Guest Column: Minimum Wage Law Erin Shannon | Director, WPC for Small Business Erin Shannon became director of the Washington Policy Center for Small Business during January 2012. She has an extensive background in small business issues and public affairs. The Center improves the state’s small business climate by working with owners and policymakers toward positives solutions.
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Controversy over job-killing high minimum wage coming soon to a city near you
he debate over imposing a superhigh minimum wage is everywhere right now.
• Voters in the City of SeaTac approved a measure to increase the minimum wage to $15 an hour for some workers (unions were exempt). • Mandating a $15 an hour wage was a centerpiece of Seattle’s mayoral campaign. • And, there have been calls for the proposed Bellingham waterfront development to guarantee a so-called “living wage” for the thousands of new jobs the project will create. The issue is not new to Bellingham. In 2002, the City debated an ordinance requiring companies that do business with the city pay employees a “living wage.” Concerns over the significant cost of the mandate resulted in passage of a version that was significantly watered down, limited in scope and laden with exemptions. Proponents argue a “living wage” wage higher than the state’s 2014 legal minimum of $9.32 an hour (already the highest in the nation) should be imposed by law. The idea is to help lift low-wage workers out of poverty. But what does the wording “living wage” mean? There is no clear definition of that term. Right now 84 | BUSINESSPULSE.COM
supporters have settled on the completely arbitrary number of $15 an hour, but the phrase could equally apply to $12 an hour, or $25 an hour, and of course activists could always say “living wage” means something different next year, or the year after. Basing government-imposed mandates on vague political slogans is a bad way to make public policy.
There have been calls for the proposed Bellingham waterfront development to guarantee a so-called “living wage” for the thousands of new jobs the project will create. Besides, no amount of forced wage increase can lift people out of poverty if the law has priced them out of the labor market. Research shows that forcing a big increase in the minimum wage hurts small businesses and pushes many low wage workers out of their jobs. As Dr. Joseph Phillips, of Seattle University’s Albers School of Business explains, when costs become too high for employers, they quit hiring or let people go.
As Professor Phillips puts it, “At some point, it adds up and discourages employment. We need a minimum wage law, but set it too high and it stops helping those it is designed to help.” Study after study shows increases in the minimum wage reduce the employment opportunities of low-skilled workers. 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. The overall result of a superhigh minimum wage is fewer people working and higher poverty rates. Perhaps that is why a wage survey of 336 labor economists reveals 93 percent believe a very high minimum wage law is not an efficient way to solve the income needs of poor families. Indeed, an ever-increasing minimum wage has not helped reduce poverty in Washington State. In fact, our state’s poverty rate has increased over the years, even before the Great Recession, despite the state’s automatic minimum wage increase every year. And studies examining the poverty rates of other states that increased their minimum wage between