THE BLOG
10/03/2014 09:39 pm ET Updated Dec 03, 2014

Can Seattle Afford to Pay a Premium Minimum Wage?

CEO Nick Hanauer sees the possible approach of a modern Shay's Rebellion: Farmers with pitchforks marching on investment bankers and plutocrats. If social unrest is to be avoided, Hanauer believes the top 1/100th of one percent must show greater political accountability for the design of the economic system and for laws that foster increased inequality. After all, lobbyists working for financial elites have helped tilt the playing field.

During the last several decades corporate profits have expanded remarkably. These gains reflect productivity increases acquired through technological advances, improvements in business efficiency and an "open society" approach to market development. Multi-national businesses engaged in global trade have benefitted from the growth of low-wage work forces in developing countries, lower net corporate taxes relative to profits, lower interest rates on corporate bonds, and larger markets across which to spread overhead. By most measures this combination has produced a stunningly profitable era for big business, high finance, top corporate management, and mega-investors.

During the last 35 years the top 12,000 richest families in the U.S. have pulled away from the top 1.2 million households (the top one percent), while the top one percent have left the bottom 80 percent in the dust -- median U.S. household income hovering around $52,000 in 2013. (Even at the 90th percentile, annual household income remained under $150,000 in 2012.) Theoretically and rhetorically, democratic capitalism is not supposed to produce this effect. The core political idea in democratic republicanism is that the vast majority have sufficient political wherewithal to hold their own in competition for resources, opportunities, and prosperity. Unfortunately, the public's shrinking share of the American apply pie contradicts this expectation.

Nick Hanauer is concerned that widening gaps in income and wealth bode poorly for the sustainable prosperity of elites like himself. Consequently, he is working tirelessly for "middle-out"economic policies that boost the capacity of consumers to spend, thus funneling a larger net share of the economic pie to the bottom 90 percent. Since middle and working class families spend a far greater portion of their total income than do elites, sustainable economic stimulus comes from looking out for consumers, not just pumping easy money for investment banks.

Recently, Nick Hanauer was influential in helping the Seattle City Council approve a plan to increase the minimum wage within the city's jurisdiction to $15 an hour by 2018 -- potentially the highest minimum wage in the U.S. This move raises the question of whether Seattle is becoming the new Paris of the Pacific: a place that can sustain a higher wage than most parts of the country because of its enviable circumstances. It also raises questions about the scalability of Seattle's strategy -- questions that other advantaged cities are entertaining as well.

No one thinks Seattle is a typical American city. The Seattle metro area is rich with nationally important corporations well-positioned in their business sectors: corporations such as Microsoft, Amazon, Weyerhauser, Quest, Costco, Paccar, Starbucks, Nordstrom and Seattle's high-pay, semi-oligopolistic employment giant, Boeing (with its headquarters now in Chicago). Geographically speaking, Seattle dominates one of the most attractive and unique port locations in America. With its infrastructure of globally dynamic businesses, major companies from around the world cannot afford to ignore Seattle, even if the costs of doing business there climb.

Forbes rates Seattle's tech job growth as number one in the nation. Inc.com lists over sixty companies in the Seattle metro area with a three-year revenue growth over 100 percent, plus dozens of smaller internet, software and STEM companies with considerable potential. Instructively, the Lewis Mumford Center for Comparative Urban and Regional Research ranks the Seattle metro area number three in the nation when combining the five competitive metrics of "knowledge jobs," globalism, economic dynamism, innovative capacity and the digitization of the local economy.

Once the area's business synergies are evaluated it becomes evident that Seattle can afford to pay premium wages because its companies have cultivated national and worldwide market advantages that sustain premium pricing or competitive advantages in products and services. Thus, the economic encumbrance upon local residents is relatively light if Seattle moves to a $15 an hour minimum wage. Visitors from across the nation and around the world (many traveling at the expense of their employers), will not be deterred but will fill the coffers of Seattle area businesses all the faster. Meanwhile, the social services burden of caring for the urban area's underemployed will decline, as food service, hospitality, retail and other low wage sectors receive a larger subsidy from outsiders.

Since most of the manufactured goods that "Seattleites" buy are not manufactured in Seattle, the cost-of-living impact of raising the minimum wage is minimal upon metropolitan residents, especially when Seattle's superior household income level is taken into consideration.

Additionally, with so many business-hub communities surrounding Seattle (more than a dozen not counting bedroom communities), residents desiring low-cost local services do not have to drive far to find businesses not constrained by the new minimum wage.

In sum, Seattle, like several dozen other advantaged U.S. cities, can raise its minimum wage, battle income inequality locally, and prosper. The larger question is what happens when Seattle's move goes viral?