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Friday, February 23, 2024
Feb. 23, 2024

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In Our View: State takes wise approach to minimum wage

The Columbian

While there is room for reasonable debate about the minimum wage, one positive aspect of Washington’s law is clear. Linking the rate to inflation avoids contentious legislative debates and allows for gradual wage increases rather than large jumps that jolt the economy – or long periods of stagnant wages for low-income workers.

The Washington Department of Labor and Industries this week announced that the statewide minimum wage for 2024 will increase to $16.28 an hour — up 54 cents from the current level. Washington already had the highest minimum wage of any state in the country, and changes are dictated annually based on the Consumer Price Index.

That reflects the wisdom of Initiative 1433, which was passed with 57 percent of the statewide vote in 2016 (in Clark County, 54 percent of voters approved). That measure incrementally increased the minimum wage from the 2016 rate of $9.47 to $13.50 by 2020 and subsequently tied it to inflation.

To provide some context, the $9.47 rate of 2016 would now be $12.01 if linked to inflation since then.

There are, indeed, reasonable arguments against increasing the minimum wage – or even the need to have one. Economic purists might argue that a free market will fairly dictate wages for workers depending on their skills and experience. And critics inevitably decry any increase to the minimum wage as “job killing.”

Such arguments do not stand up to scrutiny, however. Nor do they meet the definitions of basic fairness and compassion.

The federal minimum wage (which does not apply in Washington) has been $7.25 since 2009, which reflects the difficulty of expecting legislative intervention. More than 20 states stick to the federal minimum for at least some jobs. In the past 14 years, inflation has cumulatively increased prices 41 percent, greatly diminishing the purchasing power of that $7.25.

Meanwhile, the compensation for executives has skyrocketed. According to the left-leaning Economic Policy Institute, CEO compensation in 2021 was 399 times that of the average worker.

That is the crux of discussions regarding wealth inequality, but it skews arguments about the minimum wage. While pay and stock benefits for executives at large companies have increased, that typically does not apply to small-business owners who make up a vast majority of employers.

The owner of a family-run corner market or a local nursery is not reaping stock benefits but is having their employees’ minimum wage dictated by state law. And when entry-level workers receive a pay increase under that law, it can drive up wages for employees who receive a little more than minimum wage.

Meanwhile, there is little or no correlation between a state minimum wage and a state’s unemployment rate. Washington ranks 38th in unemployment, according to the U.S. Bureau of Labor Statistics, but several states with a $7.25 minimum (West Virginia, Texas, Kentucky) have higher unemployment rates.

Adding to the issue is the impact that minimum-wage increases have on inflation. If wages go up, people have more to spend, which is one of the defining factors behind price increases.

That leads to a question of priorities. Do we believe that people at a minimum-wage job should be paid $16.28 an hour to help fund their food and shelter, or are we more concerned about prices at the local coffee shop?

All of this generates complex, worthwhile discussions about worker compensation. But we’re glad Washington has put those discussions behind it.