High Minimum Wage Washington Beats US in Economic Growth: Does this justify minimum wage?

Did you know that Washington State has the highest minimum wage rate in the nation ($9.32 an hour)? It is also a relatively healthy state economically-speaking according to this article from Bloomberg. As an aside, Washington has not one, but two, big-time entrepreneurs with New Mexico ties…two of the richest men in the world: Bill Gates and Jeff Bezos.

Does Washington State’s economic success mean that minimum wages aren’t harmful or that they are actually good? Of course not. It just means that other aspects of Washington’s policy/social climate are more attractive. Remember, minimum wages are one, small economic policy. And, while proponents of the free market may oppose them on principle, because they disproportionately impact low-income workers, by definition, the impact of minimum wages on the overall economy is relatively small.

What’s not small? How about the fact that Washington State has no personal income tax?

As Art Laffer and our upcoming speaker Stephen Moore noted in a paper done for RGF, having no personal income tax results in both greater economic prosperity and population growth. In other words, the positive impact of not taxing the productive activities of 60+ percent of the population that works (thus encouraging more of them to enter the work-force because they can keep more of their money) is far more important to a state’s economic growth than the tiny fraction of workers that make the minimum wage (or anywhere near it).

In other words, even though I remain 100% convinced that minimum wages are bad policy, I’d happily accept an increase in New Mexico’s minimum wage to $10 an hour or more in exchange for elimination of the personal income tax.

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11 Replies to “High Minimum Wage Washington Beats US in Economic Growth: Does this justify minimum wage?”

  1. According to the DOL, only about 5 percent of those paid by the hour are paid minimum wage. I predict that, if the minimum wage increases continue, many employers will just keep paying their employees their current wage, which will be in line with the increased minimum wage. So, the percentage of workers on minimum wage will increase. Proponents of minimum wage will then point to the increased percentage of wage earners earning minimum wage (and staying there longer) as evidence of growing rates of poverty. This will then be used to call for further minimum wage increases.

    As with a lot of government action, unintended consequences of policies are used to justify further action.

      1. Money doesn’t just accumulate unless you stick it under a mattress. You know any rich people who do that? They get rich by investing it. They build better products and make our economy more productive. Really has nothing to do with the minimum wage.

  2. The answer, in a word, is No. No, the higher minimum wage is not justified. No, we don’t need more highly paid unskilled workers. Although Paul touched on a reform of the Personal Income Tax, I think a change or elimination of the Gross Receipts Tax is in order that NM might reach it’s potential.

    1. To Dr Peabody,
      Whether you are a Ph.D. or an M.D., I would expect you to know the difference between “its” and “it’s.” Shame on you for not knowing. This state already has enough stupid people who can’t spell or write, but when you see that coming from someone with the title of “Doctor,” well, it is sad, very sad. Unfortunately, this country has an epidemic of people who are so stupid they do not know the difference. Do they not teach that in third grade anymore?

  3. The average hiring salary of recent college graduates in 2013 is very close to the real dollar salary of the same in 1973.

    There appear far fewer (percentage) making minimum wage today than 1973.

    Stuff to chew on

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