It is axiomatic that a knowledge of history is necessary to avoid repeating the mistakes of the past. When it comes to the minimum wage, Washington has a track record worth remembering.
Amid heightened labor activism, however, state and local policymakers should carefully examine both the past and the future before acting to boost the minimum wage still further.
Washington’s current minimum wage of $9.47 an hour is a product of Initiative 688, passed by voters in 1998. I-688 substantially increased the state minimum wage and, for the first time anywhere in the U.S., automatically increased it every year for inflation. Washington’s minimum wage has exceeded that of every other state almost every year since then.
At the time, supporters of I-688 like the Economic Opportunity Institute claimed that boosting the minimum wage would help Washingtonians “earn their way out of poverty” without harming employment, and that indexing it to inflation would “depoliticize the issue.”
Current events have proven the latter claim false, with labor groups like SEIU-backed Working Washington pouring millions of dollars into campaigns to increase the minimum wage around the state.
Unfortunately, the economic predictions of I-688’s supporters have turned out to be as accurate as the political ones.
A Freedom Foundation analysis of Bureau of Labor Statistics and Census Bureau data found the nation’s highest minimum wage failed to reduce poverty, while slowing job growth in low-wage industries and driving up teen unemployment.
In 1998, a single, full-time minimum-wage earner with two children earned 81.6 percent of the poverty line. By 2014, the same worker would earn 101.6 percent of the poverty threshold. Despite the significant increase in the state minimum wage relative to the poverty line, there was no detectable decrease in the percentage of Washingtonians living in poverty.
Minimum wage supporters sometimes reference Washington’s strong overall population and employment growth to support their contention that a high minimum wage doesn’t destroy jobs. However, the state’s generally positive economic trends obscure the negative consequences of our high minimum wage felt by the relatively few employees and businesses actually affected by it.
For instance, growth in hotel and restaurants jobs slowed following I-688’s implementation, even though overall job growth exceeded national trends. Consequently, while Washington’s share of the nation’s population increased by 5.7 percent since 1998, and its share of total U.S. jobs increased by 6.3 percent, the state’s share of U.S. accommodation and food service jobs fell by 5.7 percent.
Declining entry-level job growth corresponded with elevated unemployment for low-skilled workers like teens. Before I-688’s passage, teen unemployment generally followed national trends, but Washington’s teen unemployment rate has significantly exceeded the national rate every year since, reaching a staggering 34 percent at the height of the recession.
There is little reason to believe that further increases in the minimum wage will produce different results. A recent analysis from the National Federation of Independent Business’ Research Foundation projected that a $12 minimum wage statewide would eliminate about 16,000 private-sector jobs, mostly at small businesses, and sap $7 billion from the state’s economic output over 10 years.
Washington has had plenty of time to experiment with high minimum wages and has little to show for it. Thankfully, it’s not too late to learn from our mistakes.
Maxford Nelsen is labor policy analyst at the Freedom Foundation. Patrick Connor is the Washington state director for the National Federation of Independent Business.
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