Archives for April 2014

There are lot of good reasons to oppose a “tip credit”, but one that isn’t often discussed is the way it incentivizes bad behavior on the part of unscrupulous employers by magnifying the rewards of wage theft. The math is subtle, but simple.

Let’s say you earn $27 in tips over the course of a nine hour shift. Under a straight up $15 minimum wage, you’d earn $15 an hour in wages plus $3 an hour in tips for a total cash compensation of $18 an hour. That’s $162 in tips and wages over a nine-hour shift.

But under a tip credit, that same shift would earn you only $135: $12 an hour in wages, plus $3 an hour in tips, for a total of $15 an hour. If your tips per hour are smaller than the maximum tip credit, all of your tips go toward your employer’s tip credit. You know—in his pocket. Whether you earn a dollar or two an hour more in tips or a dollar or two less, it makes no difference on your paycheck—all it does is raise or lower your employer’s labor cost by an equal amount. And that’s where the wage theft incentive comes in.

For example, let’s say your employer cheats you out of an hour, forcing you to clock out after only 8 hours or recording only 8 hours on your pay stub. Well, of course you lose an hour of pay, so your paycheck goes down $15 to $120. But your employer, who would have paid you $12 an hour over the course of a 9-hour shift, now gets to spread your $27 in tip credit out over fewer hours. $27 divided by 8 equals about $3.38 an hour in tip credit. So rather than paying you $12 an hour for 9 hours of work, your employer now only pays you $11.62 an hour for 8 hours of work. Such a bargain!

Of course, not all employers cheat like this. I’m guessing most don’t. But some do. And as the free marketeers will tell you, if you incentivize bad behavior, you’re likely to get more of it.

With Mayor Ed Murray expecting a recommendation on a minimum wage ordinance by the end of the month, members of his Income Inequality Advisory Committee are now negotiating in earnest. Nothing is set in stone, but the political realists on the committee realize that the proposal Murray ultimately submits to the city council will be for a $15 an hour minimum wage—if in name only. The proposal will also include some sort of multi-year phase-in, at least for “small” businesses; that’s a concession council member Kshama Sawant has already made from her initial “$15 Now” position. Also, expect to see tougher enforcement of wage and tip theft attached to the proposal.

Of course, details! But apart from the main points above, the debate has mostly shifted toward the definition of the word “wage.” Many on the business side of the table are arguing for a so-called “total compensation” minimum wage that would count both tips and the cost of providing benefits towards the employer’s $15 an hour obligation. As I’ve previously explained, that’s bullshit. Total compensation would mean a minimum wage worker earning $3 an hour in “benefits” (however those are defined and valued—again details!) would only take home $12 an hour in cash take-home pay. That’s not $15 hour! And that alone should make “total compensation” a nonstarter for anybody (or any mayor) who seriously claims to support raising the minimum wage to $15.

If we were talking about, say, an $18 total compensation minimum wage, that would be different. But we’re not.

(Also, because the cost of providing health care benefits inflates at a rate many times the Consumer Price Index, a total compensation model would erode the real value of an inflation-indexed minimum wage over time, as health care benefits gradually consumed a larger and larger share of total compensation. Honestly, read my analysis. The numbers are all there.)

Because of these obvious political and policy flaws, I am convinced that some on the committee are proposing total compensation as a mere negotiating tactic (you know who you are), intended to make way for a classic “tip credit.” (Opponents call it a “tip penalty.” What it really is, is a “tip deduction,” but we’ll use “credit” here for the sake of avoiding confusion.) A tip credit would permit employers to deduct from their minimum wage obligation the employee’s tips, up to the difference between Seattle’s minimum wage and the effective minimum wage for tipped employees under state and federal law—currently the Washington State minimum wage of $9.32 an hour.

To be fair, assuming no wage or tip theft, a tip credit would guarantee $15 in cash compensation. So there’s that. And on the vast majority of minimum workers who earn little to nothing in tips, a tip credit would have little to no impact. Considering where we were when striking fast food workers first started making the demand for $15 an hour, a $15 minimum wage with or without a tip credit would be a remarkable accomplishment.

So then why are the folks on the workers’ side of the table so adamantly opposed?

Because precedent!

