Article by Erik Smith. Published on Thursday, September 29, 2011 EST.

As Unemployment Lingers, State Mandate Will Give Washington Highest Minimum Wage in Country

By Erik Smith

Staff writer/ Washington State Wire

OLYMPIA, Sept. 29.—As unemployment remains stagnant and it looks like a double-dip recession is right around the corner, Washington residents can take pride in one thing – next year Washington employers will pay the highest minimum wage in the country.

State law requires the Department of Labor and Industries to announce a new minimum wage rate Friday that likely will top the $9 mark for the first time anywhere. But while minimum wage earners might want to pop open a bottle of Andre, there isn’t much celebrating going on among the business interests that actually have to write the payroll checks. Sometimes being Number One isn’t a good thing, they say.

            They are looking forward to the announcement with a sense of resignation. It’s a simple math calculation, based on the consumer price index. You can do it yourself. And it’s looking like Washington’s minimum wage will be somewhere in the neighborhood of $9.04, up from the current $8.67.

            It’s the kind of honor business wouldn’t mind passing up.

            “This is a burning issue for our membership,” said Bruce Beckett of the Washington Restaurant Association. “The way that the minimum wage is adjusted each and every year is a huge issue to our members, and it is exacerbated by the fact that this is one of only seven states that doesn’t allow tip income to be credited toward some portion of the minimum wage.”

            Forty-Nine States Pay Less

            The nearest state is Oregon, which sets its minimum wage in a similar way and earlier this month pegged next year’s figure at $8.80. But most states in the country are in the seven-dollar range. Either they tie their state minimum wages to the federal minimum wage, which is now $7.25 an hour, or else they have lower state figures that are superseded by the federal requirements.

Washington became an outlier because the state Legislature in the 1990s pushed this state’s minimum wage to the top of the heap. Right at that particular moment, in 1998, voters said yes to an initiative sponsored by the state Labor Council that indexes the minimum wage to inflation. Washington is one of ten states that does it that way.

There was also something a little tricky about the way Initiative 688 did it. It tied the increase to the fastest-rising measure of inflation that is available from the federal government. That’s the consumer price index for urban wage earners and clerical workers, also known as the CPI-W. So that means what happens in Centralia is dictated by a measure that covers 32 percent of the population, and it pretty well guarantees Washington will be on top forever, unless some other state decides it wants top honors.

Over the 12 months preceding Sept. 1, the federal Bureau of Labor Statistics reports that the CPI-W has gone up by 4.2 percent. The more commonly cited consumer price index for all urban consumers went up by 3.8 percent.

So it’s not as if Friday’s news is going to come as a surprise to anyone. Actually, the guessing among business organizations is usually expressed as a range, anywhere between $8.95 and $9.07, depending on how L&I does its own calculation, but most are conceding that it’s probably going to be right around $9.04.

            Another Tax on Business

The Washington State Labor Council, longtime defender of the state’s high minimum wage, could not be reached for comment Wednesday afternoon.

But business groups say the state’s high minimum wage really ought to be considered another tax on business, just like unemployment insurance and workers’ compensation taxes. It’s just that not everyone is affected by it, only those employers who pay the minimum wage.

The sectors most affected are the restaurant industry, agriculture and retail. According to 2009 data from the Department of Employment Security, about 3.1 percent of jobs in this state are paid the minimum wage, or 67,000. That figure understates things a bit. It’s a full-time equivalent figure, what you get when you lump all the hourly wages together and divide by 40 hours. Many minimum wage jobs are on a part-time basis.

The restaurant association’s Beckett said the state’s high minimum wage has discouraged employers from beefing up their staffs. Teen employment is down, and Washington restaurants typically employ three fewer people than the national average.

“We don’t have any way of bringing those people into the workforce right now at a reasonable cost and give them a chance to learn and train at the same time, so the problem isn’t just the cost of entry into business, but also the inability to get new people into the workforce to get them trained and educated. It just keeps growing and growing, that disparity keeps getting bigger and bigger. And right now a lot of young people are having a hard time finding a job.”

            Challenged Process Last Year

Last year the minimum wage setting process was hugely controversial. The CPI measurements actually sank in 2009, thanks to the recession, and so the minimum wage increase for 2010 was zero. Last year the measures increased, but they didn’t catch up completely with 2008, and the question was whether the minimum wage had to increase again.

L&I sought advice from the state attorney general’s office, which said that in its opinion the department did not have to raise the minimum wage until the CPI-W rose above the 2008 rate. The attorney general’s office notes that its opinion isn’t binding on state agencies – they can decide whether to accept it or reject it. And after a hue and cry from labor interests, disregard it the department did, saying it believed the law compelled it to raise the wage. The state Farm Bureau sued to overturn the increase, but was rebuffed when a Kittitas County Superior Court judge decided the language of the law required an increase.  
            Scott Dilley of the Washington Farm Bureau said the increase will impact some farmers more than others – growers of some commodities, such as apples, already pay substantially more than the minimum wage. “It will impact growers like potato and onion growers that serve the same market as growers from other states, but have to pay them a wage that is higher than the federal minimum wage,” he said. “They are selling to the same processor, and he is giving the same money for the product. So this means the Idaho farmers have less of an input cost, and our farmers are at a competitive disadvantage.”

             Same holds true when Washington farmers have to compete internationally, he said. The extra costs in this state come out of their profits.

We’re Number One!

“We are bracing for it to go up over $9 an hour, which seems a little crazy when you consider so many people are out of work,” said Patrick Connor of the Washington chapter of the National Federation of Independent Business.

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