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Wed May 7, 2014
Seattle's $15 Minimum Wage Plan: Eye-Catching, But Don't Forget Inflation
Seattle City Council members are digging into the details of Mayor Ed Murray’s plan to raise the minimum wage to $15 an hour. That’s an eye-catching number that’s garnered national attention, but it's easy to forget the impact of that pesky thing known as inflation.
To Ebony Echols, who works behind the counter at Cherry Street Coffee House in downtown Seattle, $15 an hour sounds great.
"I’m excited for it because as a barista we do live off of our tips, so it would make a substantial difference in the comfort of living," Echols said.
Right now, Echols earns the state minimum wage of $9.32 an hour plus an extra couple of bucks in tips.
Under the mayor’s plan, because she works for a small business, she’d get a series of raises until she reaches $15 an hour seven years from now. That sounds amazing to Echols.
But wait — $15 then is not the same as $15 today.
"We will have inflation between now and then, and inflation erodes the purchasing power, so it will be somewhat less depending on what the rate of inflation turns out to be," said Norris Peterson, an economics professor at Pacific Lutheran University.
The mayor would start linking the minimum wage to inflation after it hits $15 an hour, and he uses 2.4 percent inflation for his calculations.
If you use that inflation rate, $15 an hour in 2021 is really only equal to $12.71 in today’s dollars.
Under the mayor's plan, workers at large businesses with more than 500 employees would reach $15 an hour in 2017 at the earliest. In today's dollars, that's equal to $13.97, using the mayor's inflation assumptions.
Peterson says in recent years, inflation’s been low, so it’s not front and center in our minds. But he says it still matters in terms of what we can get for our money.
"We tend to forget what impact it can have over a longer period of time," Peterson said.
At Cherry Street Coffee House, Echols says she hadn’t really considered that impact. But even $12.71 sounds like an improvement from what she makes now.
"Yes, definitely, definitely," Echols said.
She says people in her home state of Minnesota are paying attention to Seattle’s minimum wage plan. That $15 an hour is impressive, even if it’s a little less dramatic in reality.