Published February 2004

Annual increase
in minimum wage
puts jobs at risk

By Don Brunell
Guest Editorial

It seemed like a good idea at the time.

In 1999, Washington voters approved automatic annual increases in the minimum wage. Their goal was to reduce poverty and help low-income workers improve their standard of living. But instead of helping entry-level workers, they hurt them.

A recent study by researchers at Ohio University found that Washington’s ever-increasing minimum wage — now $7.16 per hour, the highest in the nation — actually increased the poverty rate in our state, as the national poverty rate declined. During the same period, per-capita personal income in Washington rose almost 10 percent, meaning that the damage was concentrated on the people at the bottom of the economic ladder.

The study also found additional evidence that a high minimum wage leads to higher unemployment. In fact, Washington has one of the highest unemployment rates in the nation. Even before the dot-com bust and Sept. 11, Washington’s unemployment rate had risen a full percent higher than expected. That translates into a loss of more than 31,000 jobs — a loss the researchers tied to our high minimum wage.

The simple truth is that, faced with ever-higher costs for marginal entry-level workers, employers hire fewer people, cut their hours or reduce benefits. For that reason, mandated increases in the minimum wage have led to more poverty and fewer jobs — exactly opposite of what the voters intended. But statistics don’t tell the whole story.

Consider what happened to Jim Mickelson of Northwest Embroidery, a small business located in Fife. The company recently lost a bid to a Washington city when the contract was awarded to a company in Texas, where the minimum wage is $5.15 per hour. Mickelson says it’s ironic that the city in our state, acting on behalf of the same taxpayers who voted to increase our state’s minimum wage, awarded a contract to a company that pays lower wages.

Mickelson, who pays his workers $11 per hour, thinks Washington should issue guidelines that prohibit state and local governments from awarding business to companies in states where the minimum wage is less than ours.

“Competing with China is bad enough,” says Mickelson. “Now I have to compete with Texas.”

In reality, the city did what all customers do — they looked for the best product at the lowest price. Washington’s minimum wage is now 36 percent higher than the national average. That puts our employers at a significant competitive disadvantage.

Most minimum-wage jobs are entry-level positions where people get job experience and training, then move on. They are the threshold of careers and the beginning of any economic recovery. To destroy those job opportunities in the name of higher wages makes no sense.

In the end, it doesn’t matter if the minimum wage is $7, $10 or $15 per hour if there are no jobs.

Don Brunell is president of the Association of Washington Business, Washington state’s chamber of commerce. Visit AWB on the Web at www.awb.org.

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