Washington is one of only seven states without a tip credit, a distinction our restaurant industry and its Republican surrogates have relentlessly attempted to “fix.” Throughout much of the rest of the nation, the minimum wage for tipped employees is only $2.13 an hour, an absurdly low figure that inflicts poverty and abusive work conditions on a disproportionately female and minority workforce (70 percent of tipped workers are women!), while providing near-free labor to many restaurateurs. Wage and tip theft is rampant, and tip-dependent workers are forced to put up with all sorts of humiliation (and even outright assault) in order to secure the best shifts, and earn the highest tips.

Yes, the problem is with our tipped culture as much as it is with the tip credit, but a tip credit only makes things worse. Since the first $5.68 an hour of a worker’s tips would go straight into the employer’s pocket (as a deduction from their $15 obligation), any employee earning less than $5.68 an hour in tips (and most tipped employees do) would cost more to employ. Thus there would be even more pressure on a waitress to unbutton another button on her blouse in order to lower her employer’s labor costs.

I’ve got a daughter. Do I really want her being forced to show a little extra cleavage in order to keep her job, let alone up her hourly take-home pay? No.

So while $15 an hour with a tip credit would be a helluva lot better for most minimum wage workers than $9.32 an hour without, worker advocates and labor representatives simply don’t want to set the precedent that tip credit is an appropriate policy. They rightly fear giving state Republicans and squishy pro-business Democrats the ammunition to impose a tip credit statewide—a policy that would lower the income of Washington’s tipped workers everywhere outside of Seattle. That’s simply unacceptable. And they are also looking to set a good example for the cities and states that will inevitably attempt to follow in Seattle’s $15 an hour footsteps.

A tip credit is bad policy. It incentivizes wage and tip theft (an incentive I will illustrate in a subsequent post). It deceives consumers (who have no means of knowing if their tips are increasing the incomes of servers, or just decreasing the labor costs of employers). It helps perpetuate an unjust and abusive system. It is a totally arbitrary policy created in 1966 to buy off the National Restaurant Association (“the other NRA”) from opposing a federal minimum wage hike. And that is exactly what the Washington Restaurant Association and its surrogates are attempting today.

All that said, there may be room for a little compromise. But I’ll save that discussion for another post.

In Goldy’s metacommentary piece yesterday on The Seattle Times’ oppposition to funding Metro, he gave them some well deserved shit for pretending to oppose it because of its regressive nature.

Oh no! It’s a “regressive” tax! This from an editorial board that has opposed every single progressive tax (like, you know, on income or estates) that has come before it. What a bunch of fucking concern trolls.

But I think it’s even worse than that: We’ve known something was coming for a while. The Seattle Times ed board hasn’t exactly been leading the charge for a better system. Dow Constantine has been telegraphing since he got into office that he’d do something if the state didn’t act. And in that time The Seattle Times has neither suggested what that something ought to be nor have they pushed the legislature to act to allow King County to have a better system.

Could you imagine how different the debate would be in the state, if the state’s leading — or at least largest — paper had editorial after editorial pushing the legislature to let King County tax ourselves however we want? If they demanded that even if the GOP didn’t pass a complete transit package, that they at least give us a more progressive option?

Please join us tonight for an evening of politics under the influence at the Seattle Chapter of Drinking Liberally.

We meet every Tuesday in our new home at the Roanoke Park Place Tavern, 2409 10th Ave E, Seattle. The starting time is 8:00 pm, but some folks show up even earlier for dinner.

Can’t make it to Seattle? Check out another Washington state DL over the next week.

The Tri-Cities, Vancouver, WA, and Redmond chapters also meet on Tuesday. On Wednesday, the Bellingham chapter meets. On Thursday the Bremerton and Spokane chapters meet. The Centralia chapter meets on Friday.

With 215 chapters of Living Liberally, including nineteen in Washington state, four in Oregon, and three more in Idaho, chances are excellent there’s a chapter meeting somewhere near you.

I’m trying to generate the appropriate outrage at the Seattle Times editorial board for endorsing a “No” vote on King County’s Metro-saving Proposition 1, but then it’s kinda like raging at my dog for killing squirrels. It’s what she does. It’s her nature. And reading this editorial is like watching the editors chase a squirrel.

VOTERS should weigh the regressive tax request embedded in King County Proposition 1 against history.

