New year brings increase in state's minimum wage
Washington already has highest in U.S.; local business owners say it will lead to higher prices
Monday, December 31, 2012
The state's lowest-paid workers will receive a mandatory pay hike starting today, an increase some local business owners predict will raise prices.
Advocates for low-wage earners say the increase of 15 cents per hour promotes economic growth and protects the value of earnings in low-income households.
Washington's minimum wage -- already the highest among states -- jumped from $9.04 to $9.19 per hour today, raising pay for an estimated 144,000 workers. The increase is the 13th adjustment since voters passed an initiative in 1998 that required the yearly change, tied to the Consumer Price Index for urban wage earners and clerical workers.
That index rose 1.67 percent during the 12 months ending Aug. 31, 2012, according to the Washington state Department of Labor & Industries.
The state's minimum wage increase could generate an average of $310 per year for each low-wage worker, according to the Seattle-based Economic Opportunity Institute, a nonprofit research and advocacy group.
The group expects the additional cash to boost consumer spending by $29 million this year.
The wage hike "puts more money in the pockets of low-wage workers who have little choice but to spend it immediately on basic expenses," said John Burbank, executive director of the institute.
Fast-food restaurant owners bemoan the annual adjustment, saying wage hikes only pose more problems to their industry, which has already suffered at the hands of frugal consumers. Increasing food supply costs and higher labor costs can only add up to higher menu prices, said Scott Dickinson, a Vancouver owner of seven KFC restaurants and one A&W.
He expects the minimum wage hike to push prices higher everywhere, from convenience stores to grocery stores, restaurants and retailers.
"That's what's really so crazy about this cycle of the minimum wage going up every year," said Dickinson, owner of Dickinson Northwest Inc.
The Vancouver-based chain has already permanently closed three Clark County KFC restaurants within the last three years, due to slumping sales.
Rising labor costs contributed to the decision to close those stores, Dickinson said. He added that most fast-food chains follow a business model aimed at accruing profit over a long period of time.
"The profit margins are slight in the quick-service business," he said.
Dickinson also blamed the state's increase for wage compression, giving less experienced employees annual wage hikes that rival the rates being paid to more valuable workers.
"They were rewarded with a higher wage when the business model allowed you to do that," said Dickinson. He said the minimum-wage hike will affect about 60 percent of his 75-employee restaurant chain.
Many workers around the country won't be as lucky as the ones in Washington state. Since the law went into effect in 1998, the annual adjustment has increased the minimum wage by $3.49 to reach the hourly rate of $9.19 today. Workers one state over in Idaho will make nearly $2 per hour less in 2013.
But automatic minimum wage increases designed to compensate for inflation have steadily pushed salaries up in some states, even through the recession, expanding the pay gap between areas that make annual adjustments and those that don't. Of the 10 states that will increase the minimum wage Tuesday, nine did so automatically to adjust for inflation.
Oregon's minimum wage rises to $8.95 per hour today, up from $8.80.Rhode Island lawmakers approved that state's wage increase in 2012.
Along with Washington, Oregon and Rhode Island, minimum wage hikes will also occur in Arizona, Colorado, Florida, Missouri, Montana, Ohio and Vermont.
Of the states with automatic adjustments happening this year, the average minimum wage is $8.12 per hour, up from a little under $8. States that do not have automatic changes have an average minimum wage of about $7.40.
Many states, including Idaho, follow the federal minimum wage of $7.25 per hour.
The Associated Press contributed to this story.