Regional economist Dick Conway told KPLU that a $15 minimum wage is “really not that outrageous.” Conway has been on record before; he was the economist Gov. Inslee cited by name at AWB’s legislative day (about 41 minutes in).
As a benchmark for setting public policy affecting thousands of businesses and tens of thousands of employees, not being outrageous is the lowest hurdle you’d want to clear. And before you acted, you’d probably want to raise the bar a bit and ask whether it’s a good idea and what might be the downside.
In fairness to Conway, with whom we’ve worked in the past, he holds out some qualifiers.
…he says a sudden switch would prove risky for businesses, especially if neighboring areas don’t raise their minimum wage.
Risky for business and for employees.
Conway says there would probably be some jobs lost if the minimum wage goes up to $15.
Overall, he says our economy could weather the change.
No doubt, our economy could survive. It does concern me a bit, though when I read economists – and this is true of many who support boosting the minimum wage – dismiss the job losses as collateral damage. Sure, there are tradeoffs – some folks get a raise, some get a pink slip – but for those who don’t make the cut, the consequences are severe.
So let’s examine a few points Conway seems to overlook. He says that he worked for the minimum wage of $1.25 an hour in 1963 as an 18-year-old. Clearly, he moved on. It was a starter wage, not a living wage.
Adjusting for inflation, that $1.25 is about what Washington state’s current minimum wage, the highest in the country.
That’s true. It’s about $9.65 if you use the Consumer Price Index. The Congressional Budget Office uses the price index for personal consumption expenditures, finding it to be a more accurate indicator of inflation in labor markets (here, note 6, page 4; more discussion by St. Louis Fed, here). Using the PCE, the $1.25 wage in 1963 adjusts to $7.47 in 2014, about half the proposed $15 and nearly $2 below the current statewide minimum.
Conway further argues that the minimum wage ought to be increased as a matter of fairness, citing high levels of corporate profits. But few corporations employ many minimum wage workers. The targeting is poor. There’s nothing fair about hitting a bookstore with thin margins because someone else is enjoying high corporate profits.
Conway would also increase the wage to account for Seattle’s high cost of living and Washington’s “regressive tax system.” That’s not all.
Plus [Conway] says you should boost the minimum wage to account for gains in productivity. That’s the additional output that workers have helped create. So what did he get when he put his pencil to paper?
“You end up with a minimum wage of about $16.82,” said Conway.
We addressed the productivity issue in this post. Where workers have posted high productivity gains, wages have increased. Low-wage hospitality and retail workers have not seen the wage growth because their productivity has not grown substantially. I like the way Adam Ozimek reframes the issue.
Instead of asking why wage growth has been so slow for the lowest earning workers, …we should be asking why their productivity growth has been so slow.
Finally, back in 1963 there was no such thing as an earned income tax credit, which is much better aimed at providing wage support to the poor.
Not outrageous, maybe. Unwise, certainly.