CHIEFTAIN: Automatic increases in minimum wage can harm workers
Published 4:00 pm Tuesday, January 17, 2012
Increasing the minimum wage is a noble cause. Handing out an automatic pay raise reflects the goodwill many people have toward workers on the bottom rung of the economic ladder.
The result, however, may be less than noble. At best, it does little to help workers. At worst, it could hurt those it was meant to help.
Minimum-wage workers in Washington state this month received a 37-cent-an-hour raise to $9.04. In Oregon, the raise was 30 cents an hour, to $8.80, giving the two states the highest minimum wages in the nation.
Washington and Oregon have laws that automatically boost minimum wages each year based on the cost of living in Seattle and Portland.
Everyone wants to make sure workers are paid fairly. The question is not whether to raise the minimum wage, but how.
Do you take into account the status of the economy?
Do you base these increases on the rate of inflation in urban areas only or on all areas of the state?
Raising the minimum wage occasionally is a good idea. It only stands to reason that the government mandate a certain base level for the bottom of the pay scale.
However, those adjustments need to take into account other factors such as the economy, unemployment rate and local differences in the cost of living.
For example, the November unemployment rate in the Portland area was 8.7 percent, but some rural areas of Oregon such as Grant, Harney and Crook counties had unemployment rates ranging from 13 to 15.5 percent. A higher minimum wage won’t help those folks at all. If anything, employers will think twice before adding workers or, worse yet, lay off employees or cut their hours to control expenses.
At the same time, the cost of living in Portland or Seattle is significantly higher than most rural areas. The cost of housing, transportation, consumables and health care are all above the national average in those two cities and less than the national average in rural areas of Washington and Oregon, according to the Economic Research Institute.
The state of the economy also should be considered.
During this recession, every business, large and small, is watching every dollar. When the government comes along and increases the minimum wage by nearly 4 percent – and payroll taxes along with it – that money does not magically materialize. It has to come from the bottom line, layoffs or reduced hours.
Many workers likely will hear something like this: “The good news is you got a raise. The bad news is we’ve cut your hours.”
We suggest that the state legislatures in Washington and Oregon back up and rethink how their minimum wages are adjusted. Instead of an automatic, one-size-fits-all adjustment, the states’ legislatures should decide when – and how much – to increase the minimum wage.