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Dems Push $12 Minimum Wage in the House — an Issue for 2014 Elections?

Jessyn FarrellDemocrats in the state House are signing on en masse to a bill that would increase the state minimum wage, already the highest such wage standard in the country, to $12 an hour by 2017. Even as the measure makes its debut it has a deathly pallor.

Opposition in the Senate seems likely to write a quick end to the bill, if it gets that far. And there is at least one telling indication that it may not. For an idea that has pushed into the spotlight by a national campaign from labor and activist organizations, and buoyed by a first-of-its-kind vote in the city of SeaTac last year for a $15 minimum wage, the sponsorship list is a bit weak. It carries only 32 sponsors — 18 short of the number required for passage in the House. Nearly all backers come from safe Democratic districts in the urban Puget Sound area.

But this is a time when passage may not the point. Advocates for the measure say they want to make a statement, always a popular thing in an election year. Increasing the minimum wage would reduce poverty, they insist, and reduce the gap between rich and poor. Naturally it is a point hotly disputed by the state’s business community, which would wind up having to pay for it. Resigned to a debate that seems inevitable this year, they are looking forward to the revival of one of the oldest and hoariest debates at the statehouse, and one made all the more ironic by the fact that Washington’s minimum wage of $9.32 an hour already far exceeds every other state in the land.

At a news conference Thursday, sponsor Jessyn Farrell, D-Seattle, kicked off the argument with a progressive theme: “Not since 1929 have we seen such extremes between what our top earners earn and what our lowest wage earners earn — not since my grandmother’s generation. So we are here introducing this bill to really promote the idea that a day’s work should produce a living wage. We know that if you work full-time at minimum wage in Washington state, you’re still at the federal poverty level. That means you qualify for food stamps and other assistance. The goal here is that people should be able to pay their rent, pay for child care and pay for food without government assistance.”

Janea Holmquist NewbrySo begins an argument that may approach the heat of the Legislature’s traditional partisan squabbles over guns and abortion. Even if Democrats fall short in their vote count on the House floor, it doesn’t mean there won’t be a fight — as was demonstrated last year in their on-the-floor meltdown over gun-control legislation. And if the bill does make it out of the House, there’s going to be a twist. Rather than killing it quietly, Senate Commerce and Labor Chair Janea Holmquist Newbry, R-Moses Lake, promises to give it a full hearing — if only to demonstrate the folly of the idea. A minimum wage increase does nothing to relieve poverty, she argues, and may actually increase it. “I think it would have a devastating impact and actually hurt those it is trying to help.”

Not Exactly a Surprise

Gov. Jay Inslee addresses a joint session of the House and Senate Tuesday as he delivers his State of the State address.

During his State of the State address, Gov. Jay Inslee touts a $1.50 to $2.50 increase in the minimum wage — a few cents shy of the proposal that has emerged in the House.

The most striking thing? Washington is no shirker when it comes to the minimum wage. Oregon’s wage ranks second at $9.10, and most states go no further than the federal minimum of $7.25 an hour. The reason for Washington’s high rate is an initiative that guarantees annual increases. Sponsored by the Washington State Labor Council in 1998, I-688 indexes the minimum wage to the fastest-rising federal measure of inflation, the consumer price index for urban wage earners and clerical workers. It essentially means that the cost of living in the Puget Sound area drives wages statewide.

House Bill 1276 would temporarily suspend the annual increases and leapfrog ahead, raising the minimum wage in three phases, to $10 in 2015, $11 in 2016 and $12 in 2017. Though the state Department of Employment Security estimates that only 3 percent of the state’s workforce earns the minimum wage — the equivalent of 67,000 full-time workers — the effect would be far greater. A House Democratic Caucus briefing paper notes that a half-million Washington workers earn $12 or less. And its effect would extend even beyond that level, because many businesses use the minimum wage as a basis for step increases based on experience.

It’s not as if any of this was a surprise. Gov. Jay Inslee called for an increase of $1.50 to $2.50 during his State of the State address. The state Labor Council, meanwhile has been calling for $12 or more. But it is more than a Washington-state effort.

In the last year, labor organizations have elevated the minimum wage to a major issue; in Congress the AFL-CIO is pushing an increase in the federal minimum wage to $10.10 an hour. And some organizations, like the Service Employees International Union, have been arguing for a $15 figure — essentially guaranteeing an income of roughly $30,000 a year for workers who are employed full-time. Last year SEIU provided backing for the SeaTac campaign; now the effort has moved on to the state’s big enchilada, the city of Seattle.

Patrick ConnorPatrick Connor, director of the Washington chapter of the National Federation of Independent Business, notes that the national small-business organization finds itself battling similar minimum-wage proposals in legislatures across the country. “I had kind of been hoping that given our lofty height on the minimum wage, Washington might be able to avoid some of this,” Connor said. “It just goes to show that when it comes to labor unions and some lawmakers who are enamored of spending other people’s money, enough is never enough.”

