Spokane Journal of Business

Minimum-wage hike isn’t answer

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The governor and president have spoken quite a bit about income inequality within our state and nationwide. How do we broaden the middle class and increase wealth for all? 

Some in our state Legislature propose increasing the minimum wage. Many business owners disagree, and statistically-founded arguments indicate that job opportunities don’t increase when the minimum wage is higher.

Employers in Washington state still are struggling to stabilize and grow after the recession. Even with the oft-discussed economic recovery, our state still ranks 29th in the country with an unemployment rate of 6.6 percent. Ironically, Washington already has our country’s highest minimum wage at $9.32 an hour. 

Across the border in Idaho, the minimum wage is tied to the federal wage at $7.25 an hour. However, our Idaho neighbors have an unemployment rate of just 5.7 percent, ranked 15th lowest in the country. When labor costs are the most important issue in the mind of an employer, the decision to locate in Idaho becomes all too easy to make. Further increasing the minimum wage will only drive both current employers that can relocate and potential new employers elsewhere. 

To keep business competitive in Washington, and especially in the Spokane area, we need to hold on to those competitive advantages still available such as affordable electricity, availability of reasonably-priced land, tax incentives, no state income tax, and a skilled workforce. It would be a shame to lessen the benefit of those economic advantages we do possess, by outdoing ourselves as we increase what already is the highest minimum wage in the country to a new high. 

Statistics show an inverse relationship between minimum wage and unemployment level. Nineteen of the 25 states with the lowest unemployment rates require the federal minimum wage. Only 11 of those 25 states having the highest unemployment rates require the federal minimum wage. 

Only two states have a minimum wage over $9—Washington and Oregon. Oregon’s unemployment rate is worse than Washington’s, holding 34th place.

The Gini coefficient, used by the federal government, places a number on income equality in various regions. A coefficient of 0 means there is perfect income equality—everyone makes the same. A coefficient of 1 means one person may hold all of the wealth in the area. So if increasing the minimum wage does increase income equality, you would expect to see states with higher minimum wages also have low Gini coefficients. However, this also doesn’t prove to be true. 

In 2010, the U.S. Census Bureau measured the Gini coefficient in each state. The 10 states with the most income equality all mandate no more than the federal minimum wage. Thus, Gini statistics don’t support the hypothesis that a higher minimum wage will lead to greater income equality.

The government needs to move out of the way of entrepreneurs and job creators. Our state doesn’t need increased costs and more mandates; we simply need to provide stability.

The American dream can be alive and well, but only if government loosens the reins.

 

Rep. Jeff Holy, R-Spokane, represents
the 6th Legislative District and serves
as Assistant Minority Whip in the state
House of Representatives. 
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