Arguments about the impact of a minimum-wage increase are as old as the wage itself.
Now, those debates are being rekindled in Washington, with the state’s minimum wage scheduled to increase to $13.50 an hour on Jan. 1. Advocates say workers will have more money to spend, boosting their financial stability and, in turn, the economy. Critics claim that increasing salaries for some workers will lead to businesses reducing hours or workforce, or perhaps closing their doors.
In the process, Washington is serving as a petri dish for the important experiment of sharply raising the minimum wage. In 2014, the Seattle City Council passed an ordinance to phase in a $15 wage floor by 2021. In 2016, voters statewide passed Initiative 1433, phasing in increases that after next year will be tied to cost-of-living increases.
At a glance, it is difficult to see negative impacts from Washington’s increases in recent years. Despite sky-is-falling proclamations from critics, the state routinely is ranked by experts as having one of the best economies in the country, despite typically having the highest minimum wage.
That leads to questions about the difference between causation and correlation, which is why an ongoing study from the University of Washington is so important. Since Seattle started implementing sharp annual increases in minimum wage, researchers have been keeping a close eye on the impacts. Last year, they reported that increases are, indeed, increasing pay for low-level workers but have led to a slight reduction in employment numbers.
Earlier this year, they released a report about the impact on child care facilities, finding that an increasing minimum wage had, in most cases, resulted in a reduction of hours for workers and/or an increase in tuition. In a separate report, researchers looked at the impact on grocery prices as a result of minimum-wage boosts and found no significant evidence of price increases.
As with most things that impact the economy, there is much more gray area than is claimed by advocates on either side. Most important, the University of Washington study is planned to continue for several years, providing an in-depth examination of how the minimum wage impacts the economy through both booms and busts.
While Washington has been among the national leaders in providing a robust minimum wage, attention is lacking at the national level. The federal minimum wage has been $7.25 an hour since July 2009, and several states — particularly in the Midwest and the South — have declined to raise their state minimum above that amount. While inflation has been relatively low over the past decade, that $7.25 an hour continues to decline in purchasing power each year.
Washington’s annual increases to the minimum wage have presented a reasonable approach to the issue. Employers have had time to prepare for incremental increases — in the case of the January increase to $13.50, they have had three years. They also have had time to balance how best to offset the increases by passing costs along to consumers, reducing hours for workers or adopting another strategy.
It is not difficult to find studies about the impact of a minimum-wage increase that reach conflicting conclusions. Some find that it leads to a decrease in employment numbers; others find the opposite.
But the state of Washington’s economy makes it difficult to believe that aggressive wage increases have had a deleterious impact on the state’s economy.
