By Emily Hamann
The Bellingham Business Journal
A new year, a new wage hike.
On Jan. 1, the next phase of the Washington minimum wage law goes into effect. Employers will now have to pay workers at least $11.50 per hour, as well as provide paid sick leave. The new minimum wage is a 50-cent increase, relatively small compared to the beginning of 2017, when it shot up from $9.47.
The paid sick leave requirement is new. All workers, full-time, part-time and seasonal, will accrue at least one hour of paid leave for every 40 hours worked. It must be paid at their normal hourly wage. Workers can use that paid leave if they get sick or if they need to take care of a sick family member, if their workplace or child’s school or childcare is closed for a health-related reason, or to flee a domestic violence situation.
Eric Grimstead, of the Small Business Development Center, has been helping small businesses through the process of implementing this new phase of the law, Initiative 1433, which Washington voters passed in 2016.
The center, part of Western Washington University, advises local small businesses. Grimstead has been helping clients break down the numbers for the new changes.
“It will impact people differently based on the industry, the size and what the workforce looks like,” Grimstead said.
With all the variables, each business owner needs to figure out the potential impact for their specific business.
“The smartest thing to do is look at the real dollar and cents impact of what might be the maximum exposure,” Grimstead said. He recommends that businesses build it into their budgets assuming employees will take their maximum sick leave.
“Prepare for the worst case scenario,” he said. “And then if it winds up being slightly different than that, then you’re going to be better off.”
It’s possible that employees might not use all their sick leave. Grimstead pointed out that among employers who offer generous benefits packages, it’s common that employees don’t use them.
After calculating how much it could cost, Grimstead said, business owners need to look at where that money is going come from, whether they can streamline their business somehow, or whether they’ll have to raise prices.
“Paid sick leave and other mandates are beyond the control of the business owner,” Grimstead said. “But there are plenty of things they can do that are within the business operations.”
Grimstead said he doesn’t know whether the sick leave will help or hurt business’ bottom line.
“The assumption is if people are sick they’re not going to show up for work,” he said. That’s not always true, however. Some workers may not be able to afford any loss in pay, and come in to work even when they’re sick.
That could mean a loss in productivity. They might also spread their sickness to the other employees, eventually leading them to lose productivity or take time off as well.
In theory, offering paid sick leave could be more efficient, and might actually save money, Grimstead said. Businesses will have to wait and find out.
Jeremy Hawkinson, who owns the coffee stand Cool Beans with his wife Kelli, are getting ready to raise prices again at the beginning of the year, to make up for the new labor costs.
They have three locations, all in Bellingham, and 11 part-time employees. Adjusting to the minimum wage increase last year was rough, Hawkinson said, as the new year greeted customers with high prices, and a sign in the window of each coffee stand explaining why.
“Last year was a big hit,” Hawkinson said.
They had to make up costs wherever they could, which means cutting some hours for their employees, and working more shifts themselves.
Since I-1433 took effect, Hawkinson said they’ve had to rethink their business.
“It make us question if this is going to be our long-term plan,” he said. “I’ve had to seriously consider taking another job just to supplement our income.”
Along with their increased labor costs this year, their cost of goods went up, as vendors had to charge more to keep up with their own increased labor costs.
“I knew some other people in the same industry,” Hawkinson said. “They had to make another adjustment mid-year.”
The impact of the latest stage of I-1433 is a little harder to calculate, as Hawkinson doesn’t know for sure how many employees will call in sick. He thinks it will probably go up, however.
More workers taking sick days probably means Hawkinson and his wife will be covering those shifts themselves, he said, since all but one of his employees are students and when they’re not working they’re usually in class.
“Jobs like this, it’s not supposed to be a living wage,” he said. “We don’t expect any one to come in here and make a career off of being a barista.”
Some businesses, however, do want their employees to spend their careers there.
Village Books has to invest some time in training its employees, and wants to keep them there.
“We encourage longevity,” co-owner Paul Hanson said.
The bookstore has offered paid sick leave ever since he can remember.
“We don’t want our employees to have to choose between taking sick leave and taking a wage,” he said.
They also don’t want any employees to come in and interact with other employees or customers if they’re sick.
To his knowledge, employees only take the leave if they actually need it.
“I don’t feel like it’s something that’s been taken advantage of,” he said.
Paid sick leave is just one of the benefits Village Books offers its employees. It also provides paid vacation, and supports employees philanthropic and educational efforts.
“If that instills some loyalty and keeps them here for a long time, that’s even better,” Hanson said.
Those benefits have always been a part of the Village Books business model, he said.
“It’s worked into our system,” he said.
What they’ve had to add to their system, however, is the higher minimum wage.
They’re paying for that by continuing to streamline their book-buying process, and eliminating superfluous steps from the system.
The company supports the new wage, and advocated for I-1433 before the vote in 2016. Even if I-1433 didn’t pass, Hanson said, the store was planning on following the gradual wage increase.
It might be painful in the short term, Hanson said, but in the long term setting up a business model that allows for higher wages will pay off.
With the higher minimum wage, Hanson believes that money will come back to the store, as more workers in the community get more disposable income.
If they shop online, however, Whatcom County will see much less of that money.
“If all of that extra money goes into Amazon’s pocket,” he said, “that will ultimately hurt Bellingham.”