(Editor's note: This has been updated to include Conway's analysis on the minimum wage that he presented in his March 2014 issue of The Puget Sound Economic Forecaster.)
For hours on Wednesday, people spoke up both for and against the proposal to raise Seattle’s minimum wage to $15 per hour. At 60 percent higher than the state’s current minimum wage, it’s an eye-popping number.
But well-known regional economist Dick Conway says the figure is not so crazy.
Conway says when he first heard the idea of lifting Seattle’s minimum wage to $15, he was skeptical.
“I kind of shook my head; I thought that seems a little on the high side. But when I put my pencil to it, it’s really not that outrageous,” he said.
First he thought back to the start of his own working career in a furniture factory. It was 1963, and he was 18 years old. He earned the minimum wage, $1.25 per hour.
“Back then, $1.25 could buy you quite a bit of stuff,” Conway said.
Adjusting for inflation, that $1.25 is about the same as Washington state’s current minimum wage, the highest in the country. But Conway says it’s not enough. You’ve got Seattle’s high cost of living. And you’ve got a regressive tax system that disproportionately hits low-wage workers.
Plus he says you should boost the minimum wage to account for gains in productivity. That’s the additional output that workers have helped create. So what did he get when he put his pencil to paper?
“You end up with a minimum wage of about $16.82,” said Conway.
He calculated that figure using 1963 as his base year, but later also calculated it using 1981 as the base year and came up with a minimum wage of $13.48. That's because hourly compensation relative to inflation grew at a fast pace from 1963 until 1981. He presented that analysis in his March 2014 issue of The Puget Sound Economic Forecaster.
But that doesn’t mean Conway thinks it should be changed overnight; he says a sudden switch would prove risky for businesses, especially if neighboring areas don’t raise their minimum wage.
But Conway says really it comes down to fairness. Since 2000, corporate profits have jumped and wages haven’t.
“We’ve developed a huge surplus of underutilized labor, which has tended to keep wages down, so we’ve not seen a lot of growth in employee compensation but at the same time, we’ve seen tremendous growth in corporate profits,” he said.
Conway says there would probably be some jobs lost if the minimum wage goes up to $15. But mostly he thinks businesses would raise prices to offset the higher costs. And he says they’d probably slow their hiring and ask existing workers to do more. Overall, he says our economy could weather the change.