Somebody Has to Pay

The problem with a minimum-wage hike is that the money has to come from somewhere, Connor says — meaning a business’ bottom line. “Just because the calendar year changes doesn’t mean that small business suddenly have an infusion of more money to pay wage increases,” he said. “So while our minimum wage goes up each year, the dollars available for small businesses to make that salary increase happen don’t magically appear. They have got to make cuts in other places, raise prices or somehow find a way to sell more of the goods and services they provide to customers. So whenever prices for labor go up, that means something else has got to be squeezed.

“That means delaying pay raises for other workers who are earning above the minimum wage. It means having employees share more of the cost for benefits. It means delaying or simply not being able to expand the business, purchase new equipment and a number of things that businesses might need in order to grow and expand and create that next job. Our biggest concern is that by raising the minimum wage, you might give a few workers a small increase, but you are going to prevent other workers from being able to get a job. And the higher the minimum wage goes, the less likely employers are to hire younger workers, those without any experience, and it denies teen workers the opportunity to get that first job they need to be successful later in their career.”

Tees Up Election Issue

The current teen unemployment rate in Washington seems to support Connor’s argument. Washington currently has the 6th highest rate of teen unemployment in the nation - 30 percent versus the national average of 22.9 percent, for youths age 16 to 19. Among 16-to-24-year-olds, Washington’s rate is 18 percent versus the national average of 16.3 percent.

The thing you have to remember is that a high minimum wage increase would make it more expensive to hire entry-level workers, says Kris Tefft of the Association of Washington Business. And therefore a “fairly durable law of economics” comes into play — the more expensive something is, the lower the demand. He says the fact that the bill is being sponsored primarily by lawmakers from the urban Puget Sound area, from Olympia to Everett, ought to tell you something about the politics of the argument.

“I have to assume that not every member of the House or Senate Democratic Caucus is going to be in favor of this approach, particularly those members who are representing rural areas and areas where unemployment has been a real challenge through the recession,” he said. “It would surprise me if the bill passed the House of Representatives this year. But I really don’t know that that is its primary objective. The proponents, including the governor and the labor unions, are clearly teeing up an issue that is not going to go away. It will be with us past the session and into the election season.” So an issue for the ballot box, one way or another.

As always, the issue has a partisan tinge: Every sponsor in the House is a Democrat. Farrell told reporters the reason the bill was dropped with only 32 sponsors was that its supporters wanted to move quickly. “There is clearly an upswell of support in the House Democratic Caucus for this, so we wanted to get the bill out,” she said. And she said supporters will be working hard to find the missing 18.

Meanwhile you don’t find a single Republican aboard. But if the bill makes it all the way across the Rotunda, Republicans in the Senate aren’t going to let it die quietly. Holmquist Newbry says she wants to give the bill the full treatment, bringing in testimony from economists and other expert witnesses about the impact a stiff wage mandate would have on job creation. “Their proposal will not create one additional job, and it is going to do nothing to lift people out of poverty,” she said.

Think of it this way, she said: If the world really worked that way, Washington’s highest-in-the-nation minimum wage ought to give the state the lowest poverty rate. “That is just not true. Our state’s poverty rate has increased over the years, even in the years before the great recession, despite the state’s minimum wage increases every year.”

And when you consider a recent CNBC ranking that indicated Washington has the fifth-highest cost of doing business, you can see it as another measure that discourages employers from hiring, she argues. The biggest driver of poverty, she said, is not a low minimum wage, but rather not having a job at all.

Room for a Deal?

It is an age-old argument at the statehouse. Until the Washington State Labor Council took the matter out of the Legislature’s hands by sponsoring that 1998 initiative, the minimum wage debate was a feature of nearly every session. Since then activity has been muted; while there have always been skeptics, there has never been sufficient support to change the law. Indeed, when Republican Dino Rossi endorsed a lower “training wage” for new hires during the 2008 gubernatorial election he sank five points in the polls. But that idea and others continue to percolate. This year state Sen. Jon Braun, R-Centralia, has introduced a bill that would preempt local efforts to increase the minimum wage — a measure that would block the SeaTac initiative and stop the Seattle effort in its tracks. But that measure is expected to encounter strong opposition in the House.

Under ordinary circumstances you might sense an opportunity for compromise. But don’t hold your breath here. Farrell told reporters that advocates of the measure have a point to make. “It is really important to me, and I think to the rest of the people who signed on to the bill, that this is a floor and communities can do something else,” she said.

And on the Senate’s side of the divide, Holmquist Newbry said, “I don’t see what you could marry this with or include in it to move it forward, because I think it would have a devastating impact, and it would hurt those we are trying to help. But I’ll keep my mind open.”

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