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Guest Commentary / U.S. Department of Labor study


Stats debunk wage myths

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By Patrick Connor
Published:
So was it all just a giant con game played on the voters of Washington state in 1998?
John Burbank, executive director of the labor union-supported Economic Opportunity Institute, for one, owes us an answer. His July 16 column argued for higher minimum wages for all Washingtonians, not just ones living in Seattle.
But wait. Wasn't Initiative 688, which passed that year, supposed to take the worry off of legislators and city councils across the state, when it linked minimum-wage rates to rises in the federal Consumer Price Index and thereby help every worker forever after “keep up”?
It's been the law of the land since then. Has it failed? Should it be scrapped if legislative bodies need to step in and gin up wages? These are fair and logical questions to ask.
If readers of this commentary take away only one thing, let it be this: No public policy issue in America — ever — has more armor-plating against facts, studies and everyday economic observation than the minimum wage. Oppose an increase and you are quickly branded a heartless cad, especially if you're a Republican, which Burbank takes pains to swipe at from the ivory tower of his “nonpartisan” institute.
The most important thing to know about minimum-wage earners comes from the U.S. Department of Labor's Bureau of Labor Statistics: “Minimum wage workers tend to be young. Although workers under age 25 represented only about one-fifth of hourly paid workers, they made up about half of those paid the federal minimum wage or less. Among employed teenagers (ages 16 to 19) paid by the hour, about 20 percent earned the minimum wage or less, compared with about 3 percent of workers age 25 and older.”
Forbes magazine contributor Jeffrey Dorfman crunches the bureau's numbers and writes, “Within that tiny group, most of these workers are not poor and are not trying to support a family on only their earnings. In fact, according to a recent study by economists Joseph Sabia and Richard Burkhauser 63 percent of workers who earn less than $9.50 per hour (well over the minimum wage of $7.25) are the second or third earner in their family and 43 percent of these workers live in households that earn more than $50,000 per year. Thus, minimum wage earners are not a uniformly poor and struggling group; many are teenagers from middle class families and many more are sharing the burden of providing for their families, not carrying the load all by themselves.”
Second in importance to know about the minimum wage is Washington state's unique history with it.
Four years after voters decided to link our state's minimum-wage rate to annual changes in the CPI, economists Richard Vedder and Lowell Gallaway of Ohio University presented their findings to the Washington Legislature, the most salient comments from which were: “The passage of the referendum in 1998 that has dramatically raised the state minimum wage in Washington is the quintessential example of the Law of Unintended Consequences. The goal was to improve the lot of the disadvantaged in Washington, but the effect has been for poverty to rise, not fall, and rise far more than income trends would suggest should happen. … Rather than a relatively cheap way to alleviate poverty, the law has cruelly and capriciously brought about job and income loss to workers and small entrepreneurs. Had the voters known this would happen, it is difficult to believe they would have endorsed this well-intended but truly economically destructive mandate.”
On and on one could go with study after study. But if you think raising the minimum wage is bad for the economy, be careful what you say, lest you draw the scorn of people who have never hung an open-for-business sign, created a job or dealt with a cost increase or a solvency-threatening frivolous lawsuit.
Patrick Connor is Washington state director for the National Federation of Independent Business.
Story tags » EmployeesEmployersWages & Pensions

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