Washington minimum wage increase will help thousands of workers, strengthen local economy

September 30, 2011 | Economic Opportunity Institute

Washington State will increase its minimum wage rate from $8.67 an hour to $9.04 on January 1, 2012, the state Department of Labor and Industries announced today, in line with state law that provides for annual rate adjustments that keep pace with the rising cost of living.

Today’s announcement echoes similar announcements from officials in Colorado, Montana and Ohio. Oregon announced their new rate on September 15th. Three additional states are expected to announce new 2012 minimum wage rates in mid-October. Washington’s minimum wage increase means an additional $769.60 per year in wages for a full-time minimum wage worker (at 2080 hours/year).

The National Employment Law Project, the Economic Opportunity Institute and the Washington State Labor Council all hailed the upcoming increases as an essential move to help working families that face stagnant wages and rising prices, increase consumer spending at local businesses, and promote the kind of good jobs that will be critical to the nation’s economic recovery.

“Wages are falling as a result of staggering unemployment, slow job creation, and declining unionization,” Christine Owens, executive director of the National Employment Law Project. “These modest annual minimum wage increases are one of the few policies that counteract declining wage trends and prevent America’s lowest-paid workers from falling even further behind.”

Eighteen states plus the District of Columbia have minimum wage rates above the federal level of $7.25 per hour – or just over $15,000 per year for a full-time minimum wage earner. Unlike the federal rate – which loses value every year it is not increased by an act of Congress – 10 states increase their minimum wage rates annually to ensure that the lowest-paid workers don’t lose ground: Arizona, Colorado, Florida, Missouri, Montana, Nevada, Ohio, Oregon, Vermont, and Washington. Legislation to raise the minimum wage and add an annual cost of living adjustment was advanced in several states this year including California, Massachusetts, Maryland and Illinois. Additional states are considering such proposals for next year.

While weak consumer demand is slowing business expansion, raising the minimum wage puts a little more money in the pockets of low-wage workers who have little choice but to spend that money immediately on goods and services. “The lack of consumer demand has dramatically slowed job creation. Making matters worse, Congress is unwilling to allow the federal government to prime the demand. The only bright spot in the economy is the rise of state minimum wages that have been indexed to inflation, allowing our lowest paid workers to better meet their needs while increasing overall consumer demand,” said Jeff Johnson, President of the Washington State Labor Council, AFL-CIO.

Strengthening the buying power of low-wage workers is especially critical in the current economic climate. A recent NELP study finds that the majority of new jobs created in the wake of the recession are in low- and mid-wage industries. And while the bastion of low-paid workers is growing, the wages for this group are declining: workers in lower-wage occupations (with median wages under $13.52) have seen a 2.3 percent decline in real wages since the recession began.

“When the voters raised and indexed our minimum wage in 1998, they must have had a crystal ball. A strong minimum wage that maintains purchasing power is even more critical in a struggling economy. We are proud that our state minimum wage continues to be the strongest in the nation, providing a modicum of security for the low wage workers we depend on,” said John Burbank, Executive Director of the Economic Opportunity Institute.
A large body of research shows that raising the minimum wage is an effective way to boost the incomes of low-paid workers without reducing employment. A groundbreaking 1994 study by David Card and Alan Krueger, President Obama’s nominee to head the Council of Economic Advisers, found an increase in New Jersey’s minimum wage did not reduce employment among fast-food restaurants.

These findings have been confirmed by 15 years of economic research, including a 2010 study published in the Review of Economics and Statistics that analyzed data from more than 500 counties and found that minimum wage increases did not cost jobs. Another recent study published in April 2011 in the journal Industrial Relations found that even during times of high unemployment, minimum wage increases did not lead to job loss.
According to the Bureau of Labor Statistics, three quarters of minimum wage earners nationwide are 20 years or older, and more than 60 percent are women. Most minimum wage earners are adults, and many of them support families.

Posted in EOI, Minimum Wage

Comments

  1. Doug Nelson says:

    Small correction:

    “Washington’s minimum wage increase means an additional $769.60 per year in wages for a full-time minimum wage worker (at 2080 hours/year).”

    A full-time minimum wage worker will work 2088 hours (there are 261 Monday to Friday workdays) in 2012. The “normal” definition of days worked for an hourly employee is based upon the principle that there are 5 days (Monday – Friday) per week. Multiply those 5 days by 52 weeks in a year and 8 hours per day to get the 2080 hours.

    Unfortunately, the Gregorian calendar impacts the “normal” definition.

    In 2011 there were 260 Monday – Friday workdays. In 2013, 2014, 2015, 2016 there will be 261, returning to 260 in 2017, 261 in 2018, 2019 and 262 days in 2020.

    As you can see from the numbers above, a more accurate definition of the “normal” work year for a full time hourly wage earner is 2088 hours.

    Finally, the additional 8 hours in 2012 will result in an additional $2.96 – see what I mean when I say a small correction.

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