In 1998, Washington voters approved an AFL-CIO initiative that
raised that state's minimum wage and tied it to changes in the
federal Consumer Price Index.
Here in Nevada, AFL-CIO representatives testifying before the
Legislature this spring cited the Washington law as a model
for what the State of Nevada should do—in order to “fight
poverty.”
Really? The fact is, the Washington law CREATED poverty—exactly
as opponents within the business community had warned!
(The
following information is excerpted from The Economic Impact
of Washington's Minimum Wage Law, by Richard Vedder and
Lowell Gallaway, of Ohio University.)
In 1998, the year prior to the beginning of the state’s higher
minimum wage, the poverty rate was 8.9 percent. In 2001, it
was 10.8 percent -- implying an increase of the actual number
of poor persons of substantially over 20 percent. By contrast,
nationally, the poverty rate fell by a percentage point, and
in the neighboring states of Idaho and Oregon the decline was
even greater.
If that sample period seems too small, compare 1997 and 1998, the
last two years prior to the implementation of the minimum wage
increase, with 2000 and 2001, after the law had taken effect.
The results are similar to those derived from the single year
data. Poverty rates fell elsewhere, but rose in Washington
during the period following the implementation of the higher
state minimum wage.
A detailed examination of changes in the two-year poverty rate
from 1997-98 to 2000-2001 reveals that the poverty rate
rose far more in Washington than in any other state in
the Union! Indeed, only six of the 50 states had rising
poverty rates during this period of general prosperity,
despite the mild 2001 recession.
It is at least conceivable that Washington’s rise in poverty might
have been a mere coincidence, unrelated to the introduction of
sharply higher minimum wages. "That possibility would be
strengthened," write scholars Vedder and Gallaway, " if the
period in question was one of economic stagnation and decline
in Washington." But that was not true: "Real per capita
personal income rose 9.65 percent from 1997 to 2001, which,
other things equal, should have led to some reduction in
poverty." Remarkably, the real income growth in Washington
exceeded the national average for the same period! "The
median real per capita income growth for the 50 states and the
District of Columbia was 7.96 percent, suggesting that
Washington’s real per head income growth was more than
one-fifth larger than the typical state. In most of the rest
of the U.S., poverty rates were falling as real income was
rising – but not in Washington."
The Richard Vedder-Lowell
Gallaway
study on Washington State's minimum wage law is of great
importance to the future of Nevada. You can read it yourself
by downloading it. Click: here.
(If you need the latest free version of Acrobat Reader, go to
http://www.adobe.com/support/downloads/main.html)
