The Living Wage Movement Comes to Washington State
2007-23
The term “living wage” has been in use for many years, often referring to a job that paid a wage capable of supporting a household or family. Politicians use the term to describe “living” or “family-wage” jobs – jobs that pay enough to support a middle-class family.
But a “living wage” has also come to mean something completely different over the past 15 years. Living wage is now used as a policy term to mean a “hyper” minimum wage – a mandated wage floor based not on work value or productivity, but as a labor price control meant to guarantee a certain standard of living.
Supporters of a mandatory living wage are concerned that some people with low paying, low-skill jobs are unable to support a family in today’s economy. They are convinced that the best way to lift people from the ranks of the working poor is a law to guarantee a wage level high enough to remain off of government assistance programs.
In 2007, living wage proponents pushed an ordinance in Spokane that would have required large retail businesses (over 95,000 square feet) to pay all employees at least 135% of the state’s minimum wage if health care benefits are provided, or 165% of the minimum wage if benefits are not provided.
Activists targeted the city of Spokane, but this year they failed to gather enough signatures to place the measure on the November ballot. They vow to try again, so Spokane, and other Washington cities, have not seen the last of living wage proposals.
Washington’s first minimum wage law was enacted in 1961, setting the minimum labor price at $1.15 per hour. Lawmakers regularly increased the minimum wage one-to-three times per decade through the 1960s, 1970s and 1980s, but with the passage of Initiative 688 in 1998 the wage is now set on auto-pilot. It increases automatically every January 1st based on the Consumer Price Index. Currently, Washington’s minimum wage is the highest in the nation, at $7.93 per hour.
With the automatic increase provision in place, the last several years have seen significant rises in the minimum wage ($0.30 in 2007, $0.28 in 2006, $0.19 in 2005) and Washington’s minimum wage will break the $8.00 an hour mark ($8.07) next January 1st. For comparison, the federal minimum wage is $5.85.
The idea of imposing a hyper minimum wage, the living wage ordinance (LWO), appeared in the mid 1990s. Baltimore was the first city to pass an LWO (1994), but the law applied only to companies that provided contracted services for the city. Proponents argued that private companies benefiting from taxpayer-funded contracts should be forced to pay a living wage to their employees. In fact, almost all of the more than 100 LWOs passed by cities and counties in the last 15 years apply only to government contracts with private companies – not to general businesses or to specific industries.
Recently, however, living wage proponents have focused their efforts against retail businesses. They assume large retail businesses harm the local economy and are the source of the working poor, despite research that shows the presence of a large retailer often drastically reduces the local cost of living, creates jobs and reduces poverty.
It is important to look at who earns the minimum wage, since these are the workers LWO proponents say they are trying to help, particularly low-wage earners supporting a family.
Unfortunately, national statistics show that an LWO would not help low-wage heads of households as much as proponents hope. Actually, most of the benefit would go to households with incomes well above the federal poverty level.
Most minimum wage workers are young, inexperienced, unmarried and live in a home with another earner who makes far more than the minimum wage. In addition to being the second wage-earner in a household, minimum wage workers often see rapid increases in income over time. Most minimum wage workers receive an increase in their earnings above the minimum level within one year.
Therefore, mandating a higher wage level would not help the truly working poor. In a living wage survey of 360 labor economists across the United States, three-fourths said that a national living wage would result in employment losses, because the living wage requirement would price lower skill level workers out of the labor market. Similarly, 93% of the labor economists surveyed believe a living wage ordinance is not an efficient way to improve the incomes of poor families.
There are effective steps state and local governments can take to help the working poor. Encouraging an environment for strong economic growth and lowering the cost barrier to creating jobs will benefit low-skilled workers. Equally, if not more important, is to improve the academic quality of public schools. Research shows those with more education are much less likely to end up in a working poor household.
Price controls, such as an LWO, cause severe distortions of the labor market. Its primary effect is to create a surplus of labor and a shortage of jobs. The result is the most vulnerable workers, those with less experience and fewer skills, are the first to be priced out of the market and denied job opportunities.
Moving up the socioeconomic ladder entails access to starter jobs, yet these are the first jobs to disappear when costs are artificially high. Simply mandating a higher wage does not help those who need it most, and it does little to lift working people out of poverty.
Read the full policy brief, "A National Movement Hits Close to Home: The Living Wage Proposal in Washington State"online at www.washingtonpolicy.org.