Oh no! It’s a “regressive” tax! This from an editorial board that has opposed every single progressive tax (like, you know, on income or estates) that has come before it. What a bunch of fucking concern trolls.

The pattern is clear. As in previous rounds of asking taxpayers for more money, Metro sees its shortfall as a revenue problem, rather than thoroughly confronting its well-documented unsustainably high operating costs.

And since the pattern is so “clear” and these unsustainably high operating costs are so “well-documented,” we can presume the editors are about to clearly document them.

Um… no:

Voters also should consider the near future when they face many other ballot requests, from parks to city transportation. Tax fatigue could jeopardize crucial investments such as public prekindergarten.

Yes, please consider the other future tax measures the Seattle Times will endorse “No” on. For the children!

When Washington voters in 1999 approved Initiative 695, it wiped away a vehicle excise tax that gave the King County Metro system about one-third of its revenues.

In response, King County leaders asked voters for a 0.2 percent increase in the county sales tax “to preserve and improve our bus system,” promising 575,000 more hours of bus service, as the 2000 voter pamphlet read. Voters said yes. Over the next six years, they got only 203,000 hours of new bus service.

Yes, voters did approve I-695. But not Seattle and King County voters. We rejected it. Also, the MVET that I-695 wiped away was the most progressive tax in the most regressive tax system in the nation. But I don’t remember the fucking concern trolls at the Seattle Times shedding any tears over that.

In 2006, King County leaders again asked for a 0.1 percent sales tax increase, to fund Rapid Ride expansion. Voters said yes. The promised expansion is behind schedule, and in spots is not the superfast service promised.

And in 2008 the nation plunged into the Great Recession, taking Metro’s sales tax revenue with it.

During this period, driver wages rose significantly, to the point that Metro had the third-highest-paid drivers in the country. In 2008, Metro attracted the scrutiny of the Municipal League of King County, which issued a damning report on the agency’s cost structure. In 2013, it issued a grumpy follow-up report, noting modest improvements but reiterating cost structure concerns.

A) That was six years ago. B) Don’t trust this editorial board’s numbers. Ever. And C) Unionized bus drivers! It burns!

In 2012, after sales-tax revenues crashed because of the Great Recession, Metro got a boost with a temporary $20 car-tab tax.

A temporary fee that only made up a portion of Metro’s shortfall. The rest was met through cost cuts, fare hikes, and using up the last of its cash reserves. Also, this temporary fee was intended to tide us over until the legislature approved a more stable funding source. It never did. So King County is using the only taxing authority it has.

This year, King County leaders are back again. Metro faces a $75 million deficit when that car tab expires. This time, the request is breathtaking, for its size and for the regressive nature of the proposal. A $40 hike in car tabs and another 0.1 percent sales tax increase would yield an estimated $1.6 billion over 10 years. Three-fifths of it goes to Metro, the remainder to roads, bike lanes and road diet programs.

Of course they’re back again. The temporary $20 car tab fee expired, and the reserve funds are all used up. Everybody understood it was only a stopgap measure at the time the car tab fee was passed. And the size of the package is no more “breathtaking” than the MVET authority Olympia promised, but refuses to deliver. The two tax packages raise exactly the same amount of revenue, and for exactly the same purposes.

As for the regressive nature of the tax, yes, car tabs and sales tax are more regressive than an MVET, which taxes the value of your car, and thus hits owners of more expensive vehicles harder. But what the fucking concern trolls at the Seattle Times don’t tell you is that is that the package includes a $20 rebate for low-income households, as well as a new low-income fare. And of course, nothing could be more regressive than slashing bus service!

Metro’s defenders cite recent cost-saving reforms in the 2010-2013 contract with the Amalgamated Transit Union Local 587, including a wage freeze the first year and an overall 2.3 percent increase the second year.

In the private sector, that would be called a rational response to an economic crisis. In the public sector, those concessions are deemed justification for a breathtaking new revenue increase.

Though the Municipal League is supporting Proposition 1, it does so “reluctantly,” citing ongoing concerns with cost controls and efficiencies. It urges Metro to do better, including measuring itself against peers.

But: If voters approve Proposition 1, King County would have no incentive to do the hard work of bringing down labor costs that still saddle Metro with the fifth-highest driver costs in the country, behind only Boston, Santa Cruz, Washington, D.C., and Chicago.

