Who needs the money more?
Tomorrow Washington’s increased minimum wage goes into effect, and I have to wonder whether it’s good news for the local economy. Is it better to put more money in the pockets of consumers or to leave that money with businesses?
Washington already had the nation’s highest minimum wage at $8.07 per hour, and tomorrow it will rise nearly 6 percent to $8.55. (Details on this are in the Dec. 26 issue of the VBJ ).
From our nation’s capital, the Employment Policies Institute argues that mandated minimum wage hikes lead to job losses that particularly affect vulnerable employees, such as young minorities and high-school dropouts. And to recoup increased labor costs, businesses with small profit margins would need to increase sales significantly, EPI predicts.
But a study released in 2006 by David Holland, economics professor emeritus at Washington State University, found that increased minimum wage had a mostly positive effect on the state’s economy. At the time, a 5 percent wage increase meant losing 2.5 percent of the state’s minimum wage jobs, but put the baseline gross state product down only 0.006 percent.
Owners of small local businesses I’ve talked to expressed worry about keeping up with the increase in a down economy – it’s harder for them to pay bills, let alone compete for and keep good workers. But I also know people who would welcome a 6 percent raise with open arms – not so they can splurge, but so they can pay the bills and eat.
What’s your take on the state’s new minimum wage?
–Charity Thompson can be reached at cthompson@vbjusa.com
