Raising minimum wage a burden, not a benefit

During his campaign, Governor Inslee liked to say he would focus “like a laser beam” on creating jobs. Fast forward to 2014. In his first “State of the State” address, Inslee only mentioned job creation to take credit for Boeing narrowly deciding not to take its 777X jobs elsewhere.

With his next breath, Inslee outlined his plan to discourage employment, raise prices and burden Washington’s job creators by further raising the state minimum wage.

Boosting the minimum wage is all the rage these days. Last fall, SeaTac voters barely approved a targeted $15 minimum wage initiative. Labor activists, spurred on by Seattle’s new socialist council member, have declared their intention to spread $15-an-hour fever to Seattle this year.

Not to be left out, Inslee proposed raising the state’s minimum wage from $9.32 — already the highest state wage floor ­— to between $10.82 and $11.82.

“Every job offers dignity, but not every job offers a living wage,” Inslee declared. By some measures, though, Washington already has a “living wage.” The living wage for a single adult in Washington is $8.77, according to the Massachusetts Institute of Technology’s “Living Wage Calculator,” noticeably below the state minimum.

Many living wage advocates, however, contend that a single worker should be able to support a family on only a minimum wage salary. But where should the line be drawn?

The living wage for one Washington worker with three children is over $30 an hour, according to MIT. Only about eight percent of minimum-wage earners in Washington are single parents, but there might be a minimum-wage worker somewhere supporting four or five children. Should the state mandate wages high enough to support a family of any size on a single income, regardless of economic consequences?

Though fond of denouncing the “injustice” of low-wage work, the vague moral rhetoric of wage activists fails to specify what “justice” looks like or when it has been achieved.

Consider this alternative: A “fair wage” is not an arbitrary, feel-good, one-size-fits-all number mandated by government, but one that an employer voluntarily offers and a worker voluntarily accepts.

Labor activists might argue that employers have a stronger bargaining position than workers, and that a government-enforced minimum is needed to keep employers from driving down wages in a “race to the bottom.” If that were true, we would all earn the minimum wage. Instead, over 97 percent of American workers are voluntarily paid more than the government-mandated minimum by their employer.

Philosophical considerations aside, cold, hard economics also has something to say about Inslee’s plan.

Inslee laid out his economic arguments for a higher minimum wage in two sentences, contending that it would not “kill jobs” and would result in “more money being spent in our economy.”

The effect of higher minimum wages on employment is controversial. For decades, research has shown that higher minimum wages decrease employment. A 2006 survey of recent minimum wage studies found that 85 percent of the most credible studies pointed to job losses.

In recent years, however, a handful of progressive academics have published reports challenging this consensus. Last year, however, leading minimum wage expert David Neumark exposed significant methodological flaws in the new studies, concluding that “[N]either the conclusions of these studies nor the methods they use are supported by the data.”

Inslee’s opinion notwithstanding, boosting our state’s already high minimum wage by 16 to 27 percent would deprive some Washingtonians of the dignity a job provides.

In arguing that higher wages boost spending in the economy, Inslee turned to an oft-repeated progressive talking point. Minimum-wage advocates typically support this argument by misinterpreting a single 2011 study by researchers at the Chicago Federal Reserve which found that household spending rises somewhat in the first year following a minimum-wage hike.

The study’s authors explicitly warn that their study is “silent about the aggregate effects of a minimum wage hike.” In separate papers, the same research team concluded that raising the minimum wage increases prices and decreases employment. After accounting for these factors, the researchers concluded that a higher minimum wage might provide some stimulus “for a year or so,” but would “[serve] as a drag on the economy beyond that.”

Good intentions and rhetoric about fairness do not produce prosperity. Instead of promoting policies that will set back Washington’s economic recovery, Inslee should seek to reduce the barriers to job creation. Allowing a lower training wage for young workers and passing a state law overriding local wage mandates would be a good place to start.

If Inslee is serious about jobs, he needs to refocus his laser on policies that work, not failed social experiments.

Maxford Nelsen is a labor policy analyst for the Olympia-based Freedom Foundation.

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