Who needs the money more?
Tomorrow Washington’s increased minimum wage goes into effect, and I have to wonder whether it’s good news for the local economy. Is it better to put more money in the pockets of consumers or to leave that money with businesses?
Washington already had the nation’s highest minimum wage at $8.07 per hour, and tomorrow it will rise nearly 6 percent to $8.55. (Details on this are in the Dec. 26 issue of the VBJ ).
From our nation’s capital, the Employment Policies Institute argues that mandated minimum wage hikes lead to job losses that particularly affect vulnerable employees, such as young minorities and high-school dropouts. And to recoup increased labor costs, businesses with small profit margins would need to increase sales significantly, EPI predicts.
But a study released in 2006 by David Holland, economics professor emeritus at Washington State University, found that increased minimum wage had a mostly positive effect on the state’s economy. At the time, a 5 percent wage increase meant losing 2.5 percent of the state’s minimum wage jobs, but put the baseline gross state product down only 0.006 percent.
Owners of small local businesses I’ve talked to expressed worry about keeping up with the increase in a down economy – it’s harder for them to pay bills, let alone compete for and keep good workers. But I also know people who would welcome a 6 percent raise with open arms – not so they can splurge, but so they can pay the bills and eat.
What’s your take on the state’s new minimum wage?
--Charity Thompson can be reached at cthompson@vbjusa.com
Wednesday, December 31, 2008
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2 comments:
Posted by Admin for Jon Ferguson:
These continued minimum wage increases hurt the small business person as well as the consumer on many levels.
First of all, it limits the ability for businesses to financially reward their top employees. By having a high wage minimum wage in many cases there are just not available funds to truly reward your best workers. The discrepancy in pay between your best producer and your worst is simply not big enough. In doing so there is less incentive to perform. Because of this the small business person loses out as well as the consumer.
Minimum wage was designed to be an "entry wage". Most people earning minimum wage are either new to the job market or have not learned the skills that provide "value" to the marketplace. They have to be taught these skills. Jobs that rely on minimum wage also are typically dealing with high turnover costs because they are in fact training people who have never held a job before and therefore lack basic disciplines and skill sets.
Minimum wage was designed as a ladder. You start at the bottom and as your skills increase and the value you bring to the marketplace increases, your wage increases accordingly. That is American in every sense of the word. Why reward mediocrity? It goes against nature to reap before you sow. Everyone wins when you are paid for the value you provide.
I remember when you had to work hard just to earn hours. I worked in Portland and at $4.25 an hour 25% of my check went to taxes. I NEEDED hours. Nowadays many people working minimum wage jobs are kids living at home, with no state tax coming from their checks, and have little incentive to put in extra effort. The wage is high enough that they are comfortable and don't really need the extra hours or a higher wage. That drive to survive and to thrive is eliminated.
You could argue that there are those who do need the hours and the higher wage. If they work hard and set themselves apart all of the hours they need will be available to them. Promotions are easier than ever to be had because it is easy to look good in contrast to the current crop of newcomers.
If businesses had a low minimum wage with clear, set, measurable criteria as to how their employees can make more if they choose to put forth the effort, reward them. The businesses and the consumers will win. Prices will be more affordable for the consumer as businesses will run more efficiently and more profitably.
Somewhere along the line we got backwards on this. Let's get back to reap, then sow. Anything less violates the very laws of nature. Let's get back to requiring excellence, hard work and initiative. We as people and as a country will all be much stronger in the long run.
That thunk you just heard was me stepping off of my soap box.
Jon Ferguson
Camas
Minimum wage was not designed to be an "entry wage," as Mr. Ferguson states. It was designed as a basement to prevent employers from exploiting workers.
Most minimum wage jobs are not, in fact, held by teenagers living off of their parents. Our community, especially, has a significant amount of laborers working for minimum wage, many of whom are trying to support families on these paltry wages.
It is crude and unfair to blame the worker and presume that all entry-level employees will receive some illusory "free lunch" by starting at a higher wage. It's our responsibility as parents to teach our children to work for what they receive, and it's our responsibility as employers to set clear standards and goals for our employees. If someone isn't performing, it's not because a reasonable minimum wage has made them lazy.
Further, to respond to some of the quotes that were in the 12.26 VBJ article, if a higher minimum wage means more competition for better workers, so be it. Don't whine about how hard it is to be competitive-- do the work and make the effort to get find good people and keep them. Incentives don't always have to be monetary. If you can't keep good employees, paying them less certainly isn't going to give you a better pool to pick from.
While a higher minimum wage might force some employers to reevaluate their staffing and adjust their standards of excellence--that's a housecleaning change that will, in the end, be a benefit for all. Perhaps a higher minimum wage means an employer can only hire one worker instead of two. But that higher wage also means only one person will be on welfare or unemployment--whereas a lower rate will keep both workers just poor enough to continue to need public services.
We should embrace these changes and look to our chambers of commerce, business groups, and political leaders for assistance in ending this exploitation economy and developing a truly sustainable economy .
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