Thursday, January 11, 2007

The Effects of Higher Minimum Wages

The New York Times ran a good story today on the way minimum wage law acts on the Idaho-Washington border where the highest minimum wage in the country meets the lowest. They pointed to the relationship between Post Falls and Liberty Lake. But the story was the same where I grew up in Moscow Idaho/Pullman Washington.
But instead of shriveling up, small-business owners in Washington say they have prospered far beyond their expectations. In fact, as a significant increase in the national minimum wage heads toward law, businesses here at the dividing line between two economies — a real-life laboratory for the debate — have found that raising prices to compensate for higher wages does not necessarily lead to losses in jobs and profits.

Idaho teenagers cross the state line to work in fast-food restaurants in Washington, where the minimum wage is 54 percent higher. That has forced businesses in Idaho to raise their wages to compete.

With a lowball minimum wage, Idaho businesses who pay minimum wage sacrifice more committed workers who cross the State line to Washington and is stuck with the bottom of the barrel labor at least in town near the border. One of my good friends in High School who commuted to Pullman to work every day made the comment once to me "why would anyone in this town want to work in Moscow, yes you pay a little more for gas to commute but its more than made up for by the difference in wage." Idaho businesses near the border, this article pointed out excellently are at a huge disadvantage if they fail to pay close to Washington's minimum wage to their employees.

No comments: