Washington’s High Minimum Wage Stifles Job Creation

In this month’s Seattle Business Magazine managing editor John Levesque grudgingly acknowledges that nixing the state’s new 37-cent increase in minimum wage that took effect January 1 (raising the mandatory wage to $9.04 per hour) “may” create more jobs and help jump-start the economy, but questions “do we really need to rescue the economy on the backs of those who can least afford to carry out the offensive?”  What he doesn’t seem to realize is that the automatic yearly increase, while it sounds generous, often results in a wage of zero, because our high state minimum wage prevents many people from being hired in the first place.

As Joseph Phillips, Dean of Seattle University’s Albers School of Business and Economics explains, when costs become too high for employers, they quit hiring. Washington already boasted the highest minimum wage in the nation at $8.67 per hour, well above the federal minimum wage of $7.25.

When combined with state-imposed increases in workers’ compensation and unemployment insurance taxes, a 37-cent per hour increase is more than one more straw on the camel’s back.  As Phillips succinctly puts it, “At some point, it adds up and discourages employment.”

Do we really need to rescue the economy by preventing small businesses from creating jobs?  Talk about putting the burden on the backs of those who can least afford it. 

Some lawmakers are savvy to this.  SB 5968 has been introduced to return the state minimum wage to $8.67 an hour effective July 1, 2012.  The bill’s purpose is to help people get jobs and to spur economic recovery. 

The Washington Policy Center has several practical recommendations on how to improve the state’s minimum wage policy.

1. Decouple automatic minimum wage increases from the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) to reflect the true cost of living across the state,

2. Delay automatic increases in years when state unemployment is higher than the national average,

3. Allow restaurants to count tip income as part of normal minimum wage earnings, so employment costs in one industry are not artificially inflated, and

4. Refrain from imposing mandatory “living wage” controls, whether or not directed at a particular industry.