The Governor Won’t Build a “Working Washington” with a 27% Minimum Wage Increase

January 16, 2014

Last month Governor Inslee said it was time for Washington to “have a conversation” about increasing our state’s minimum wage, already the highest of any state in the nation.  At the time the Governor did not specify what the higher minimum wage should be, only that the current wage of $9.32 is not enough.

In Tuesday’s State of the State address, the Governor switched from wanting to have a “conversation” about raising the wage, to calling for an “increase in the range of $1.50 to $2.50.”  That is an increase of up to 27%.

Conjuring the image of moms and dads who work two or three jobs and still can’t earn enough to feed their children, the Governor used “fair” and “living” to describe the wage he believes every worker needs to “lift” them out of poverty.  He went on to say, “an increase in minimum wage means more money being spent in our economy.”

But what constitutes a “living” or “fair” wage?  There is no clear definition of either term.  Some advocates say it is $15 per hour, while Governor Inslee has decided it is between $10.82 and $11.82 per hour.  “Fair” and “living” could equally apply to $25 an hour.  If increasing the minimum wage means more money being spent in our economy, why not raise the wage to $50 per hour?

And despite the image invoked by minimum wage hike supporters, the average minimum wage earner is not a single mom or dad depending on the minimum wage to support a family.  The average family income of a minimum wage earner in Washington is $47,540; and 60% live with a family member or have a spouse who also works.  Just 8% of minimum wage earners in Washington are single parents with children. 

Nationally, just 2% of full-time workers earn the minimum wage.

The fact is the overwhelming majority of minimum wage earners are young and unskilled workers who work part time, live at home or are second earners in a two-income household.  Very few depend on their wages to support a family or put food on the table.  Policymakers never intended the minimum wage be the sole source of household income or provide “livable” support for a family.  Rather, the intent was to ensure a reasonable wage for workers who could not command higher pay in the labor market because they had little or no work skills, such as young people just entering the work force.

Ironically, despite the Governor’s claim that the increase won’t “kill jobs,” it is the people the minimum wage was designed to help—those with little or no work skills—that suffer the most when the minimum wage is increased.

Numerous studies have shown employment for low-skilled workers tends to decline when the minimum wage is raised.  The higher the increase, the more negative the impact.

Labor policy researchers at Cornell University found a 10 percent increase in the minimum wage caused four times more employment loss for employees without a high school diploma and African American young adults than it does for more educated and non-black employees.  And a summary of the last two decades of research from economists at the University of California-Irvine and the Federal Reserve Board found that 85% of the most credible studies on the minimum wage point to job loss for less-skilled employees.

As Nobel-Prize winning economist Milton Freidman explained:

“What you’re doing is to assure that people whose skills are not sufficient to justify that wage will be unemployed…the minimum wage law is most properly described as a law saying that employers must discriminate against people who have low skills…minimum wage laws…have increased unemployment and increased poverty.”

So an increase in the minimum wage may help low-skilled workers who remain employed, but other workers will lose their jobs, have their hours cut back, or find it difficult to find work in the first place, all of which reduces their income and pushes their families into poverty. 

No amount of forced wage increase can lift people out of poverty if the minimum wage has priced them out of the labor market.

In his address, the Governor emphasized his plan to help small businesses and to “build a Working Washington that works for everyone,” even offering welcome B&O tax relief to small businesses.  But it should go without saying that an increase in the cost of labor of up to 27% will certainly not help our state’s small businesses.