Idaho

Bringing the Economy Home

Bottom Rung: Why One Idaho Border Business Chose Washington

Jessica Robinson / Northwest News Network

Tim Skubitz stands in front of his McDonalds in Newport, Washington. It's right across the street from Oldtown, Idaho.

The border between Washington and Idaho is like a petri dish for what the minimum wage does to the economy. That’s where two extremes meet. Idaho has the federal minimum wage: $7.25 an hour. Meanwhile, Washington’s is nearly $2 more.

At $9.19, Washington has the highest minimum wage in the nation. You might expect that wage gap to send Washington border businesses fleeing over to Idaho. But that’s not what’s happening.

Idahoans like Ron Mendive pride themselves on having a business-friendly state. The Republican state representative from Coeur d’Alene shares the view of many about the minimum wage.

“Jobs are lost when the minimum wage goes up,” says Mendive.

But in 2010, a group of researchers decided to put that conventional wisdom to the test. And they used counties along the Washington-Idaho border, and hundreds others like them, to do it.

Washington

Minimum wage = $9.19

Population = 6.89 million

Number of minimum wage workers = 29,000

Idaho

Minimum wage = $7.25

Population = 1.59 million

Number of minimum wage workers = 31,000

See, the county that surrounds Coeur d’Alene, for example, has an economy much more closely tied to Spokane’s than to Boise’s. But the state laws governing wages stop at the state line.

Bill Lester of the University of North Carolina-Chapel Hill was on the team that looked at 16 years worth of restaurant employment data for 316 pairs of border counties.

“When you add up all those comparisons and look at the average of all those differences in employment, the difference is zero,” says Lester. “On aggregate, there’s no job losses.”

Lester is saying when the minimum wage goes up, no jobs are lost.

Really? No job losses? I wanted to see this for myself, so I went to a place on the map where all things should be equal geographically.

The very first business you see when you cross from Idaho to Washington is McDonalds. The state of Idaho is so close, says owner Tim Skubitz, you can toss a rock into it. “Whenever we get folks from out of town, they get a real kick out of walking across the street and saying, ‘Hey, I just crossed state lines!’,” Skubitz exclaims.

“We’re the second ownership of this franchise up here,” says Skubitz. “And I couldn’t tell you what the logic was at the time of placing it in Newport — except it’s location, location, location.”

So, just to be clear: this McDonalds is in the state with the higher minimum wage, Washington. And this busy intersection is so profitable that it didn’t occur to Skubitz to move, even when he tore down the old McDonalds in 2011. He built a fancier new one in the same place — not in the state right across the street with the lower minimum wage, Idaho. He says wages are just one piece of a larger puzzle.

“Just because we’ve expanded our business shows that we’re growing our business and so with growing our business, I need more employees,” he says. “So we’ve grown substantially I’d say in the last year and a half.”

The researchers who studied neighboring counties across state lines say there are a couple of reasons why minimum wage increases turn out to be a wash for businesses overall. First, the wage hike reduces turnover. It also leads employers to invest more in worker training, which increases productivity.

Of course, there are some cases of high minimum wage making a business pick up and leave town. Robin Toth is the vice president of business development for Greater Spokane Incorporated. She’s engaged in what she calls a “friendly competition” with Idaho to recruit and keep business. And sometimes she loses.

“There was a bakery that went over to the Post Falls area several years ago,” Toth remembers. “It was because of the wages.”

But Toth says more often, the retailers and restaurants – the industries that pay minimum wage – follow the industries that pay much higher wages. Toth is courting manufacturing, professional services, and technology. She says they want to know about the workers.

“Can you show me how many people you have in this wage range, what type of skills do these people have, what’s your training program like?”, says Toth. “That’s what we hear anymore and it’s not, nickels and dimes.”

The skills gap is a challenge facing Idaho right now. People in the crucial 25-29 age bracket are leaving the state for higher paying jobs elsewhere. Meanwhile, retirees entering the state are pushing up demand in the service sector. Currently, Idaho has the largest share of minimum wage workers in the nation.

And there’s some indication that Washington’s higher minimum wage may be drawing some of those workers across the border. The Idaho Department of Labor says 18,000 people live in Idaho but work in Washington.

One of them is 29-year-old Sarah Wagner. She’s a barista at a Starbucks in Liberty Lake, Wash., just four miles from the Idaho border. Wagner says the starting pay here is higher than at her old Starbucks in Idaho, and she gets more breaks. So it’s worth the trip.

“I drive 16 miles each way and it’s worth every cent,” says Wagner.

But there are trade-offs. Back at the McDonalds in Newport, Wash., Tim Skubitz says he used to give employees a raise for each positive evaluation.

“I strongly believe it’s important to reward people frequently and often,” he says.

But the higher minimum wage in Washington gives him less flexibility to do that. Skubitz says, given a choice, he’d prefer to start people at Idaho’s minimum wage. But it’s not going to change his mind about doing business in Washington either.