Let’s be clear, the Seattle Times opposition to Proposition 1 is based solely on its opposition to anything that remotely smells of organized labor. The drivers union is the editors’ squirrel. It doesn’t matter how regressive the taxes in Prop 1 are—if the measure balanced the tax hike by busting the union, the paper would happily wag its tail in approval.

Also, don’t trust the editors’ numbers. They’re almost always wrong.

If voters turn down Proposition 1, King County threatens a round of devastating bus-service cuts, many on popular routes including those carrying students to college. County and Metro leadership should not let that happen.

County leaders are trying not to let this happen. By raising revenue. Because, you know, shit costs money.

The threat ignores other options, including further fare increases and ever tighter control of administrative costs and capital expenses.

And the editors ignore the fact that Metro has been pursuing these options for years. Metro is about to raise fares for the fifth time since 2008—and it already has some of the highest farebox returns in the nation.

Cutting services is not a threat. If Prop 1 fails, service will be cut, just like it was in Pierce and Snohomish counties when they failed to raise new tax revenue.

King County has been negotiating with the drivers union for nine months. Talks are now in mediation. Both sides could earn voters’ trust with quick resolution of a contract that further drops costs.

Jesus. Again with drivers union. Squirrel!

Saying no to Proposition 1 is not a message that transit does not matter. It does. The region, particularly job-dense downtown Seattle, needs reliable bus service. Nor should a no vote be read in Olympia as a sign the state Legislature does not need to pass a transportation package that includes less regressive transit tax options. It does.

No, it’s a message that low taxes matter more than transit. At least to the editors of the Seattle Times.

Vote no on Proposition 1, and send King County government a message that Metro has more work to do on righting its cost structure before asking voters for more revenue.

Actually, all the Seattle Times is doing is sending a message that it is either too stupid to understand that time has run out, or too dishonest honest to admit it. The legislature was supposed to grant Metro MVET authority two sessions ago, but senate Republicans have persistently blocked the bill, you know, just because.

The $20 tab fee expires in June. The reserve funds are empty. Whatever other options may exist cannot be exercised in time to avoid devastating service cuts. Reject Prop 1 and Metro will slash service. That’s not a threat. That’s reality.

But look: squirrel!

– I voted so if someone cuts your bus service, blame someone else.

– Nothing freaks me out like Muslims eating meat butchered in a fashion that affects me in no demonstrative way.

– Whether or not a person chooses to vote, elections happen and someone wins. And then, as in Wisconsin and elsewhere, the winner wins big, and the big winner is a raging ideologue, they tend to stomp hell out of their opponents.

– If you’ve been affected by the landslide, FEMA is asking you to call 1-800-621-FEMA (3362)

– These are some solid new stereotypes about women.

– Right Wing Science Dude.

Took me all day, and I’m not sure the DNS is fully propagated, but it looks like HA is up and running on its new server, and omigod is it faster! If you think the website was slow, you should’ve tried using the Admin. Can’t tell you how stupid I feel for making everybody suffer through the total shit show that our old server became.

Anyway, check things out and let me know if anything is broken.

First of all, if Christopher wants to interview people who are truly struggling to scrape by on their meager income, he might want to start by interviewing his own staff. Second, I’m not sure I get the whole point of featuring failing businesses as the poster children of the anti-$15/hour side of the debate? I  mean, what’s the argument? If we raise the minimum wage, the unprofitable bookstores and coffee shops Christopher loves will fail even sooner? That’s hardly a sound premise on which to base economic policy.

Don’t get me wrong, I have great empathy for small business owners. I come from a family of small retailers, and I owned and operated a small business myself. My then-wife and I founded Eccentric Software in 1993, initially to publish what I loving describe as “the world’s most widely pirated rhyming dictionary software,” capitalizing our business on credit cards and some small loans from family members. Over the next five years we sold tens of thousands of copies of four different titles in shrink-wrapped retail packaging through major outlets like Computer City, CompUSA, Egghead, and in all the major mail-order software catalogs. Our software (much of which I developed myself) garnered great reviews and developed a loyal following, generating hundreds of thousands of dollars in revenue. To this day I’m proud to say that I am one of the few Americans who can boast a trade surplus with Japan.

