Washington’s New Minimum Wage Rate Will Cause Continued Job Loss Among Vulnerable Groups
Legislators Past Effort to Index the Minimum Wage Causing Extreme Job Loss in Bad Economy
Publication Date: December 2008
Topics: Minimum Wage
WASHINGTON – As Washington approaches yet another increase in the minimum wage rate on January 1st, the Employment Policies Institute released new data showing that last year’s hike caused increased job loss in the state, particularly among vulnerable groups. The 2009 hike to $8.55 marks the twelfth straight year the wage has increased, which is a 66% hike over that time frame.
The negative effects of this ever-rising wage can be seen in Washington’s employment data. Teen unemployment, an indicator for the least skilled and most vulnerable, has grown 123% from last year, 106 percentage points higher than states which don’t index their minimum wage.
According to research from the University of California at Irvine, minimum wage hikes unambiguously reduce employment of those with the fewest skills. These negative effects are concentrated on the most vulnerable employees, particularly young minorities and high school dropouts. For every 10 percent increase in the minimum wage, estimates are that employment falls 8.5 percent for vulnerable groups.
The job loss is a result of the burden the consistently increasing wage puts on businesses. For example: Since 2006, Washington’s minimum wage will have increased by 92 cents. For a business with 20 entry-level employees, that increases costs over $35,000 per year. Businesses with small profit margins would need to sell hundreds of thousands of dollars in additional goods to recoup those increased costs.
“Decades of economic research by leading economists at major universities is consistent with what we’re seeing in Washington: increased job loss follows mandated wage hikes, particularly among the least skilled and least educated workers,” said Kristen Lopez Eastlick, senior economic analyst for the Employment Policies Institute. “It doesn’t take an economic expert to see the pitfalls with automatic wage hikes. If government is mandating businesses increase their labor costs regardless of skill levels or productivity, the result is going to be lost jobs – especially at a time when small businesses are struggling in a weak economy.”