Minimum Wage Increase

Posted on January 05, 2011

On Jan. 1, Washington’s minimum wage will increase for the 10th time in 11 years. In a state where the teen unemployment rate is still averaging over 33 percent, it’s going to be even harder to find an entry level job.

Washington’s minimum wage is indexed to inflation, which means the cost to hire and train entry level employees, like teens, rises almost every year.
For labor-intensive businesses with low profit margins, like restaurants and grocery stores, even a seemingly small increase in labor costs can trigger unintended consequences.

As customers continue to demand low prices, employers respond by cutting staff hours or positions and — overtime pay — are forced to turn to more cost-effective alternatives, like automation and self-service.

The consequences for the teen job market are clear: New research from the United States Military Academy at West Point finds that each 10 percent increase in a state’s minimum wage decreases teen employment by 3.6 percent.

Michael Saltsman
Research Fellow
Employment Policies Institute
Washington, D.C.