An Honor Washington Could Do Without - Highest Minimum Wage in the Nation
January 2005
It's January and sure enough Washington's minimum wage increased yet again. This time the wage increased from $7.16 to $7.35 (a 2.6% increase) an hour. But this year Washington gets the honor for having the highest minimum wage in the nation—despite the fact that we still have one of the highest unemployment rates in the nation (5.8% – only seven states have higher rates according to the U.S. Bureau of Labor Statistics).
The wage increases automatically every January 1, in accordance with a citizens' initiative passed in 1998. The amount of yearly increase is pegged to the Puget Sound cost of living, the highest in the state, also one of the highest in the nation. A comparison of the states with the top-ten minimum wage rates shows that several share a disproportionately high unemployment rate when compared to the other 40 states. Washington's $7.35 (5.8% unemployment rate) is followed by Oregon at $7.25 (6.8%), and Alaska at $7.15 (7.3%).
The unemployment rate is not entirely a result of the higher minimum wage, but to say the high wage bears no significance on the higher unemployment rates is to ignore not only the numerical evidence, but also what employers, particularly smaller businesses, are saying.
At Washington Policy Center's Small Business Conference last year, over 350 small business owners came together to let their voices be heard on a number of topics—and what they said was Washington's mandatory minimum wage increases continue to stifle business competitiveness.
Their main concern wasn't necessarily the hit their bottom lines would take but rather they were afraid that a higher minimum wage would price several of their "starter" jobs out of the market. These are usually jobs that hover between being necessary or not to a business's overall function. Essentially, many of the minimum wage jobs are becoming too expensive for small businesses to justify keeping around.
But what are some alternatives?
The intent of the minimum wage was never to support a family. It has always been intended as a "starter" wage—something for first-time workers and young people looking for experience and good references so they can move on to better-paying jobs.
First off, our state could consider holding off minimum wage increases during bad economic conditions. There's nothing worse for a struggling business than increasing overhead unnecessarily, especially when profits are not increasing. One proposal identified by small businesses calls for eliminating the yearly wage increase when the state unemployment rate is above the national average (currently at 5.4%).
Other proposals include a call for a different calculation of the minimum wage. Using a region-specific minimum wage would help alleviate some of the pressure rural employers face when they are forced to comply with Seattle's big city minimum wage. Another idea is allowing a training wage for employers to give to younger or inexperienced workers (also called a probationary wage).
A nineteen cent per hour increase might not seem like a lot of money but factor in the higher increases in providing employees with health care insurance, workers' compensation increases and the cumulative effect of increasing the minimum wage $1.65 since 1999. You can begin to see a window into why so many of our businesses continue to lag behind their competitors in other states. The mandatory yearly increases force many businesses into the unfortunate position of firing workers or delaying new hiring.
For years now, Washington's high minimum wage has contributed to an overall unfriendly business climate in our state, not just for employers, but for consumers as well. The result is a higher cost of living for everyone. And while most of us can absorb the slight price increase for hamburgers or a house, those who are hit hardest are the ones who can least afford any increase because it eats away at their limited income.
Naturally, the high minimum wage alone is not solely responsible for the weakened state of our economy, but even taking a relatively small step to slow the minimum wage boost each year could help smaller businesses remain in this state. That would help ensure there are plenty of jobs for our younger and less experienced workers.