The real value of Washington’s minimum wage

August 4, 2011 | Economic Opportunity Institute

By EOI Policy Intern Tatsuko Go Hollo

hotel maidThe minimum wage just isn’t worth what is used to be. A recent news article points out that while the minimum wage has seen modest increases over the last several decades, inflation has led to a drop in the value of those wages.

In fact, the minimum wage is now worth less than it was worth in the 1950s. Had the federal minimum wage kept pace with inflation, today’s rate would be $10.39, a far cry from the actual rate of $7.25. Many families of minimum wage workers rely on those wages for more than half of their income. With the value of the minimum wage decreasing, these working individuals can afford less of what they need to support their families.

So what does this mean for Washington? Washington state boasts the best minimum wage in the country at $8.67, meaning low-wage earners are able to afford more of what they need. This is especially important for Washington women and people of color, as both groups are disproportionately represented among minimum wage earners nationally.

Additionally, as minimum wage workers typically spend all of their earnings, that money goes right back into our economy. Consumer spending is critical for economic recovery, especially in Washington, where a significant portion of our general fund revenue is generated from sales tax.

Ultimately, a strong minimum wage benefits not only working Washingtonians, but also contributes to a functional economy- something we all value.

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Posted in Minimum Wage

Comments

  1. Winslow P. Kelpfroth says:

    When the minimum wage is discussed in the context of a living wage, we tend to overlook other consequences. The benchmark for semiskilled and skilled labor becomes multiples of the minimum wage. I’m certainly thankful that in my younger days I was able to work at the local paper mill as a common laborer at twice the minimum wage. However, these benchmarks and their labor rates create an incentive to look elsewhere when a business thinks about expanding or relocating. That’s bad for all of us.

    • Alex Stone says:

      Winslow,

      This piece simply points out that the minimum wage is too low for many people to get by on – a problem that’s exacerbated when there’s inflation but the minimum wage remains stagnant. The minimum wage is just that, a minimum standard. A ‘living wage’ is representative of the cost of living, including: transportation, health care, housing, childcare, etc. In Washington state, a ‘living wage” is nearly double the minimum wage: http://washingtonpolicywatch.org/2011/01/27/good-jobs-paying-a-living-wage-are-essential-for-economic-recovery-on-main-street/

      You argue “labor rates create an incentive to look elsewhere” – but it’s not the minimum wage that drives outsourcing, it’s greed. Many businesses realize they can cut back on wages and benefits if they move production offshore, creating a ‘race to the bottom’ that exploits workers in China, Cambodia, Vietnam and elsewhere. What would be bad for all of us is cutting our basic standards here in the U.S. – as doing so will not bring good jobs and wages.

      • Winslow P. Kelpfroth says:

        can’t agree, alex. Semi-skilled and skilled labor rates are tied to the minimum wage; I have experience in labor negotiations to back it up.
        and despite your stand that outsourcing is the result of business greed, it’s people who buy Vietnamese and Chinese shoes at Payless that drive outsourcing. I only buy New Balance, as it has the few remaining plants in the US. And that’s the key: when enough consumers buy local manufacture outsourcing will go away. But I’m not holding my breath for it.

  2. Abby Cutter says:

    Thank you for this concise explanation of how important living wages are and what that would actually consist of. As we can see the minimum wage is not keeping up. Thanks Tatsuko!

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