An initiative approved by voters in Washington state in 1998 is increasingly becoming a concern for growers.
Initiative 688 indexes the state’s minimum wage to urban-based cost- of-living increases, which automatically boost wages every year. Currently at $7.01 per hour, one of the highest rates in the nation, the rate will rise to $7.30 next year and could conceivably jump $1 every three years, according to Jim Jesernig, a consultant with Jesernig & Coyne, former Washington state legislator and previously head of the Washington Department of Agriculture.
The initiative passed overwhelmingly by two-thirds of voters, at a time of a booming economy with stock options, Internet startups and the state enjoying a huge surplus. Even as support swelled for the initiative, business owners and agriculture leaders warned about repercussions. They warned against increased poverty and higher unemployment due to lost jobs. Washington’s unemployment rate is now one of the highest in the nation at 7%, which is in part due to the minimum wage law, many agriculture industry representatives and business leaders believe.
“There was no organized opposition to it. It’s always tough to fight these sorts of issues without looking like you’re opposed to high wages,” said Jim Hazen, executive director of the Washington State Horticultural Association (WSHA), which represents 3,000 growers and shippers in the state. The initiative was supported by the state’s labor unions.
“It’s a huge concern if we can’t do something with the escalator clause. This runaway minimum wage is going to put people out of work,” said Jesernig. “Growers want to hire folks, but they will not be able to afford it,” he said.
“It really boils down to if something seems too good to be true, it is. The escalator passed when there was a lot of jobs. The economy was hot. It has caused a lot of unemployment for people who can’t now get jobs,” Jesernig said.
“It’s going to put us at a great disadvantage over time. I typically pay better than minimum wage. It’s going to be more and more of a problem as wages escalates,” said Warren Morgan, immediate past president of WSHA and owner of Double Diamond Fruit in Quincy, Wash.
Morgan noted that as the minimum wage is not capped, Washington state will be at a disadvantage with other states with less labor costs and other countries with considerably less costs. Neighboring Idaho has a minimum wage at the federal level of $5.15 per hour.
“The CPI (consumer price index) is probably not a very good indicator. Even with a weak economy you can still have prices go up – prices aren’t necessarily stagnant or decreasing,” said Hazen. “You don’t want to build in wage increases when the economy is weak. These built-in wage increases have no connections to economic reality,” he said.
Hazen said that an exemption for agriculture to the initiative was discussed but was not supported by the agriculture industry. He said exemptions “become a target for elimination the next year,” and it’s tough to keep an exemption that no one else has. The state of Alaska does allow an exemption to its minimum wage law for natural resources, including agriculture.
The unintended consequences, with Washington state with one of the highest unemployment rates in the country, spurred a coalition to action. The Job Creation Retention Coalition includes WSHA, the Washington Potato and Onion Association and the Washington Grower League.
The coalition sought to tie raises in the minimum wage to periods of time when the unemployment rate is below the national average. That bill passed the Senate but was not introduced in the House, effectively killing the bill until this fall.
“We lobbied for the unemployment trigger,” said Morgan. He said it was defeated by the Washington state’s House of Representatives, which is controlled by Democrats while Washington’s Governor Gary Locke is also a Democrat.
“There’s a general anti-business climate that exists in the state of Washington,” said Morgan. He said the state is really two states, with the west side very liberal and urban and the east side rural and conservative. Hazen and Morgan both noted that Washington state also has very generous unemployment compensation and workers’ compensation.
Jesernig said the coalition has been working to build editorial support for the “full employment trigger.”
This full employment trigger makes sense because it’s a link to economic health and to the capacity of employers to absorb additional costs of doing business, according to a fact sheet distributed by the coalition. Newspapers such as the Seattle Times and Yakima Herald are in support of the initiative, Jesernig said.
Morgan said the long-term impact of the minimum wage bill will be less overall employment in agriculture. “We’ll make every effort to replace human beings with machines,” said Morgan. He said in the field and in packing plants “machines will continue to replace people which will lead to more unemployment.”
Hazen agrees that growers will try to do more with fewer people. He said that agriculture will support more research on mechanized processes.
A study by Richard Vedder and Lowell Gallaway from Ohio University looked at the economic impact of Washington’s minimum wage law. They concluded that the minimum wage initiative in Washington is a quintessential example of the “law of unintended consequences.”
“Agriculture, competing in highly competitive markets where farmers have no control over price, probably suffered not only from job loss, but from profit squeeze that the minimum wage imposed, as evidenced by a noticeable drop in the number of farm proprietors (unlike in earlier periods, where the number had grown),” the authors concluded in their report.
Vedder and Gallaway wrote that the Washington minimum wage has failed in its primary objective to alleviate poverty. They said the law has cruelly and capriciously brought about job and income loss to workers and small entrepreneurs.
Many believe that that there is more support out there to change the minimum wage law as Seattle’s economy, which dominates the state, is not what it used to be. “In 1998 before the tech bubble went bust, a lot of people in Seattle and the King County area all thought that the good times would keep on rolling,” said Hazen.
Hazen said that this “wage creep” in Washington state makes it hard for agriculture to compete as retail stores such as Wal Mart and Target pay the higher minimum wage, agriculture is pressured to pay more to attract workers.
Despite the challenges, Hazen said growers are extremely creative, optimistic and competitive.
Last year a similar initiative was narrowly passed in Oregon. This Measure 25 raised the minimum wage to $6.95 in 2003. The wage is increased each January based on a CPI in the Portland area.
As growers in Oregon are also concerned, the Oregon Farm Bureau helped introduce a bill, House Bill 2624, which sought to remove the annual indexing until the economy stabilizes and the unemployment rate declines. Oregon also has one of the highest unemployment rates in the country, at 8% in mid-June.
The bill passed the House in April and is anybody’s guess as to when or if it will be voted on in Oregon’s evenly divided Senate, according to Gary Claus, communications director for the Oregon Farm Bureau.
Claus said Oregon’s Governor Ted Kulongoski wants to give the minimum wage bill a few years to study its impact and is threatening to veto the bill if it passes. “It’s in committee with no hearing scheduled – no action period. It’s on life support right now,” Claus said on June 11.
The Oregon Farm Bureau continues to work on the issue and is trying to find another kind of indexing instead of the urban CPI that would be acceptable to legislators, according to Claus.
