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A fair minimum wage stokes economic growth

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By John Burbank
Published:
Earlier this month minimum-wage workers received some good news. Rather than seeing their minimum wage eroded by inflation, they will get a cost-of-living adjustment on Jan. 1. This 14 cent increase puts our minimum wage at $8.07, thanks to the wisdom of Washington voters almost a decade ago. In 1998, the Washington State Labor Council, AFL-CIO, took a great idea from Social Security -- the annual cost of living adjustment -- and grafted it onto our minimum wage. This was overwhelmingly supported through an initiative to the people that first raised the minimum wage and then tied it to inflation.
It is a good thing they did, since in that same time period, the federal minimum wage sat at $5.15 an hour and did not budge. You may remember all the coverage about Congress finally passing an increase in the minimum wage and George W. Bush grudgingly signing this increase into law. (He had to, if he wanted his money for the war in Iraq, since it was part of the war funding package.) The weird thing is that this action was so delinquent and the increase so small that it literally meant nothing for the vast majority of workers in our country. That's because 30 states, following our example, already have minimum wages over the new federal minimum of $5.85.
One good thing about our state's minimum wage announcement is that it wasn't accompanied by the typical "woe-is-me" rhetoric from businesses about how this increase of 1.8 percent is going to wipe them out. Perhaps that's because with the best minimum wage in the country, employers are seeing less worker turnover. That means lower costs for recruitment and training, and more productivity from workers who stay on the job and are committed to their work. "You get what you pay for" makes as much common sense when paying wages as it does when shopping for office furniture.
Of course, the minimum wage used to be a lot higher all across the country than it is now. Back in 1968, the minimum wage in 2007 dollars was $9.75. That is a fifth more than what it is now in our state, and two-fifths more than the federal minimum wage. Those of us who were alive in 1968 recall a booming economy, massive investment in public education and transportation, a strong union movement and a thriving middle class. A decent minimum wage was part of the package for widespread economic progress.
So it should be no surprise that this same ingredient is part of Washington's current economic success. We have had three strong years of job growth, our median annual household income is $4,000 higher than the national median, our union membership is just about the highest in the country, and hourly wages have climbed in the last two years. And we have the best minimum wage in the nation.
It used to be that the increase in the minimum wage tracked increases in worker productivity. That makes sense: the increase in the value of goods and services should be shared between the people putting in their hours of work and the shareholders of various companies. Between 1947 and 1973, productivity increased 104 percent and the minimum wage increased in real dollars by 101 percent. From the high point of the minimum wage (1968) to the present, worker productivity has doubled. If the minimum wage had continued to track increases in productivity, it would be above $17 an hour. Of course, that didn't happen. In fact, the stagnation of the minimum wage helped to drag down the average wage, which is one of the reasons we now have the growing disparity between the top one-fifth of Americans and the broad middle class.
When Jan. 1 arrives, and minimum wage workers, along with Social Security recipients, get a COLA (the cost-of-living adjustment), we can be proud of our state. We lead the nation in compensation for low-wage workers. Many other states will follow us, with California and Massachusetts at $8 an hour and Oregon at $7.95. Minimum wage workers deserve this inflation adjustment as much as any worker. In fact, looking back over the past 40 years, it is only a partial slice of equity for them.

John Burbank, executive director of the Economic Opportunity Institute (www.eoionline.org ), writes every other Wednesday. Write to him in care of the institute at 1900 Northlake Way, Suite 237, Seattle, WA 98103. His e-mail address is john@eoionline.org.

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