Making Government Work

A Northwestern State Proves That a Higher Minimum Wage Doesn’t Necessarily Increase Unemployment

March 10, 2014
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A Northwestern State Proves That a Higher Minimum Wage Doesn’t Necessarily Increase Unemployment
A restaurant worker fills an order at a Chipotle restaurant on March 5, 2014. Washington voters approved a minimum wage linked to cost of living and it didn't turn into a disaster for jobs. Joe Raedle/Getty Images
The state with the highest minimum wage has an unemployment rate below the national average. Coincidence?

Talk about forward thinking. For 16 years now, the state of Washington has boasted the highest minimum wage in the U.S. — currently $9.32 per hour, a full two dollars and change more than the federal mandate of $7.25.

When west coast voters passed the initiative in back in 1998, opponents claimed that a higher wage would kill jobs. Coincidentally, this is the same argument that is being used by politicians, business groups and lobbyists who are fighting against President Barack Obama’s push for a $10.10 minimum wage. As the debate continues, Bloomberg analyzed the numbers in Washington state, and the results are surprising.

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After Washington’s minimum wage increase passed, which increased wages over two years to $6.70 and linked future increases to inflation as measured by the Consumer Price Index, unemployment in the state spiked for a three-year period. However, in the years that followed, unemployment gradually decreased. For four of the past five years, Washington’s unemployment rate has been below the national average — as well as below the averages for the Western and Southern regions. Overall, Bloomberg reports that Washington’s job growth has continued at an average of 0.8 percent annually, outpacing the national growth rate of 0.3 percent.

An added bonus? Poverty in the state trailed the U.S. average for at least seven years as well. And payrolls at Washington’s restaurants and bars — employees of which are particularly vulnerable to minimum wage laws — have expanded by a whopping 21 percent. In other words, after 15 years of implementation, Washington’s minimum wage increase is successful. “It’s hard to see that the state of Washington has paid a heavy penalty for having a higher minimum wage than the rest of the country,” Gary Burtless, an economist at Brookings Institution and former U.S. Labor Department worker, told Bloomberg.

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How do the results seen in Washington line up with those projected nationally? A report by the Congressional Budget Office published in February found that President Obama’s proposal of raising the minimum wage to $10.10 would reduce employment by 500,000 workers — a talking point that has been levied by opponents of the wage increase. However, the same report found that a higher minimum wage would lift 900,000 people out of poverty.

So while it’s true that raising the minimum wage would create higher costs for employers — which could lead to job cuts — the increase in pay will likely be pumped back into the economy by citizens who are spending more money than they would be able to if they were being paid at a lower rate.

That might not be enough to convince Congress, but just take a look at this sobering map created by the National Low Income Housing Coalition, which shows the hours per week that minimum-wage employees would need to work in order to afford a two-bedroom apartment. In Washington, these employees would need to clock 81 hours a week — and that’s despite the fact that they are paid the the highest minimum wage in the country. For the 19 states that adhere to the federally-mandated $7.25 an hour … well, let’s just say it doesn’t look like these employees will be affording the apartment of their dreams (or even any apartment) anytime soon.

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