Exploding Myths About Washington’s Minimum Wage

January 16, 2008 | Aaron Keating

Add this to the pile of research showing Washington’s minimum wage, which includes an automatic cost of living increase, is a smart step for our state:

The state’s controversial law calling for an automatic review of the minimum wage each year does little to harm business and benefits the vast majority of low-paid workers, says a new study by Washington State University.

The article featuring the study quotes Grant Nelson of the Association of Washington Business in Olympia (who had not yet seen the WSU study) as saying:

“It hurts our competitiveness with other states, including neighboring states with a lower minimum wage,” Nelson said.

Hmm. Let’s do the math and see.

Take, for example, retail business operating costs, where labor costs account for approximately 20-25% of the total operating costs. Even if all employees in a firm are working at minimum wage (they’re not), and the minimum wage goes up 10% (and Washington’s is going up only 1.8% in 2008) that would result in, at the most, an annual 2-2.5% increase in total costs.

Moreover, what will most likely be an extremely small increase in labor costs is countered by increases in productivity, decreased costs for training and recruitment of new employees, and/or a decrease in profits. The possible profit decline is what drives the opposition to the minimum wage increase. But we’re not talking about people going out of business – maybe just taking one less trip to Hawaii.

The article continues:

Lynn Harsh, chief executive of the Evergreen Freedom Foundation, a free market think tank in Olympia, said it is “ignorant and arrogant for politicians to decide economic winners and losers.”

A gentle reminder for those whose memories are fuzzy: It was actually voters who decided about Washington’s minimum wage, not politicians.

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Posted in Minimum Wage, State Economy, Work & Family

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