Don C. Brunell Lawmakers should examine impacts of minimum wage law
November 4, 2008 · Updated 4:37 PM
In 1998, Washington voters passed Initiative 688 by a large margin. It uncoupled our state’s minimum wage from the federal act and approved automatic annual increases. Those increases have outstripped the national standard, giving Washington the highest minimum wage in the country.
Today, Barack Obama wants to increase the federal minimum wage to $9.50 per hour by 2011 and follow Washington’s lead by linking future yearly hikes to an inflation index. He believes further increases are necessary so that full-time workers can earn a living wage that allows them to raise their families and pay for basic needs.
However, according to Census data, less than one percent of workers over 25 are earning the minimum wage. And rather than family heads or full-time workers, they tend to be young single adults, teenagers living at home or spouses providing a second income. For example, in 1962 when I was a high school sophomore saving for college, I earned a buck an hour bussing tables in a restaurant. That minimum wage job was my entrée into the job market.
So, elected officials must decide if the minimum wage is meant to be a living wage, considering those who depend upon it. Because if it is, then it’s a whole new ballgame.
On the tenth anniversary of the passage of I-688, the governor and lawmakers ought to examine the impacts of the law and determine if there are some unintended consequences that are drying up jobs.
A study would be especially timely during these tough economic times when any job is increasingly important. Wage rates and benefits are competitiveness factors and part of the total cost of doing business calculation. Washington is a high cost state, and often costs determine whether a company locates in our state.
When Washington’s law took effect in 1999, our state minimum wage rose to $5.70. Since that time, our state’s base wage consistently has been the highest in the nation, and it is set to go even higher in January when it jumps from $8.07 to $8.55 per hour.
Washington’s minimum wage applies to workers in both agricultural and non-agricultural jobs. The increase will apply to all workers 16 years and older and is tied to the urban consumer price index, although 14 and 15 year-olds may be paid 85 percent of the minimum wage, or $6.86 an hour.
One problem is the state Department of Labor & Industries recalculates the minimum wage each September according to changes in the federal Consumer Price Index for Urban Wage Earners and Clerical Workers.
It is an urban index, but job markets and businesses in rural areas are very different than those in big cities. It makes no sense to tie wages in small rural communities to big city economics. And while a drive-in restaurant in Seattle may be able to absorb annual wage increases, a small rural business or farmer may not.
One Association of Washington Business member who runs a long-time family-owned nursery business wrote, “As you probably know, we as a company do not complain too easily but there is an issue that is going to hit us fairly hard.
“This fifty cent an hour increase is going to increase our labor cost by seven to eight percent next year. With our business, we are lucky if we can increase our pricing two to three percent per year, and the labor squeeze is putting us in jeopardy with respect to how long we can continue our operation in the way that we are functioning now.”
We all support paying people good wages. Good wages and benefits attract good workers. The question is whether our state can continue to allow the minimum wage to ratchet upward if the economics don’t work for employers. If worker costs continue to exceed the employer’s ability to make a profit, the jobs will disappear or leave the state.
Lawmakers should look at the impact of the state’s minimum wage law when they convene in January. They should conduct a study to see if, after a decade, it is helping workers or cutting job opportunities, especially in these troubled economic times.