Yakima employers eye strategies to confront rising minimum wage

Come Jan. 1, Washington state employers and business owners will see the first of several increases in the minimum wage under Initiative 1433. The initiative, which was approved by 57 percent of statewide voters last month, will increase the minimum wage to $13.50 by 2020 as well as implement mandatory sick leave (starting in 2018). The first increase will put the minimum wage statewide at $11 an hour, an increase of 16.2 percent from $9.47 this year.

The Yakima Herald-Republic checked in with employers and business owners in three key industries expected to be heavily impacted by the increase.

Restaurants weigh options

Much of the attention nationwide around increasing minimum wage has been about its impact on fast-food restaurants. But food service operators across all levels — from fast food to fine dining — will see a rise in labor costs with the new wage.

However, the strategies restaurant owners are adopting to cover the increased minimum wage vary as much as their respective cuisines. While the most simple way would be to increase prices, that’s not necessarily the move some owners are making — at least right away.

“We’re not looking at always to raise prices,” said Jim Rowe, who employs about 170 workers among the five restaurants he owns in Yakima and Kittitas counties. “We’re looking to manage our business as a whole.”

At Creekside West Bar & Grille, which is Rowe’s upper-end restaurant, he aims to use a little bit of marketing to help him cover costs. Commodity prices for beef have declined, which means the profit margin for some menu items, such as steak, has increased, Rowe said. He plans to better promote those items in hopes of increasing customer orders, resulting in a revenue boost that will allow him to better cover increasing labor costs.

Rowe is employing a completely different approach with Blue Rock Saloon, the country bar he owns in Ellensburg. Instead of raising prices, he’s planning to cut them. The primary clientele for the saloon is Central Washington University students who are often strapped for cash. That’s why a price increase isn’t an option. But why cut them?

“Let’s just pack the place and make it a place that people will go all the time,” Rowe said. In other words, let volume cover the increased cost.

“If that doesn’t work, if I don’t get new customers because of it, I will change again,” he said.

Don Copp, owner of eight Yakima County Papa Murphy’s locations that sell a variety of take-and-bake pizzas, also wants to avoid raising prices for now. The corporate headquarters of the pizza chain encourages its franchisees to stick to even dollar pricing, so an increase would be at least $1 across the board, Copp said.

Copp already initiated a $1 increase for all his pizzas more than a year ago, so it’s too soon for another price change. Not to mention that price increases, as Copp has experienced previously, usually come with a 3 to 5 percent decline in sales. So price increases should be done with care, he said.

“I’m going to see how the first three months go,” he said.

Race for solutions

About 1 in 10 Yakima Valley residents work in the retail trade, which runs the gamut from big box, department and speciality stores to mom-and-pop shops.

Pres Tuesley, owner of Yakima Bindery, a downtown Yakima office supply and services store, was against Initiative 1433. When the measure passed, Tuesley went right to work on how he could cover the anticipated increase in labor costs.

Tuesley, who has 14 employees, immediately implemented one such strategy — increasing the cost of single copies from 10 to 14 cents. He’s not expecting the change to make a huge dent but hopes the increased revenue will add up over time.

However, given the quick turnaround from the initiative’s passage to the implementation of the first increase, Tuesley said there isn’t sufficient time to institute every change or adjustment he needs in order to cover the wage increase.

Tuesley doesn’t want to default immediately to price increases — it’s not even an option with some items, such as copier paper, given the competitive landscape. But he plans to take a look at every item to see what adjustments can be made. He also will look to see whether he will have to cut services that no longer pencil out financially.

“I’m going to evaluate things, piece by piece, department by department,” he said.

Beyond minimum

While retail and restaurants are some of the key industries impacted by minimum wage increases, there are several other businesses that hire minimum wage workers.

While most positions in health and social services make well above minimum wage, there is a subset of workers that will benefit from upcoming wage increases. For example, nearly all of the 39 employees at Ponderosa Assisted Living Community in Yakima will see a raise come Jan. 1.

Many of the employees are scheduled for raises in the coming months, but the facility’s owner decided to apply those increases Jan. 1, said administrator Marilee Ramos. It was important to the owner, she said, for the pay scale to acknowledge employees with more experience and tenure.

“I know that (the owner) was looking at health care as a whole and where it was going,” she said. “(He) just wanted to make sure we were able to hire the cream of the crop.”

There are no plans to pass those costs on to clients in the form of a rent increase this year. Ramos said.

Instead, she and other operators of what are known as long-term care facilities are hoping for successful efforts in Olympia to adjust the reimbursement rate for residents on state-run Medicaid insurance programs to better reflect increased operating costs, including labor.

“We would like them to use current expenses,” said Randy Hyatt, chief operating officer of Hyatt Family Facilities.

The company employs about 550 workers at its four skilled nursing care facilities and one assisted living development statewide. Hyatt said that cutting employees or hours to cover higher wage costs isn’t a realistic option for his industry since the state requires a certain amount of staffing.

Hyatt believes pay raises are warranted for the company’s hard-working employees, but also acknowledges that such restrictions make it more challenging to keep a viable business.

“We have ways to (cover costs),” he said. “But we would prefer to see Washington state with all the requirements step up to the plate with increased subsidies.”

Leap Ahead Child Development Center owner Larry Fournier said he’s being cautious about increasing rates. Any revenue he would gain from such increases would be negated if he loses customers in the process.

Fournier, who has 29 employees at his Terrace Heights business, also hopes for some help through increasing the state subsidy the business gets for low-income customers through the state Department of Social and Health Services.

However, he also doesn’t like the idea of higher taxes that could be passed down to Washington state residents to cover an increased subsidy. And he’s looking into options, such as reducing hours or the number of paid days off for employees, to help balance the impact of increased wages. But Fournier doesn’t take such moves lightly.

“I don’t like doing things that hurt my employees,” he said. But “this initiative (may) force us to do (those) steps.”

An earlier version of this story incorrectly identified the owner of Yakima Bindery. It's Pres Tuesley.