In late 2010, the Restaurant Association, Farm Bureau and a handful of other corporate interest groups sought to block a scheduled minimum wage cost-of-living adjustment for 2011. Their challenge to Washington’s voter-approved law was denied — but that hasn’t stopped them from bringing their faulty economic theory and poor business practices to Washington’s legislature.
House Bill 1258 — which would allow employers to pay employees 75% of minimum wage for their first 680 hours, or about 4 months for a full-time employee — was recently introduced by Rep. Gary Condotta (R-E. Wenatchee), and is scheduled to be heard today by the Labor and Workforce Development Committee.
Despite their utter lack of evidence, the bill’s sponsors argue that an adult training wage (Washington already has a teen training wage) would be good for business. Marilyn Watkins, Policy Director for EOI, is testifying as to why such a policy would do more harm than good — and actually reduce business profitability.
Full text of her testimony is below the jump.
Testimony of Marilyn P. Watkins, Ph.D. on House Bill 1258
House Labor and Workforce Development Committee
Good morning. I am Marilyn Watkins of the Economic Opportunity Institute. Thank you for allowing me to testify this morning against H.B. 1258 and the institution of a training wage below Washington’s minimum wage.
Allowing a sub-minimum wage during the first 680 hours of employment could potentially impact a large share of Washington’s workforce. It would reduce economic security and buying power for low wage working people and their families and increase turnover, thereby adding to costs and reducing profitability for our state’s businesses.
According to Bureau of Labor Statistics publications: [i]
- 19% of all workers had been with their current employer fewer than 12 months in January 2010. That figure is lower than usual now because of the recession. In 2006, fully 24% of employees had been with their current employer less than 1 year.
- Over the past decade, median job tenure for all U.S. employees has been about 4 years, meaning half of all workers have been with their current employer a shorter period of time.
- Sectors with the largest number of minimum wage jobs tend to have higher rates of turnover. In retail, median job tenure is about 3 years. In restaurants, it is about 1.5 years.
Higher minimum wages do not reduce the number of jobs available. Some earlier research indicated that there might be a small amount of job loss associated with raising the minimum wage. However, those studies failed to take into account regional variations and long term trends. The most recent, economically sophisticated studies take into account regional variations by pairing contiguous counties across state borders – for example Spokane and Coeur d’Alene, and by controlling for long term growth differences among states.[ii] Contrary to earlier minimum wage studies, these newer studies find no significant impact on employment numbers resulting from minimum wage increases.
These newer studies have found that an increased minimum wage did result in:[iii]
- Higher average monthly earnings for all groups, especially for teens in restaurants.
- Substantial drops in job separations and turn over.
- No substitution of teens for older workers.
When workers stay in their jobs longer, employers have lower hiring and training costs, and productivity increases. We can be proud of Washington’s strong minimum wage law. It is working to protect low wage workers, employers, and our communities. We do not need to change it.
[ii] Arindrajit Dube, T. William Lester, and Michael Reich, “Minimum Wage Effects Across State Borders: Estimates Using Contiguous Counties,“ The Review of Economics and Statistics, November 2010, http://www.mitpressjournals.org/doi/abs/10.1162/REST_a_00039; Allegretto, Sylvia, Dube, Arindrajit, Reich, Michael, “Do Minimum Wages Really Reduce Teen Employment? Accounting for Heterogeneity and Selectivity in State Panel Data” forthcoming in Industrial Relations, April 2011, http://www.irle.berkeley.edu/workingpapers/166-08.pdf; Dube, Lester, and Reich, “Do Frictions Matter in the Labor Market? Accessions, Separations and Minimum Wage Effects, ” October 12, 2010, http://www.irle.berkeley.edu/workingpapers/222-10.pdf.
[iii] Arindrajit Dube, T. William Lester and Michael Reich, “Do Frictions Matter in the Labor Market? Accessions, Separations and Minimum Wage Effects,” October 12, 2010, http://www.irle.berkeley.edu/workingpapers/222-10.pdf.