February 12, 2014
Vol: 21 No: 7

Community & Editorial

Maximum impact for minimum effort

Raising the state minimum wage would boost spending and employment

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Last week 31 state representatives joined Representative Jesslyn Farrell (D-Seattle) in proposing to increase our state’s current minimum wage of $9.32 an hour to $10 in 2015, $11 in 2016 and $12 in 2017. It is about time. Our minimum wage has steadily fallen away from its high point in 1968. 

That was 35 years ago. And yet, worker productivity has almost doubled since then. 

Up until 1968, increases in the minimum wage kept up proportionately with productivity increases.  That made sense, since the gains in productivity were in that way equitably shared between employers and employees.  Workers could increase their everyday purchases, and businesses could increase their investments (or just enjoy greater profits).  But after 1968, minimum wage increases tailed off while productivity continued to increase. 

In fact, the minimum wage has actually fallen in value when you take inflation into account. The value of the minimum wage 35 year ago, in today’s dollars, was just about $11 an hour.  So even though Washington has the highest statewide minimum wage in the country, a worker earning the minimum wage here starts out $1.68 behind what she would have made in 1968. 

A bit of history is helpful:  In 1998, voters passed Initiative 688, which increased the minimum wage from $4.90 to $5.70 in 1999 and $6.50 in 2000 and linked increases thereafter to inflation. In the two decades leading up to Washington’s minimum wage policy change, the bottom 10 percent of income earners, who earned the minimum wage or close to it, experienced an 8 percent decline in real earnings. Since implementation of I-688, that decline has been reversed, underscoring the importance of a solid wage floor.

But we have a long way to go to catch up. 

If the minimum wage had kept up with increases in productivity, it would be more than $17 an hour now. It isn’t, and while wages for the top fifth of workers have grown, everyone in the middle and below has actually lost ground.

The bottom 10 percent of workers today, compared to the bottom 10 percent 35 years ago, actually make

25 cents less per hour. The worker in the middle makes about $18 an hour, a 15 cents per hour decline. 

The decline in wages didn’t just happen. It is a conscious result of public policy decisions over the past 30 years, especially at the federal level.  Our legislators know that they have the power and responsibility to reverse this impoverishment of workers.  That’s what a minimum wage increase can begin to do.

Plus these workers spend their earnings in the local economy.  A $1 increase in the minimum wage equals a $2,000 increase in annual income. 

With 20 percent of our state’s total workforce benefiting, they would have over $1 billion more to spend in local businesses. 

That’s what the historical evidence shows us. Low-wage workers spend their earnings in the local economy, in retail businesses. As spending goes up, employers meet the demand by hiring more workers. 

This trend is particularly reflected in service sector jobs, which have a greater share of minimum-wage workers than the overall economy.  So it should be no surprise that when the minimum wage increases, jobs increase as well. In 1999, when our minimum wage increased by 55 cents, employment in restaurants and hospitality in Washington grew by 6,400 jobs, and overall employment grew by 54,000 jobs. 

In 2000, the minimum wage increased another 70 cents, hospitality employment grew by another 4,700 jobs and overall employment grew by 63,000 jobs. 

A better minimum wage increases incomes and jobs for workers, their families and our economy.  It is a public policy that works — for all of us.  And the bottom line is that low-wage workers deserve a wage that approaches the value of their labor.



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