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Dick Davis Column: Minimum Wage Initiative Spawns Copycats |
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Written On: February 2006 |
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Written By: By Richard S. Davis - President, Washington Research Council |
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A Republican Congress continues to block an increase in the federal minimum wage. Undeterred, labor unions and their wage-raising allies have turned to the states. They're likely to have more success there, as residents of Washington can attest.
With the new year, Washington again boasts the nation's highest minimum wage of $7.63 an hour. It's the continuing legacy of labor-backed Initiative 688 passed by two-thirds of the voters in 1998. I-688 boosted the state minimum wage from $4.90 an hour to $5.70 an hour in 1999 and $6.50 an hour in 2000. After that, annual increases were indexed to inflation.
Three of the five states with the highest minimum wage are in the Northwest. Oregon ranks second at $7.50 per hour, followed by Connecticut, $7.40; Vermont, $7.25; and Alaska, $7.15. Seventeen states and the District of Columbia have adopted minimum wages above the federal rate of $5.15 an hour. For those states, the higher rate applies.
The states with higher minimum wages tend to be Blue states with pro-union policies. Only one of the seventeen, Florida, is a right-to-work state; only two, Florida and Alaska, gave George W. Bush majorities in 2004.
At the same time Florida gave President Bush 52 percent of the vote, voters passed Measure 5, boosting the minimum wage and indexing it to inflation. It carried in every county, pulling 72 percent of the statewide vote. Also in 2004, 68 percent of Nevada voters passed a Constitutional amendment lifting the minimum wage and indexing it. To take effect, it must pass again this year.
These efforts stem from common roots: organized labor, the Association of Community Organizations for Reform Now (a left-leaning activist group), and liberal religious groups. Organizers plan to use the issue in 2006 and 2008 to turn out their base in key battleground states. Among the states reportedly targeted for minimum wage ballot initiatives this year: Ohio, Michigan, Arizona, Colorado, Arkansas and Montana. All but Michigan were Bush states in 2004.
As the Florida and Alaska experiences illustrates, voters can vote with labor on the minimum wage and still favor Republican candidates. But the issue complicates an already difficult year for the GOP.
In the 1990s, economists began to challenge the prevailing understanding that increases in the minimum wage caused employment to fall. More recently, according to an Employment Policies Institute report released last August,
"... a near consensus has returned to the view that minimum wage increases have significant but relative modest negative effects on the employment of teenagers and other low-skill groups."
States that have set the minimum wage above the federal level tend also to adopt tax and regulatory policies that negatively affect business, making it difficult to isolate the effect of individual factors. A study we did for the Washington Alliance for a Competitive Economy provides additional perspective. Comparing border counties, Across State Lines looked at job growth in Washington, Oregon and Idaho. Washington — with higher taxes, higher minimum wage rates, and a more restrictive regulatory regime — trailed its two neighbors. Idaho, a right-to-work state with lower business taxes and the federal $5.15 minimum wage, fared best.
In 2004, only about 2.7 percent of all hourly workers were paid at or below the federal minimum wage, according to the U.S. Bureau of Labor Statistics. About half of them were under 25; one-fourth were teenagers. A disproportionate number were unmarried part-timers, primarily holding food service jobs.
People rarely remain long at the minimum wage, typically advancing to more lucrative employment. Increasing the minimum wage, therefore, provides little benefit to the working poor. The primary benefit accrues to those who manipulate the issue’s popularity to rally their political base and build support for so-called "family-friendly" legislation like family leave, pay-or-play health insurance and "living-wage" laws. Such attempts to dictate wages and benefits appeal to the kind of folks who want to give workers a raise without themselves having to meet a payroll in a competitive marketplace.
Ultimately, the costs compound and someone must pay the bill. The price may be reckoned in jobs destroyed or outsourced, careers denied, and opportunities lost.
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