tip credit in Washington state. But since Washington's 1988-era $2.30 minimum wage was below the federal minimum wage of $3.35, but above the federal subminimum wage for tipped employees, $2.30 an hour was our effective minimum wage for tipped employees at the time I-518 went to the ballot. A June 2, 1988 article in the Spokesman-Review appears to confirm this:
Federal minimum wage — now at $3.35 — supersedes the state minimum, but doesn't cover all employees. In Washington, according to the State Department of Labor and Industries, as many as 47,000 full-time workers earn the state minimum ... most of them in restaurant and retail.
So there you have it. Between 1989 and 1990, Washington's restaurants absorbed an 85 percent increase in their minimum wage. I've yet to find a study specifically analyzing the impact of this increase, or state employment data prior to the increase, but estimates available from the Washington State Employment Security Department show job growth within the category of "Food Services and Drinking Places" to have exceeded total growth in "Nonfarm" jobs over the following decade.
Admittedly, that's not much of an economic impact analysis. But the larger point is, there is precedent for an even larger percentage increase in the minimum wage than a hike to $15 would impose, yet there was no obvious negative economic impact. So rather than simply warning that this hike would be unprecedented, participants on both sides of the debate might want to look more closely at I-518's example.