But while the business never lost money, it never really made much money either. It was an awful industry, one in which the people who create the most value reap the least rewards, and in which longtime vendors would sometimes just decide to refuse to pay you, simply because they could. We lived comfortably, but we eventually walked away with a six figure debt.

Still, nobody shed tears for us, because such are the risks of entrepreneurialism. We knew that going in. But we took that risk anyway, partly because of the prospect of reward, and partly because we just passionately believed in our product. I can point you to dozens of Broadway musicals and Disney movies and hit songs that I know were written using our software. That’s gratifying in itself. And the money thing worked itself out too, with my then wife’s entrepreneurial experience helping her land a dot.com job that ultimately paid off our remaining debt. (I also landed good-paying dot.com work, but my options never paid off.)

So yeah, I know what it’s like to run a struggling small business. I know what it’s like to pour all my passion and time and financial resources into a business, for little monetary return. Hell, even HA was an entrepreneurial endeavor into which I sunk immense human capital, often for non-monetary return. So I feel for small business owners, and do agree that the system, alas, is stacked against them.

That said, most businesses fail. They just do. I’m sorry that Rafael Sanchez might have to go back to an unsatisfying job at Microsoft or some other bland corporation now that his lovely little business didn’t work out (I’ve been to Cintli, and it truly was a lovely little place). I feel your pain, Rafael. Been there, done that.

But life isn’t fair. So while no doubt a $15 minimum wage might push some struggling small businesses over the edge, others will take their place. Broadway won’t become an empty landscape of boarded up storefronts, bereft of coffee shops, restaurants, and retailers. The business community will adapt to Seattle’s living wage economy. That’s the way capitalism works. And there’s no rule that says the forces of creative destruction may only be unleashed by the private sector.

Another election, another Pam Roach primary — and possibly general election — challenge.

State Sen. Pam Roach, a guardian of the Republican Party’s right flank in Olympia, is getting a challenge from a fellow Republican.

State Rep. Cathy Dahlquist, R-Enumclaw, announced this week that she will run against Roach. Under Washington’s “top two” primary system, the challenge creates the distinct possibility of a November battle between two Republicans in the 31st District of eastern King County and rural-exurban Pierce County.

And at the link, Dahlquist makes good noises about education, including mentioning teacher pay that the GOP often don’t when talking about education. Still, on many issues she’s a pretty standard Republican. She voted against the Reproductive Parity Act and marriage equality. And I couldn’t find any tax increases she supports, so wanting to pay for education is nice, but presumably it means by destroying the rest of the state’s social services. So sure, she’d almost certainly be better than Roach. But that’s a pretty low bar to clear.

Because the law is the law. (Though geographic diversity could be one of several reasonable tie-breakers.)

Also, contrary to the mischaracterization in today’s Seattle Times, Justice Jim Johnson is not “an unabashed populist.” He is a government-hating ideologically rigid Libertarian.

Just setting the record straight.

One of the big debates in the battle over how to regulate Transportation Network Companies (TNCs) like Lyft, Sidecar, and uberX is over how to ensure adequate insurance. The Seattle City Council seemed pretty adamant about requiring insurance comparable to the commercial insurance required of taxi drivers, while the TNCs basically argued: “Don’t worry, we’re handling it, trust us.” Particularly offensive to the TNCs is a provision that requires that their blanket insurance cover drivers whenever they are logged into the system, not just when they are engaged with a passenger.

Good thing too, because insurance companies are busy updating their personal auto insurance policies to explicitly exclude coverage when the vehicle is used in connection with TNC services, for example, in the revision above that Amica has sent to customers:

We have excluded Medical Payments Coverage for bodily injury sustained by anyone other than you or any family member while occupying, or when struck by, your covered auto while it is enrolled in a personal vehicle sharing program under the terms of a written agreement and being used in connection with such program.

What exactly does this language mean? I’m not sure. But I wouldn’t count on my insurance company paying a claim on an incident that occurred while I was logged into a TNC. Or, perhaps, ever.

TNC boosters seem to think that because there’s an app, it changes everything! It doesn’t. Your personal auto insurance does not cover commercial for-hire use. So I’d make damn sure the TNC’s insurance does before assuming the liability that comes with being a for-hire driver.