Last month, following another increase in Washington's minimum wage, business groups reported to the state's House Labor Committee that employment, training opportunities and profits have suffered since the increase.
In correlation with their statements, the committee is considering five proposals to cut the wage or allow a “training wage” to be implemented.
At the beginning of 2012, the state's minimum wage increased from $8.67 to $9.04. The federal minimum wage is currently $7.25. The reason for the increase is the 1998 voter-approved initiative that required minimum wage cost of living adjustments based on the federal Consumer Price Index for Urban Wage Earners and Clerical Workers.
The 37-cent increase reflects a 4.258 percent increase in the CPI since August 2010, according to a Washington State Department of Labor and Industries press release.
The required increases over the last several years has created a tough situation for businesses, one where for many the minimum wage has turned into a livable wage, which was not the original intention.
Companies that employ minimum wage workers are typically in the service industry, where workers perform difficult jobs that many of us don't have a temperament for.
But, those companies often can't pass along the price increase to their customers due to fear of losing them, thereby increasing their costs by a wide margin. It could put them out of business, as they are not able to make a profit. They wouldn't see a return on the costs, which would only worsen the problem.
Businesses are also hesitant to cut personnel, even though payroll makes up the largest part of expenses, but layoffs create problems of their own. If someone is cut, there are fewer people performing the same amount of work. Either that, or the services provided by the company decreases. The company then faces being left with a product that's less desirable, and loses customers and profit.
At that point, a company's name and brand has likely been hurt to the point where a full recovery is near impossible.
Back when the initiative was approved, the state's minimum wage was at the federal level. Unfortunately, the initiative didn't take into account a CPI that would continue to increase at such a rapid pace. Now, many companies face a heavy burden that, if not solved soon, could cripple the economy in the state.
One proposal currently on the table would establish a training wage for younger employees. The state currently has an alternative minimum wage for 14- and 15-year-old workers, who can receive 85 percent of the adult minimum wage, which comes to $7.65 this year.
The training wage, or a wage for beginning workers, is a strong idea, especially for people who are getting their first exposure to the workplace, or who are still in school. At the same time, however, prices are going up. It would make saving for college, or making purchases at other businesses, more difficult.
The Legislature should also take a second look at the CPI.
Currently, the CPI rate applies across the state. But, each city and region has its own economic situation, growth rates and employment statistics. Applying one CPI rating – Seattle's – to different parts of the state, each with their own different elements and costs of living, is asking for trouble. While it will potentially create another level of bureaucracy, finding the CPI for each region and applying it to that rate would be more effective.
Allowing a lower wage for beginner workers will free up some money for those who have worked in the industry for a while. Younger workers receive skills and experience on the job, while earning some money, but will ultimately move on to a different place of employment.
Reforming the CPI and creating a training wage all factor in to the tiered approach that can help balance the situation for the service industry when a new minimum wage takes effect.
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