A sad and foolish fight against the minimum wage boogeyman in Washington

December 9, 2010 | Aaron Keating

File this one under “the more things change, the more they don’t.”

In January 2007,  New York Times reporter Tim Egan traveled to Liberty Lake, Washington, which is located about 8 miles away from another small town, Post Falls, Idaho. Egan wanted to find out whether Washington businesses faced any difficulty dealing with a minimum wage $3.00/hour higher than those across the state line.

The answer? Nope:

“We’re paying the highest wage we’ve ever had to pay, and our business is still up more than 11 percent over last year,” said Tom Singleton, who manages a Papa Murphy’s takeout pizza store here, with 13 employees.

His store is flooded with job applicants from Idaho, Mr. Singleton said. Like other business managers in Washington, he said he had less turnover because the jobs paid more.

Egan goes on to write that despite claims made by the Washington Restaurant Association and other traditionally low-wage employers, several studies concluded that modest changes in the minimum wage have little effect on employment.

Fast forward to December 2010 and a slumping economy. Shawn Vestal, a reporter for the Spokane Spokesman-Review, pays a visit to Floyd Brown to ask him whether an increase in the minimum wage will have an effect on his business. Brown has owned the Thrifty Scotsman, a Spokane Valley hamburger institution, for over 30 years. Here’s what he had to say about it:

“I don’t disagree with it going up,” [Brown] said about Washington’s minimum wage, which is set to rise to $8.67 an hour in January. “We try to keep everybody on full time and give them a good wage so we don’t have turnover.”

And business has been good and steady – the burgers and tater tots are flying – even with some pain from the recession, he says.

Vestal, like Egan, also notes that evidence is piling up to show a strong minimum wage has no effect on employment:

A trio of researchers has just published a nationwide study comparing all neighboring counties with different minimum wages – like Spokane and Kootenai – over a 16-year period. …[It] concludes that the disemployment effect is zero-ish. Not small. Not minor. Just not there.

So on the one hand you’ve got businesses like The Thrifty Scotsman, Papa John’s, Costco and Trader Joe’s, which recognize that investing in employees means better staff and higher profits — and a growing body of research that pretty conclusively demonstrates increases in the minimum wage has no effect on employment.

And on the other hand, you’ve got the Washington Restaurant Association, which is still pedaling its usual “profit before people” soundbites to anyone who will listen, and this guy, who apparently believes a strong minimum wage increases incarceration rates among black youth. Neither cites an iota of recent or reliable peer-reviewed research to back up their claims.

This is what makes the recent lawsuit against Washington’s minimum wage by a group of agricultural, restaurant and retail business associations so sad and foolish: they’re actually spending money on a court case that – if they win – will actually end up costing their own businesses (and those of their members) even more money in the long run. And regardless of the verdict, they’re spending resources on an ideological fight, when they could be actually building their businesses.

What a shame.

Posted in Minimum Wage, State Economy

Comments

  1. Winslow P. Kelpfroth says:

    One thing I never understood about the rationale behind minimum wages: $8.67 per hour, in my opinion, is still not a living wage. Why not just bump it up to, say, $25.00/hr? That’s barely enough to support a small family, in my opinion, and according to your argument, will not affect the business climate in Washington state in any way.

    • Winslow: If a low minimum wage is so good for our economy and businesses, why not just pay everyone the minimum wage? According to your argument, doing so would save every business in the state so much money, they’ll just be raking in the profits. Why, just think about how rich we’ll all be. Except, of course, for the fact that we’re all earning the minimum wage.

  2. Winslow P. Kelpfroth says:

    You misunderstand the argument if you think a low minimum wage is good for the economy. As both Prof. Williams of George Mason U and Prof. Sowell of Stanford have noted, from their experience, the minimum wage is only good for increasing youth unemployment, particularly black youth unemployment. From the employer’s standpoint, no matter where you set the minimum wage, there will be some jobs that are not worth getting done at that labor rate. From an employee’s standpoint, no matter where you set the minimum wage, there will be some jobs that are not worth taking. The idea that a defined minimum wage rate will satisfy both employer and employee for all tasks I find difficult, particularly from my personal experience. The minimum wage is a social engineering device that has outlived its usefullness and should be consigned to the dustbin of history.

    • Your rhetorical question about raising the minimum wage is a red herring – rather than rise to the bait, I answered with a similarly rhetorical question about lowering wages because it is pointless to even have a discussion in those terms.

      The relevant issue at hand is whether the existence of a minimum wage has a negative effect on our employment and wages. Professors Sowell and Williams are on record with strong *opinions* about the effect of the minimum wage (on sugar plantation workers in Puerto Rico, and cannery workers in American Samoa, respectively). But the *facts* remain the same: according to the vast majority of recent, relevant, peer-reviewed evidence, a strong minimum wage has no demonstrable effect on employment, and by definition it also improves wages.

  3. Winslow P. Kelpfroth says:

    The argument about raising the minimum wage to a ‘liveable’ rate is not a red herring. To do so would have real consequences to both business and labor.
    I can cite a real example from my brother’s speciality saw mil in Puyallup. Although raising the minimum wage seems to confer real benefits to the labor that he employs for pulling nails and odd tasks around the yard, he, and his competitors, had to raise prices. This led to a reduction in demand for his product and he had to compensate by shorting the work week. So the laborers wind up with about the same pay as before, and at least some home remodelling projects that could have been done with recycled Pacific Northwest timber is now being done with Formosan plastic composite, if it’s done at all.
    I realize that this is a marginal case, but I just don’t share your confidence in far off policy wonks making better business decisions than the people on the scene with their own money at risk.

    • If it isn’t a red herring, then why do you put the word livable in quotes? There are real economic consequences when wages fail to keep up with economic growth – namely, depressed consumer demand that eventually drags down the entire economy. Your anecdote is just that – it is not representative of what happens in the economy, on the whole, when the minimum wage keeps up with inflation.

2 Pings/Trackbacks for "A sad and foolish fight against the minimum wage boogeyman in Washington"
  1. […] The corporate lobbies that are opposing Washington’s minimum wage should be the law’s biggest fans. The latest research by economists comparing counties that share borders across state lines has found that increasing the minimum wage not only increases the incomes of low wage workers, it does so without decreasing the number of jobs. And it benefits employers by decreasing costly turnover. […]

  2. […] The latest research by economists comparing counties that share borders across state lines has found that increasing the minimum wage not only increases the incomes of low wage workers, it does so without decreasing the number of jobs. And it benefits employers by decreasing costly turnover. […]

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