Forced wage hike harmful

Gov. Jay Inslee used his State of the State address last week as much to frame the 2014 election as he did to promote his legislative agenda. Light on specifics, the speech hit on two issues likely to dominate the year ahead: increasing taxes for education and raising the minimum wage.

While he called on lawmakers to act now, Inslee knows action is unlikely. With the House controlled by Democrats and the Senate in the hands of the Republican-led majority coalition, no one expects much from Olympia this year.

No one who’s not on the state Supreme Court that is. In a recent order the court mystifyingly concluded that the 2014 session gives lawmakers “an opportunity to take a significant step forward” in school funding. The justices contend the billion-dollar boost provided last year wasn’t enough. The majority opinion requires lawmakers to present a plan this spring detailing how they’ll achieve full funding.

The court convinced the governor. He wants another $200 million for the schools this session, much of it for cost-of-living adjustments for teachers. He’d pay for it by repealing yet-to-be-specified tax exemptions. Senate leaders, noting that a billion-dollar increase isn’t nothing, are unlikely to go along. They say revenues are growing and want to see more reform.

Legislators can find support for delay in Justice James Johnson’s dissent from the majority opinion.

“Budgetary matters are the province of the legislature,” he wrote, warning that his colleagues had crossed the line on separation of powers.

Pushing for increased spending, Inslee employs the common rhetorical riff. “We must weigh tax breaks against the increasing call for action,” he says. It’s corporate loopholes versus the kids, a theme that plays nicely into progressive populists’ inequality agenda.

The Obama administration and Congressional Democrats use the inequality argument to justify lifting the $7.25 federal minimum wage to $10.10. In a world where polling makes policy, they find it polls well. They also want to put wage-hike initiatives on the ballots in several states, believing the measures will boost turnout and shift attention from Obamacare’s unhappy first year.

Washington already has the nation’s highest statewide minimum wage, $9.32 an hour, and we are one of the few not allowing a lower wage for tipped employees. In the wake of SeaTac’s narrow approval of a $15 minimum wage and with a similar effort underway in Seattle, Inslee sees an opportunity to do more.

He supports a statewide increase “in the range of $1.50 to $2.50 an hour.” The Washington State Labor Council wants to take it to $12 or more. Seattle activists promoting the $15 wage welcome a higher state rate. The greater the disparity between Seattle and surrounding cities, the greater its competitive disadvantage.

Inslee calls his proposed hike “a step toward closing the widening economic gap.” He argues that “an increase in that range does not kill jobs.”

Argument by assertion is a political staple, but the research supports a different conclusion. While modest catch-up hikes in the minimum wage may have minimal impact on employment, that’s not what he’s suggesting. Size matters. The larger the wage increase, the more employment suffers.

A boost of $2.50, up to $11.82, would be a 27 percent increase. Jobs would be lost. New jobs would be created at a slower pace.

Policymakers should focus on job creation. Diana Furchtgott-Roth, former chief economist for the U.S. Department of Labor, reports that labor force participation (the share of Americans working or looking for work) is now just 63 percent, about what it was in 1978 when women made up a smaller share of the workforce. For youth, it’s worse, only 55 percent of 16- to 24-year-olds are in the labor force, down from 62 percent a decade ago. It’s not because they’re in school. Enrollment’s barely changed. They just don’t have jobs.

The inequality discussion is a divisive distraction. Raising the minimum wage — increasing the cost of creating a job — won’t close the gap between rich and poor or build a strong middle class. While it might help some workers, it destroys opportunity for others.

With unemployment still unacceptably high, the 2014 campaign is being oddly framed: Raise taxes and boost the nation’s highest minimum wage. Really?

Richard S. Davis is president of the Washington Research Council. His email address is rsdavis@simeonpartners.com

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