Yakima Herald: Minimum wage increase comes with its own price

January 3, 2012 | Economic Opportunity Institute

From the Yakima Herald | By Mai Hoang

Employees say raise eaten up by higher costs for fuel, food; employers say it forces them to cut back on hours.

PHOTO: Andy Sawyer/Yakima Herald-Republic

Cesar Covarrubias has been paying about $5 to $10 more for his groceries lately.

As a result, Covarrubias, 20, sees a lot less of the $10 he earns per hour working at A & S Gifts, a retail kiosk at the Valley Mall.

He’s expecting a bit of a raise with an increase in the state minimum wage, which went up by 37 cents to $9.04 today.

The new wage reflects a 4.23 percent increase from August 2010 in the Consumer Price Index, which measures the average change in prices over time of goods and services.

But with day-to-day expenses rising faster than expected, workers like Covarrubias will still have a hard time keeping up.

“Whether we like it or not, prices are going to be increasing,” Covarrubias said.

Washington has been adjusting the minimum wage for inflation since voters — including those in Yakima County — approved Initiative 688 in 1998. Today, 10 states have similar laws, including neighboring Oregon, where the minimum will go to $8.80.

Washington has had the highest minimum wage in the nation for many years, but the city of San Francisco now holds that rank with a wage of $10.24.

This state’s minimum wage applies to workers in all industries, including agriculture, although 14 and 15 year olds may be paid 85 percent of the adult minimum wage, or $7.68 an hour.

While the concept of keeping wages in line with inflation looks good on paper, the increase doesn’t always keep up with the rising cost of basic expenses.

“A lot of people see their household expenses going up far faster than headline inflation,” said Greg McBride, senior financial analyst for Bankrate.com, a personal finance website.

For example:

  • Monthly rent in Yakima County in September increased year-over-year by 7.2 percent, according to the Washington Center for Real Estate Research at Washington State University.
  • Clothing, according to data from the U.S. Bureau of Labor Statistics, increased nationwide by 4.8 percent since November 2010.
  • Prices for economy domestic flights are expected to increase by 5 percent in 2012, according to American Express.
  • Unleaded regular gas in the Yakima area averaged at $3.37 a gallon, according to AAA. While lower than prices in the past month, it was still 16 cents, or 5.1 percent, more than the price a year ago.

Despite its shortcomings, the minimum-wage law is a big improvement over how the minimum wage was determined before the initiative was passed, said Marilyn Watkins, policy director at the Economic Opportunity Institute, a left-leaning Seattle-based policy center, which supports ongoing minimum wage increases.

At one time, the state minimum wage would be stagnant for years, making things unpredictable for workers and their employers. “With little predictable increases from year to year (now), it makes it easier to plan,” Watkins said.

Read more from the Yakima Herald »

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