NCPA - National Center for Policy Analysis

Effects Of Washington State's Minimum Wage Increase

May 1, 1998

On February 12, 1998, President Clinton proposed raising the federal minimum wage in two annual 50-cent increments from $5.15 to $5.65 and then to $6.15 per hour. In support of this proposal, the President claims that minimum wage increases of such magnitudes do not cost jobs, and that the benefits of these increases accrue primarily to poor adults trying to raise families.

But research on proposed state minimum wages indicates raising the minimum wage would have employment effects. Specifically, economists found a proposed hike in the Washington state minimum wage from $5.15 to $6.50 by the year 2000 would cause more than 7,431 workers to lose job opportunities.

  • As a consequence, Washington workers would lose approximately $64 million in annual income.
  • At the same time, employers would see their labor costs rise by $204 million per year to provide minimum-wage workers an increase in average family income of only 2.8 percent.
  • Fewer than one in seven of workers who would be affected by the minimum wage increase are the sole breadwinners in a family with children.
  • The annual family income of affected workers averages more than $30,000 and in some localities this average exceeds $45,000.

Furthermore, researchers say only one in six affected workers lives in a family with income of less than $10,000, and less than one dollar in five of the total income gains generated will go to workers living in families with incomes of less $10,000.

The $204 million in additional labor costs associated with the proposed Washington minimum wage increase will fall disproportionately on retail employers ($101 million) and service-sector employers ($57 million), and especially on employers in the Seattle-Tacoma area ($92 million).

Source: David A. MacPherson, "Effects of the Proposed 1999-2000 Washington Minimum," May 1998, Employment Policies Institute, 1775 Pennsylvania Avenue, N.W., Washington, D.C. 20006, (202) 463-7650.


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