Bloomberg Businessweek

How Seattle Agreed to a $15 Minimum Wage Without a Fight

On May 1, Seattle Mayor Ed Murray announced he had brokered a deal to raise the city’s minimum wage for all workers from $9.32 to $15 an hour, the highest in the country. That in itself was remarkable. Even more so was that Murray did it without the anger and political bloodshed that’s pitted employers against workers in other cities and has stalled efforts in Congress to increase the federal minimum wage. In what may be a model for other cities and states, Murray put business leaders, union bosses, and community advocates in a room for months with simple instructions: work out your differences, or else.

The “or else” was that Murray and the city council would do it without them. He had the political momentum to back up the threat. When Murray, a Democrat, took office in January, the region seemed ready for a minimum pay bump. Voters in a small town to Seattle’s south, SeaTac, passed a measure to raise wages for transportation and hospitality workers to $15 an hour. Seattle elected a socialist to the city council on a living wage platform. Rather than push his own proposal through the city council, or risk outside groups bringing ballot initiatives that would likely turn ugly and draw the attention of special interest money, he appointed a 24-member group to reach an agreement. “If you want people to get here in the end, you need to bring them to the table,” he says.

To co-chair the group, Murray chose two men on opposite sides of the debate: Howard Wright, founder of Seattle Hospitality Group, an investor in the iconic Space Needle, and David Rolf, president of a local SEIU Healthcare union. The idea tested the widely held assertion put forth by business groups that employers can’t afford to pay workers more. It also offered an alternative to the confrontational battles employees have waged elsewhere, such as the coordinated strikes by fast-food workers in New York and dozens of other cities.

Murray gave the group four months to work out a deal. If they failed, he vowed to present the city council with his own proposal, which both sides were sure to hate. He chose April 30 as a deadline because May is when outside groups that propose ballot initiatives typically start gathering signatures.

Local business leaders decided that joining the effort was in their best interest. “There is no doubt in my mind that this $15 is coming to Seattle,” says Wright. “So if we accept that as a premise, let’s figure out how to do it well.” Labor leaders in the group wanted a pay increase to take effect quickly; business owners wanted to phase it in over many years. Labor insisted that tips and benefits not count as part of someone’s wages; businesses thought they should be able to pay lower hourly rates if they provided other compensation such as retirement contributions. Everyone thought small businesses should get extra time to comply, but no one agreed on how to define “small.”

A month before the deadline, Murray narrowed the group to eight negotiators. The G8, as they became known, took over several rooms in the mayor’s office. A breakthrough came on April 14, when someone—the person asked not to be named, Rolf says—sketched out a chart showing how a proposed compromise would let wages at different workplaces rise at different rates. Businesses could count tips and health care in calculating minimum pay for workers, but only temporarily. Eventually those concessions would phase out and every employer would have to pay the same minimum wage. “You could see the body language in the room change,” says Rolf.

The proposal divided businesses into four groups. Large employers, with 500 workers or more, would need to pay $15 an hour by 2017. But if they provide health insurance, like the local outdoor retailer REI, they could have an extra year. A small business such as a dry cleaner wouldn’t have to pay $15 until 2021, but a restaurant would have to ensure that workers’ pay, including tips, totaled $15 an hour by 2019. Those distinctions would phase out by 2025, when all employers would pay the same minimum. And it would be indexed to inflation, so they’d never need to go through a painful negotiation again.

The final plan came together late on April 30, just before Murray’s ultimatum expired. The proposal now goes to the city council, where Murray hopes to keep its nine members from taking it apart. “I imagine there will be tweaks,” he says. With too many changes, he warns, the delicate compromise could collapse.