Evidence shows WA minimum wage COLA is small, predictable, with very little impact on employers

October 3, 2011 | Economic Opportunity Institute

Via Washington News Service:

OLYMPIA, Wash. – The minimum wage in Washington state goes up 37 cents on Jan. 1, to $9.04 an hour. Washington is one of only 10 states that ensure by law that their minimum wage keeps up with inflation, which was calculated at just over 4 percent this year.

John Scmidt, CEPR

“…increases in the minimum wage – especially in a state like Washington, where you have indexing – are small, they’re predictable and have very little impact on employers.” ~John Schmidt, Senior Economist, Center on Economic Policy Research

Whenever there’s a minimum wage hike, some employers claim the extra cost will put them out of business. But that has not happened, says John Schmitt, a senior economist with the Center for Economic Policy Research, who studies wage trends since the 1930s.

“What the evidence seems to suggest is that, over long periods of time, the kinds of increases in the minimum wage – especially in a state like Washington, where you have indexing – are small, they’re predictable and have very little impact on employers. They absorb them in a bunch of ways.”

Schmitt acknowledges some companies might raise prices a bit to cover the cost. But in his view, if it allows them to pay workers enough to keep them off public assistance, it’s an acceptable trade-off. For a full-time worker, the higher minimum wage will mean about $770 more dollars a year.

The higher pay is expected to help not only workers at the minimum wage, but those who make a dollar or two more per hour, he adds.

“You’re increasing the wages of people at the very bottom of the wage distribution, people who’ve fallen the farthest behind over the last 20 or 30 years. It helps to set a floor and strike a blow against this rising inequality we’ve seen for the last three decades or so.”

Nationally, the U.S. Commerce Department says consumer income was virtually flat in August, and so was spending. Schmitt says people need to earn more, and spend more, to get the economy moving again. He is convinced a higher minimum wage will help.

The Labor & Industries wage and hour information is available at www.lni.wa.gov.

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Posted in Minimum Wage

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