(The Center Square) - The National Federation of Independent Business released a Washington-specific version of its monthly Small Business Economic Trends report on Tuesday, which shows the region below the national average in three important categories related to growth and hiring.
In a Wednesday interview with The Center Square, Patrick Connor, state director for the National Federation of Independent Business, said the results should be a wake-up call for Olympia lawmakers whose policies are crushing Washington businesses.
“Small businesses in the state are stagnating. They're not able to hire. The cost of doing business, the cost to employ workers, is just getting to be a barrier to bringing on new talent, to promoting people, to growing the operation,” said Connor.
The three categories where Washington is lagging according to the survey are "Expecting Economy to Improve," "Plans to Increase Employment," and "Now a Good Time to Expand."
“Something really needs to be done to make it easier and more affordable for small business owners to do what they do best. Create a good or project, to take it to market, and to hire people to grow that business in order to better serve their communities," Conner said.
Among the NFIB findings:
Labor cost is dramatically worse in Washington than in the U.S. overall, with more than twice as many respondents ranking it as their top problem (19% vs. 9%).The best single metric on the health of the small business environment is NFIB’s Small Business Optimism Index. The latest data shows the Washington Index at 94.5, 4 points below the U.S. level of 98.5 and 3.5 points below the historical national average.
Connor told The Center Square the cost of hiring and keeping employees is holding back Washington’s small business operators from expanding.
“Our state's average minimum wage is the highest in the country. So, when you start with a base wage that is higher, that puts you at a competitive disadvantage,” he said.
The statewide minimum wage in Washington is $17.13 per hour, but cities and counties are allowed to set higher rates than the state, and several local jurisdictions have imposed higher minimum wages.
Seattle’s minimum wage has reached $21.30 an hour, while cities like Burien (ranging from $20.63 to $21.63) and Renton ($20.57 to $21.57) scale their rates based on employer size, alongside Tukwila, SeaTac, Everett, and Bellingham which have all established mandates well above the state standard.
Estimates from the Center for American Progress show that raising the floor to a $15 minimum wage nationwide could increase the wages of 1 in 4 workers—nearly 40 million—and lead to an annual wage increase as large as $8,000 for some of the lowest-wage workers.
“Add onto it that we are an outlier when it comes to the benefits paid and the premiums or taxes collected from employers, for things like unemployment insurance and workers' compensation,” said Connor.
“We've got an unemployment insurance system that has been retooled, and now we're being told that employers can expect as much as a $700-$800 million hit over the next two to three years."
Connors added that Washington’s paid family medical leave program adds another tax for employers and employees.
Washington’s Paid Family and Medical Leave is a benefit for Washington workers, when a serious health condition prevents them from working or when they need time to care for a family member, bond with a new child or spend time with a family member preparing for military service overseas. Up to 12 weeks of paid leave is available, so long as an employee has put in a certain number of hours on the job.
“Then we’ve just launched the Washington Cares program, which is another tax on workers, and soon we'll have the Washington Saves program, which, while well intended, will take more dollars out of workers' paychecks to put it into a mandatory retirement savings account," he added.
"So, every time you turn around, the state is asking small employers to do more, to pay more.”
The WA Saves Program is designed for workers whose employers do not offer a qualified retirement plan. Scheduled to launch fully by July 1, 2027, the program requires eligible businesses to automatically enroll their employees through payroll deductions, though employees can opt out.
“The millionaire's tax is just adding bitter frosting onto a terrible cake when it comes to our state's economy and job creation,” said Connor.
In initially coming out in support of the income tax, Gov. Bob Ferguson said Washington small businesses would benefit.
“Small businesses are the backbone of our economy and our communities, driving economic growth and creating jobs. And amid the affordability crisis, many of them are struggling. In Ferguson’s view, the state should not require small businesses to pay B&O taxes until they make $1 million in revenue. The state can achieve this tax reduction for small businesses using approximately $1 billion gained from the millionaires’ tax,” noted a Dec. 23, 2025, press release from Ferguson.
The governor's office did not respond to a request for comment regarding the SBET report.
Connor said business owners are fed up and looking elsewhere for answers.
“I got a call from a fellow up on the Olympic Peninsula who said, ‘I can't do this anymore.’ He simply laid off every single one of his workers and decided he's going to be a sole proprietor," he said.
"We hear reports on at least a weekly basis of employers who are closing their doors and are leaving the state. They don't get headlines like Starbucks flying off to Tennessee, but you see them moving their operations to Idaho, to Oregon. We're even seeing folks going to Utah, Arizona, and as far as Texas or Florida.”
As reported by The Center Square, a survey conducted in late April by the Association of Washington Business found about 24 percent of employers considering moving their business out of state, and even more considering moving their personal residence out of Washington.
Connors said the number of shuttered storefronts in any given town across the state should be all the evidence needed to prove the economic decline.
“You can go to any downtown core in any city or town in the state, and you will find, probably not just one, but several empty storefronts. That's not a coincidence. That's a result of the bad economic decision making coming out of Olympia on a regular basis. We will continue to see more vacant, storefront rents. You're going to see fewer small businesses because they are going to look elsewhere.”