Comments

  • WordSmith

    Jobs are NOT lost when the minimum wage goes up. Higher wages equal job retention. What a line! It’s like the so-called ‘right to work’ law here in Idaho. It’s no such thing.

    • qcubed

      The people that get elected here in Idaho are really good at LYING..and good at nothing else.

  • chuck

    No employer is going to hire more employees then it takes to do the job whether he is paying $1.00 or $10.00 an hour.

    • UncleJohn

      What about the TSA?

    • qcubed

      When people make more money they spend more money, well..until you get to the one percent, and THAT created demand, which leads to more hiring.

  • http://www.facebook.com/jcork2 JenniferC

    I worked at this McDonald’s in the summer of 1997 after I graduated high school. I always wondered why they built it in Washington instead of Idaho. Not only is the minimum wage in Idaho significantly less, it is also a right to work state, which means that they don’t have to give you as many breaks, they can fire you for no reason, among other reasons that Idaho claims that it is a better state for business. I think the financial statistics of these two states tell a different story.

    • bebbes24

      Actually Idaho is a Right to Work state, which refers to union membership. Most states are At Will states, which means that neither party has to give a reason for quitting. The employee doesn’t have to give notice and the employer doesn’t have to have a reason to let someone go. As long as there is no discrimination involved. Idaho’s break laws are a different thing all together.

      http://www.lawyersandsettlements.com/blog/right-to-work-vs-employment-at-will-whats-the-difference-01710.html

      • http://www.facebook.com/people/Shelley-Gilman-Ball/759273393 Shelley Gilman Ball

        The difference comes in when one applies for UE. If an employer has no cause for firing, then they are subject to paying higher UE premiums, whereas if the employer has good cause, then the employee is not automatically granted ue.

      • TheSongRemainstheSame1

        I think she meant that it was a right to work state-it was just written a little strangely.

        …and Idaho has a lot of “gray areas” when it comes to discrimination.

      • Tinybabe

        Idaho is a right to work and an at will state. They use both methods to keep employees down and afraid of losing their jobs at a moments notice. That’s the Republican way.

      • JenniferC

        I have been an Idaho resident for over 30 years and an employee in the state of Idaho for over ten, (vs. Washington and Oregon for more than 5). In my experience, Idaho is a very difficult place to work where employees have very FEW rights and businesses have all the power. I may not have used “Right to Work” in the most correct sense, but t
        that was what I was trying to say.

  • IdahoResident

    The fact that minimum wage laws reduce jobs is not disputable. The predominant difference between Washington and Idaho is the income tax. WA has NO state income tax 0%. ID has a 7.4% tax. Wages are only ~25% of small retail costs. Income tax is a much more significant factor.

    • HigherWagesHelpEveryone

      No, income tax is probably not relevant here for two treasons: (1) Income tax would only matter at higher income levels. People making minimum wage pay very little or no state income tax in most states that have an income tax. (2) Idaho is probably taxing their residents even if they earn their income in other states — that’s what most states do that have income tax.

      • IdahoResident

        Your second point is excellent, thanks. The article tries to make a case for higher minimum wages, but ends up making the opposite case. It says WA has 4 times the population, but fewer minimum wage jobs, demonstrating that the higher minimum wage reduces the number of jobs. The author resorts to anecdotal evidence to prove their point, but quotes the McD owner saying his business decision was based on three factors, location, location, and location. So the point the article is trying to make is disproved by the evidence presented in the article. Amatures like this should stick to human interest stories about oboe players and avoid serious economics discussions.

    • qcubed

      O gee…but did we forget the higher SALES TAX? Please, the other taxes involved more than make up that difference. Besides, given a choice between earning more in your paycheck and not paying income tax versus earning less and paying income tax AND putting up with the religious zealots that run this state? Not a difficult choice.

  • TheSongRemainstheSame1

    Good old Idaho…wages are low, and I don’t see any changes coming anytime soon.

    • qcubed

      The wages are tied into the average IQ of the legislators, I think. That would explain a lot of the problem.

  • pyxy514

    I worked in Idaho for 5 years and was never told to take a break or lunch…now back in California I am told to take a lunch. It’s more like Right to Fire than Right to Work…no job is safe in Idaho.

  • EddieCox

    Almost everything Ron Mendive thinks and says is wrong. If you want to know if something is a fact or not, just check on what he thinks and you can be pretty sure the opposite is true.

  • qcubed

    “Jobs are lost when the minimum wage goes up,” says Mendive.

    And here we get to the core of the foolishness that pervades conservative thinking. They parrot the agenda that the party endorses…and it is quite often WRONG. When my sons are done with college here, I am moving from this bottom rung, backwards state. I love Idaho, it is a beautiful place, but the morons running it are keeping people poor and uneducated…all so they can continue to make very large profits.

About StateImpact

StateImpact seeks to inform and engage local communities with broadcast and online news focused on how state government decisions affect your lives.
Learn More »

Economy
Education