One of the primary goals of having a minimum wage is to help facilitate a strong economy. The question, then, is how best to boost the economy while not overly burdening businesses.
Washington’s minimum wage this year has increased to $14.49 an hour, the highest blanket minimum for adult employees in any state. California has a $15 minimum that applies to companies with 26 or more employees; Washington, D.C., has a minimum of $15.20. In Washington state, 14- and 15-year-olds may be paid at 85 percent of the minimum — $12.32 an hour this year.
The minimum in this state saw a large increase beginning Jan. 1, up from $13.69 in 2021. That is because voters in 2016 approved a schedule for increasing the minimum wage and then annually tying it to the Consumer Price Index. With inflation at a high rate through 2021, the minimum wage followed suit for this year.
As an article this week in The Columbian detailed, that can add up to a difficult situation for employers — and employees. As one worker wrote, her wages increased, “Then so did gas, groceries, basic necessities, waste water, taxes and cable. So it’s a wash plus more.”
Advocates for raising the minimum wage argue that increasing the amount of money in people’s pockets helps the economy by giving them more purchasing power. It is a philosophy traced to one of the first great industrialists, Henry Ford, who believed that his auto workers should be paid well enough to afford the products they were building.
Others claim that forcing employers to pay more will lead them to hire fewer people, and that increasing wages leads to inflation, as there is more money chasing the available goods.
Compelling arguments can be found on both sides of the issue, but it is instructive to compare states and their economies. Washington, which in recent years has routinely had one of the nation’s highest minimum wages, also routinely ranks among the nation’s best economies.
On the other hand, Utah was ranked last year by U.S. News & World Report as having the best economy among the states — and has a minimum wage of $7.25 an hour. That $7.25 mark is the federal minimum wage, a level that has not increased since 2009; to match inflation, that rate would be $9.42 in 2021 dollars.
Utah is an exception, however. The federal minimum wage applies in 20 states, and most of those rank among the nation’s worst economies, including Mississippi, Louisiana, Wyoming, Kentucky, Alabama and Oklahoma.
While debate can be had on how a minimum wage impacts a state’s overall economy, there also are questions about what kind of state we wish to live in. In 2016, 57 percent of Washington voters approved the current minimum-wage schedule, enhancing the opportunity for all workers to have a living wage.
There are limits to this philosophy. Many nations (and some U.S. states) have experimented with guaranteed-income programs, finding mixed results. And few people would advocate, for example, a minimum wage of $50 an hour. There should be incentives for developing the skills required for a high-paying job.
But as the United States deals with increasing wealth inequity, a robust minimum wage is an important tool for adequately rewarding workers while boosting the economy. It is an important tool for ensuring that all Americans can have at least a minimum standard of living.
In this regard, Washington is on the right track.