Published November 2004

Minimum wage
needs an overhaul

By Don Brunell
Guest Editorial

In September, California Gov. Arnold Schwarzenegger vetoed legislation that would have raised that state’s minimum wage from $6.75 to $7.25 per hour in January and $7.75 in 2006. Meanwhile, Washington’s Department of Labor and Industries announced that our state’s starting wage will increase to $7.35 starting next year.

Washington’s minimum wage is already the highest in the country. It is no coincidence that Washington’s unemployment rate is also among the highest in the nation. On an hourly basis, Washington’s minimum wage will exceed Oregon and Alaska by 25 cents, California by 65 cents and Idaho by $2.20.

The truth of the matter is Washington’s new minimum wage is closer to $9 an hour and, for some industries, is now over $10 per hour because of employer payroll taxes such as unemployment insurance, Social Security and workers’ comp.

Unless Washington’s Legislature acts in 2005, our minimum wage will automatically go up again in 2006. These automatic increases were part of a union-backed initiative that passed in 1998 and which mandates annual cost-of-living increases in the minimum wage based on the federal Consumer Price Index for Urban Wage Earners and Clerical Workers.

In other words, our state’s minimum wage is pegged to wage rates in Seattle without regard for regional differences in rural parts of the state.

Take Dayton, for example. In Dayton, the world’s largest asparagus processing plant will close after next summer’s harvest because it cannot compete with cheaper Peruvian asparagus. Part of the reason is Washington’s high minimum wage. So, while Washington voters may have had the best of intentions when they passed the automatic wage increases, our high minimum wage has helped kill 50 full-time jobs and 1,000 seasonal jobs in Dayton.

That’s not what the voters had in mind.

California, a state with a heavy dependence on agriculture, would also be hurt by a minimum-wage hike. In vetoing the recent legislation, Gov. Schwarzenegger rightfully acknowledged that increasing the state’s minimum wage makes it too expensive for employers to hire inexperienced workers or provide jobs for young people and seniors.

And remember, small businesses create most of the jobs in this country. In essence, raising the minimum wage ever higher forces farmers and small businesses to cut jobs, replace workers with machines or simply close up shop.

The problem will get worse unless legislators take bold action next year to change the law. They need to do four things to change our state’s minimum-wage law before it further erodes our state’s job base:

• Repeal the automatic cost-of-living increase and raise minimum-wage rates only when warranted.
• Freeze the minimum wage at $7.35 until competing states catch up.
• Treat the minimum wage the same way we treat prevailing wages in Washington: tie it to local economies.
• Establish a lower, short-term training wage and a lower minimum wage for anyone under age 18 to encourage employers to offer job opportunities to disadvantaged and young workers.

While increasing the minimum wage may have seemed like a good idea, it has ended up hurting the very people it was supposed to help. That’s called “the law of unintended consequences.” Legislators need to change the law next session.

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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