Vestal: For some, a higher wage makes good business sense
Wed., Dec. 8, 2010
Floyd Brown runs the kind of restaurant that’s supposed to be punished by the minimum wage.
But in 30 years owning the Thrifty Scotsman, a Spokane Valley hamburger institution, Brown’s taken the opposite view of most people in his business.
“I don’t disagree with it going up,” he said about Washington’s minimum wage, which is set to rise to $8.67 an hour in January. “We try to keep everybody on full time and give them a good wage so we don’t have turnover.”
And business has been good and steady – the burgers and tater tots are flying – even with some pain from the recession, he says.
Brown’s views on the minimum wage have some good company. A trio of researchers has just published a nationwide study comparing all neighboring counties with different minimum wages – like Spokane and Kootenai – over a 16-year period. It concludes that raising the minimum wage does not drive down employment. That’s good news for us here in Washington, where our minimum is the national maximum, and it runs counter to the conventional business-world wisdom – which persists at all times, good and bad, no matter what – that raising the minimum wage costs jobs.
Even supporters of the wage have sometimes acknowledged the possibility of this “disemployment effect.” But the new study, which examines the minimum wage from 1990 to 2006, concludes that the disemployment effect is zero-ish.
Not small. Not minor. Just not there.
“The paper presents a fairly irrefutable case that state minimum wage laws do raise earnings in low wage jobs but do not reduce employment to any meaningful degree,” said David Autor, professor of economics at MIT and editor of the Journal of Economic Perspectives, in a news release on the study.
Minimum-wage borderlands like ours are often hotbeds of conventional wisdom that turns out to be less than wise. The business and food-service lobbies, in particular, have argued against increases in the minimum wage, claiming it’s a budget-killer for small businesses and, crucially, that it reduces the number of jobs overall.
The minimum wage is bad for the poor, in other words.
The evidence is mounting that it’s just not so.
T. William Lester, a professor at the University of North Carolina and one of the paper’s co-authors, said that the researchers compared all neighboring counties in the nation where there was a difference in the wage between 1990 and 2006. They wanted to see whether increasing the minimum wage did indeed lead to a drop in employment in the restaurant industry.
“What we’re finding is there wasn’t any effect,” Lester said.
There is plenty of debate among economists about this issue. Tuesday, the Employment Policies Institute, which works hard to debunk the minimum wage, released a study showing that increasing the minimum wage has no positive effect on the gross domestic product, and a slight negative effect in “lower-skilled” industries. And according to surveys, most economists still argue that the minimum wage either hurts employment or has little effect.
But the last decade has seen a growing number who disagree, as studies mount showing that the pernicious effects of the minimum wage are often imaginary or negligible.
Of course, neither an argument about GDP nor the disemployment effect speak to a fundamental question about the minimum wage: fairness. Is it OK to pay people whatever is necessary – however little will make the economy pop? According to federal statistics, about 70 percent of minimum-wage earners are 20 or older, and hundreds of thousands of people nationwide rely on it to survive.
It’s not a large group in the big picture, but it is – surprise, surprise – a growing one.
In 2009, minimum-wage jobs accounted for 3.1 percent of all employment in Washington, the most since the state started tracking it 20 years ago. It’s higher here in our half of the state, where the minimum wage accounts for nearly 5 percent of all jobs, well above the 2.7 percent west of the Cascades.
It’s not because we have so many more teenagers here.
It’s a strange kind of economy where the price of everything goes up each year – electricity, beef, potatoes, water and nametags – but the value of labor is expected to stay the same year after year, all for the sake of business owners.
Brown ran a series of chain franchises before opening his own place 30 years ago. At the chain, the employment style was part-timers paid right at the minimum wage. Turnover was high. Job skills were low.
When he opened the Scotsman, he took another tack. He starts employees at the minimum wage, and moves them up quickly. He has 12 full-time employees instead of 24 or more part-timers at a typical chain restaurant, he said, and they’ve been around for years – several for more than a decade.
He acknowledges he’s an anomaly. The state’s business lobby has resisted minimum wage increases at every turn, and is now suing to block the 12-cent increase set for January.
“I’m not the norm,” he said. “I know when I go to food shows, people are just complaining like mad about it.”
But not this thrifty guy. The new study shows what he already knows. Remember it the next time you’re told that the sky, once again, is falling.
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