How Would A $13.50 Minimum Wage Ripple Through Washington's Economy? | KNKX

How Would A $13.50 Minimum Wage Ripple Through Washington's Economy?

Oct 5, 2016

Corrected on October 11, 2016 - An earlier version of this post said Washington has the nation's 42nd-highest unemployment rate. In fact, Washington has the eighth-highest.

An initiative on the ballot this election would set Washington state on the path to having one of the nation's highest minimum wages: $13.50 per hour. 

Few, if any, detractors have argued that Washington workers don't deserve a raise. But a debate has focused on whether a jump in the minimum wage would be wind drag or jet fuel for the state's uneven economy. 

Initiative 1433 would raise the state's minimum hourly wage from $9.47 to $11 next year -- and keep raising it until it hits $13.50 in 2020. It would also require businesses to offer paid sick leave to employees.

The initiative gives Washington voters a chance to follow an example set by two of the the state's cities, Seattle and SeaTac, both leaders in a national movement for a $15 minimum wage. 

(Tacoma, the only other Washington city with its own minimum wage, is scheduled to reach $12 per hour in 2018, but would be overtaken by the state minimum wage if 1433 passes). 

Seattle in 2014 became the first major American city to begin phasing in a $15 minimum wage. Nearby SeaTac was the first city  overall to pass the wage in 2013.

But critics of the proposed $13.50 statewide minimum wage are asking: Is what's good for the Seattle area good for the rest of the state? 

Seattle's historic tech and development boom is creating jobs at three times the national rate, according to a report by University of Washington economists. But Washington as a whole has the nation's eighth-highest unemployment rate. 

"This part of the state is very low income; it's a challenging area; it has very high unemployment," said Julianne Hanner, who owns five McDonald's restaurants in the Aberdeen area. "So, I think the question is: How is it going to affect rural, low economic areas as opposed to the city of Seattle?" 

A coalition of business groups opposing the initiative argues that jobs could become more scarce in those communities as employers adjust to rising costs. 

But there's another vision. Supporters argue that the initiative would stimulate business by making an estimated 730,000 low-wage workers fuller participants in Washington's economy.

"Businesses depend on having people in their communities that can afford to buy the products that they sell," said Jack Sorensen, communications director for Raise Up Washington, the pro-1433 campaign.

"The reality is the state minimum wage is not enough to afford rent for a one-bedroom apartment anywhere in this state, let alone items like eating out or shopping at local businesses," he added.

Nathan Herrera, 21, makes minimum wage at a dollar store near Yakima. The aspiring physical education teacher said any extra money he makes would go to bills, food, shoes, and other expenses.

"I'm not say that this would make a big difference, but it would help me out a lot," he said. "Personally, it could really help me out. I mean, I've been through struggles, honestly." 

So, one side says raising the minimum wage could raise prices and cost jobs. The other says it would stimulate the economy. 

It will take time before researchers know who's right, according to Jacob Vigdor, an economist at the University of Washington. He said there's not much data on how a statewide increase of this size would ripple through the economy. 

California and New York are just beginning to phase in $15 minimum wages. An Oregon law passed this year would phase in different minimum wages, ranging from $12.50 in rural swathes of the state to $14.75 in the Portland area. 

"The typical state increase has been on the order of 50 cents or a dollar," Vigdor said. "We don't have a whole lot of experience studying what happens in these less vibrant economies when you have one of these larger increases."

Hanner, who employs about 200 people at her McDonald's restaurants, said she's worried the policy could raise the price of food and other goods in the struggling Aberdeen area.

She said it's unlikely to affect the number of people she employs, but it may influence who she hires. For instance, she said, she may be less likely to hire 16- and 17-year-olds. 

"We don't have as much flexibility to hire someone who might need a little bit more time or help to be productive," Hanner said, adding that she supports a lower "training wage" for workers in the first weeks of employment.

Vigdor leads the team of economists studying the effects of Seattle's $15-minimum-wage law. What's clear so far is that prices of goods haven't spiked and both workers and businesses seem to be thriving as wages rise.

However, it's proved difficult to tell how much of the good news is due to the wage policy and how much of it flows from the city's tech renaissance. 

"We've really tried to caution people not to apply the results of what we're finding in Seattle to other places," Vigdor said. "There are places out there that have a lot more retirees, a lot more children, a lot more people living on fixed incomes."