by Judy Ferro
Higher minimum wage means more jobs?
Does raising the minimum wage result in fewer jobs?
Intuitively, it’d seem simple math that a business that could afford to pay $30 an hour in wages could hire four people at $7.50 an hour, but only three at $10 an hour.
The economy, however, has a lot more variables than this simple math. A wage increase puts more money in circulation and brings in more business which makes it possible to increase the amount spent on wages and results in more hiring.
That’s what two recent reports indicate.
Washington has the highest state minimum wage in the country at $9.32 an hour and average job growth 60% above the national average over the last decade.
That’s $9.32 an hour for both regular and tipped employees. Idaho’s minimum wage is $7.25 for most, but only $3.35 for tipped workers. Yet, there’s a McDonald’s twenty feet from Idaho’s border. An upscale restaurant that failed to get an exemption from Washington’s minimum wage made a big show of spurning Spokane—and built there two years later.
A study of counties along the Idaho-Washington border found that job growth was as high or higher on the Washington side.
But many suspected Washington was a special case.
Until San Jose released its statistics.
San Jose adopted a $10 minimum wage, about a $2 raise, in March 2013. By December, unemployment had dropped from 7.6 percent to 5.8 percent.
The number of businesses in the city grew from 75,000 to 84,000 in spite of the fact that one locating just a few miles away could pay workers $2 an hour less.
Unemployment decreased. The number of businesses grew. About $100 million was added to the economy.
Now political leaders all over California—Mountain View, Sunnyvale, Berkeley, Davis, Richmond, and others—are considering raising their city’s minimum wages. San Francisco already has, as have Albuquerque and Santa Fe in New Mexico and Federal Way in Washington.
Connecticut has just passed a bill that will raise its minimum wage to $10.10 an hour by 2017.
Unfortunately, Idaho’s leaders prefer to stick with simple math. They don’t understand increasing demand as an economic tooll.
Their answer to an economic slowdown–cut wages.
During the recession, Idaho made some of the deepest payroll cuts in the country. When a little money was first available, it went to tax decreases. We now have one of the lowest combined tax rates of any state.
And the second highest percent of workers earning minimum wage. (Tennessee just knocked us out of first place.)
We’ve succeeded in attracting cheap businesses that can survive only because tax dollars subsidize their workers with food stamps, Medicaid, free school lunches, etc.
Idahoans should consider a higher minimum wage. Montana’s minimum wage for both hourly and tipped employees is $7.80; Nevada’s, $8.25; and Oregon’s $9.10.
Those laws didn’t just drop from the sky. Workers agitated for change. They backed politicians that believed in a living wage, or they passed initiatives. They actually regarded a living wage as important to families and communities.
Idaho’s current initiative to raise the minimum wage will likely die April 15 for lack of signatures. (See www.raiseidaho.com.)
We could start a new initiative. We could work for legislative candidates committed to a higher minimum wage.
Or we could just cross our fingers and hope.