Raise Is In The Bag Minimum Wage Increase Puts A Little Extra Cash In Many Pockets, But At What Price?

When Richard Dodge retired from his job as a baggage handler at Spokane International Airport, he thought he was going to be able to relax. But six months ago, he rejoined the work force.

Dodge, 72, began bagging groceries at Rosauers to supplement his Social Security income.

“I was retired for seven years, then inflation took that (relaxation) away,” Dodge said as he stocked plastic bags at a checkstand at Rosauers’ store on 14th Avenue. “So, I had to come back to work.”

While Dodge works 20 hours each week, his wife, Melody, is going to nursing school to start a new career at age 55. Once she begins working, Dodge hopes to fully retire again.

Meanwhile, there’s a bright spot to Dodge’s minimum wage job. Effective Jan. 1, he got an 80-cents-an-hour raise when Washington state’s minimum wage rose to $6.50 an hour.

“It makes quite a difference, because I’m here to pay the bills,” he said with a grin. “That (raise) may be a little extra to play with.”

Dodge, along with other workers in minimum and low-wage jobs, can thank Washington voters, who in 1998 approved an initiative that increased the state minimum wage from $4.90 an hour to $5.70 an hour a year ago and to $6.50 this year. But the workers’ gain presents challenges for employers, who must absorb the costs or find ways to pass along the pay increases to customers.

Washington and Oregon now have the highest base wage in the country. Idaho’s minimum wage matches the federal minimum of $5.15 an hour.

Washington also is the first state in the nation to match future cost of living increases with minimum wage raises. In 2001 and beyond, the minimum wage will increase each year with the cost of living, based on the Consumer Price Index (CPI).

Economic forecasters predict a CPI increase of up to 2.5 percent in 2001. That would mean a $6.66 an hour minimum wage next year.

Those who opposed the minimum wage increases back in 1998, such as restaurant owner David Hooke, who owns Spokane’s Senor Froggy’s restaurants, would warn minimum wage earners like Dodge that their new pay increases might not go as far as they would like. Wage hikes cause price hikes, said Hooke, who recently headed the Washington Restaurant Association.

Last year, when the minimum wage increased to $5.70 an hour, Hooke said he had to raise his prices by 3 percent. Some customers, particularly regulars familiar with Senor Froggy’s 1998 prices, weren’t very happy with the change.

“When I hit the total button,” he said, “I could see people’s eyes go back up to the reader board because they thought there was some mistake.” Hooke said he may have to raise prices this year, too. But Dodge said he isn’t worried about prices going up just because of the minimum wage increase. “They go up anyway,” he said, noting the decreased buying power of his Social Security checks over the past seven years. “This is awesome.”

Danielle Bourne, who works as a cashier at Jones Pharmacy on Spokane’s South Hill, makes more than the minimum wage but is getting a raise anyway, since the new minimum wage is higher than her pay rate last year. She, too, isn’t worried about rising prices.

“The prices go up anyway,” she said. “So you end on top, at least a little bit.”

It’s not clear exactly how many jobs pay just the minimum wage, but in 1997, prior to the vote on the increase, the state Employment Security Department said about 150,000 people statewide - 6 percent of the work force - earned less than $6 an hour.

Gary Kamimura, an economic analyst for the department, said he doesn’t have numbers specific to Spokane County, but if the statewide trend held true, the wages of about 11,000 workers in Spokane County would have been close to minimum wage here last year.

Some business owners predicted in 1998 that raising the minimum wage might put them out of business.

But Dick Heckroth, business retention and expansion director for the Spokane Area Chamber of Commerce, said he is not aware of any businesses that have had to close just because of the recent minimum wage increases.

Still, he said, “a lot of places will be adversely affected.”

One such place is the Spokane Parks and Recreation Department, where Director Ange Taylor said the city is cutting seasonal staff, many of whom make minimum wage for jobs like park and sports field maintenance.

Last year, the department lost 12 full-time equivalent positions. And, said Taylor, this year the Parks Department must cut 25 full-time equivalent positions, or about 60 seasonal workers.

“Minimum wage has really hit us big time,” he said, “because we employ 650 to 700 seasonals each year.”

At Spokane County, recreation director Randy Johnson said no job cuts are anticipated this year because of the wage increase, but hours of work will be closely monitored.

Job losses aren’t the norm across the state, said John Burbank, executive director of the Economic Policy Institute in Seattle. The Institute campaigned in favor of the minimum wage increase back in 1998.

“The unemployment rate continued to drop from 1998 to 1999,” said Burbank, “and that was with a minimum wage increase.”

In fact, Washington’s Employment Security Department reports that the state’s unemployment rate is at its lowest rate since 1966, and is 1 percent less than a year ago.

And, those who are working at the lower end of the wage scale are happy to be making more money.

Paula Young, a cashier at Jones Pharmacy, said she earned $6.25 an hour before the most recent minimum wage increase and is looking forward to her next check, which will include the raise she got because of the minimum wage hike.

“The higher the minimum wage goes,” said Young, “the easier it is for a single person to make ends meet.”

Young said she pays for what she buys with cash, and a wage increase means she can afford to buy more of the things she wants and needs.

Such increased spending, said Eastern Washington University economist Doug Orr, is often a direct result of raising the minimum wage. While employers may have to pay their employees more money, they also benefit from the increased spending of all minimum wage or low-wage workers.

“When you raise the wage of workers, they are going to buy more products,” said Orr. “Low-wage workers don’t tend to be living very well, so if they make more money they aren’t going to save it, they’re going to spend it. And they’re going to spend it locally.”

But not all companies get direct benefits from the increase. That’s the problem facing the Dana-Saad Molding Co., which manufactures plastic products for other businesses. Company President Mike Saad Jr. said his company employs 45 people, eight of whom make minimum wage.

“You can absorb some of it in the manufacturing process, but not all of it,” he said of the wage increase. “At some point the customer is going to have to pay for it.”

And if customers can purchase products or services from companies elsewhere that don’t pay their workers at least $6.50 an hour, it can be a problem.

Chase Copeland, the materials director at Tate Technology, a local manufacturer that assembles electronic components for other companies, said the minimum wage increase is causing his company to lose some of its competitive edge. While the company pays its employees more than minimum wage, it is still affected by the state’s recent increases.

“What ends up happening, of course,” said Copeland, “is that if you have a person who is a dollar above minimum and the minimum wage goes up 60 cents, that person is going to say, `You’ve got to give me more, too.’ ” Consequently, he said that Washington’s latest minimum wage increase could cost Tate Technology, which employs 80 people, about $130,000 this year.

Economists Orr and Burbank acknowledged that individual companies may suffer with the increased minimum wage, but they also maintain the overall economy hasn’t been hurt by it. Add to that the fact that low-wage workers are better off, and Burbank said that approving the minimum wage increase was a good move on the part of Washington voters.

“The economy continued to boom (in 1999),” said Burbank, “and this was the first year that low-wage workers were able to participate in that boom.”