Building an Economy that Works for Everyone

Faulty economics, poor business practices behind minimum wage lawsuit in Washington

A handful of corporate interests are trying to muddy the waters around Washington’s best-in-the-nation minimum wage. Instead they’re showing just how out of touch they are with basic economics and common business practices.

Washington’s minimum wage law is crystal clear – as were Washington voters, who overwhelmingly approved it with 66% of the vote:

“(t)he adjusted minimum wage rate shall be calculated to the nearest cent using the consumer price index for urban wage earners and clerical workers, CPI-W, or a successor index, for the twelve months prior to each September 1st as calculated by the United States department of labor.”

Inflation was 1.4% over the past twelve months, according to the CPI-W.  So to keep up with inflation and stay in accordance with the law, the minimum wage in set to increase by 12 cents/hour, to $8.67, starting January 1, 2011.

But a few business associations, representing low-wage industries like farms, restaurants, and retail outlets, have filed a lawsuit challenging the law. They argue – despite the statute’s unambiguous language – that because there was price deflation two years ago, low-wage workers in Washington shouldn’t get an increase to account for this year’s inflation.

Their decision to sue highlights how far outside the mainstream these low-wage employers really are. Costco, Trader Joe’s, and many other companies doing business in Washington have long realized that investing in their employees means you get better performance – and higher profits. Yet as Joan Blades recently wrote in her review of Jody Heymann’s book Profit at the Bottom of the Ladder:

“…despite the strong evidence we have that an employee who is paid fairly and treated respectfully will significantly outperform an employee who is underpaid and ordered around like a child, too many employers are unable to resist the apparent bargain of paying less per hour or buck the traditions of an authoritarian work culture. They tell themselves that standing at a cash register, working in an assembly line, or answering phones is so simple that anyone can do it — that workers doing these jobs can easily be replaced. And this shortsighted approach costs them. Simple math does not capture the human dynamics.”

It’s ironic that the Washington Restaurant Association is helping lead the charge against the minimum wage; of all people, they should know there is no such thing as a free lunch. Yet they continue to pursue a ‘beggar thy neighbor’ approach to doing business that ultimately undermines the economic security of the entire state, under the threadbare cover of worn-out claims about business competitiveness and employment.

A strong minimum wage doesn’t just put a few more dollars into workers’ pockets each month; it is also direct economic stimulus for our state at a time when we need it most. Few minimum wage workers can afford to save for retirement or take exotic vacations, so most pump their paychecks directly back into the local economy.

Hundreds of thousands of jobs are affected by the minimum wage. The most recent update from the state Employment Security Department (ESD) indicates that in the second quarter of 2009, the overall number of minimum wage jobs was at an all-time high of almost 67,000, exceeding the record set in 2000. Since workers within about $1.00 of minimum wage also experience raises when the minimum goes up, a decision to stop the cost-of-living adjustment will directly affect far more than that number.

We’ll keep you posted with more news as legal proceedings commence.

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