Judges: ROB McKENNA, Attorney General
Filed Date: 9/15/2010
Status: Precedential
Modified Date: 7/6/2016
Honorable Judy Schurke Director, Department of Labor Industries PO Box 44000 Olympia, WA 98504-4000
Dear Director Schurke:
By letter previously acknowledged, you have requested our opinion on two questions, which we paraphrase as follows:
[original page 2]1. Does RCW
49.46.020 (4)(b) require the Department of Labor and Industries to increase the minimum wage solely on the basis of an increase in the CPI-W1 as compared to the previous year?2. Assume: (a) the CPI-W reached a peak and then decreases because of an economic recession; (b) the current minimum wage was calculated using that peak value of the CPI-W and was not reduced even though the CPI-W subsequently decreased; and (c) the CPI-W has stopped its decline and begun to increase, but the CPI-W to be used for calculating the 2011 minimum wage remains below the previous peak value. Does RCW
49.46.020 (4)(b) require the Department of Labor and Industries to increase the minimum wage for 2011 because the CPI-W increased, or does the statute permit the Department to leave the minimum wage at its current level until the CPI-W increases beyond the earlier peak value?
In response to your second question, we read RCW
Directions for calculating increases in the minimum wage rate are set out in RCW
On September 30, 2000, and on each following September 30th, the department of labor and industries shall calculate an adjusted minimum wage rate to maintain employee purchasing power by increasing the current year's minimum wage rate by the rate of inflation. The adjusted minimum wage rate shall be calculated to the nearest cent using the consumer price index for urban wage earners and clerical workers, CPI-W, or a successor index, for the twelve months prior to each September 1st as calculated by the United States department of labor. Each adjusted minimum wage rate calculated under this subsection (4)(b) takes effect on the following January 1st.2
RCW
[original page 3]
released monthly, about two weeks after the reference period, 3 the Department calculates annual changes in the CPI-W for the twelve-month period ending August 31 of each year. The new adjusted minimum wage rate takes effect the following January 1. RCW
The CPI-W is a number representing current cost of living by reference to a designated standard, the "index base period," which is assigned a value of 100. A 36-month period in 1982-1984 currently is designated the index base period.4 In 2007, the CPI-W was approximately 200, indicating that the cost of living in 2007 was approximately twice that in 1982-1984.5 The change in this index over time is a measure of the rate of inflation. As referenced in RCW
Your question arises because, as you explain in your letter to us, the cost of living, as measured by the CPI-W, decreased between August 2008 and August 2009. Because the language of Initiative 688 refers only to increasing the minimum wage (RCW
When interpreting a statute, we look first to the plain and ordinary meaning of the language used by the legislature. Tingey v.Haisch,
[original page 4]
Cerrillo v. Esparza,
RCW
RCW
[original page 5]
response to the CPI-W. For convenience, we refer to this method of calculating the adjusted minimum wage rate as "direct calculation," because of the direct mathematical relationship between CPI-W value and the minimum wage rate. As illustrated in Figure 1, the minimum wage would decline where the CPI-W declines (between time A and time B), presumably in response to a weakening economy; the minimum wage would then increase as the CPI-W begins to increase again (beginning at time B), presumably in response to a rebounding economy.
Figure 1. Graphical illustration of "direct calculation," in which adjusted minimum wage rate is calculated as a direct mathematical function of the CPI-W. Time A marks the beginning of a decline in the CPI-W in response to a period of economic decline. Time B marks the point at which the CPI-W begins to rise again as the economy recovers.
The direct calculation method of determining the adjusted minimum wage rate is consistent with the language in RCW
[original page 6]
Consequently, the direct calculation method of determining the adjusted minimum wage rate is not consistent with RCW
The language of RCW
The legislative history of RCW
The concept of ratcheted calculation gives effect to two of the three ambiguous requirements in RCW
[original page 7]
circumstance, there are two logical approaches for determining when the adjusted minimum wage rate should start increasing again. Because the legislative history uniformly reflects an assumption that the cost of living, as measured by the CPI-W, will rise over time, that history provides no assistance in choosing between these alternatives.
In the first alternative, which we refer to as "increase-ratcheted calculation," the adjusted minimum wage rate is increased whenever the CPI-W has increased in value over the statutory 12-month period, without regard to the actual cost of living reflected by the CPI-W or its pattern of increases and decreases over time. As illustrated in Figure 2, the minimum wage would stay flat when the CPI-W declines (between time A and time B) and increase whenever the CPI-W is improving (before time A or after time B). Employees are protected from a decline in minimum wage during periods when CPI-W (and the economy) is declining (between time A and timeB). Beginning at time B, however, when the CPI-W rebounds, the minimum wage increases in response — even though holding the current minimum wage rate steady while the CPI-W declined effectively increased employees' purchasing power, rather than simply maintaining it. The dark-shaded area shows how this increase-ratcheted calculation effectively resets the adjusted minimum wage rate at a higher level with respect to the CPI-W, permanently increasing the minimum wage beyond that presumed necessary to "maintain employee purchasing power," as specified in RCW
Figure 2. Graphical illustration of adjusted minimum wage rate using "increase-ratcheted calculation," in which minimum wage increases whenever the CPI-W increases. Time A marks the beginning of a decline in the CPI-W in response to a period of economic decline. Time B marks the point at which the CPI-W begins to rise again as the economy recovers. The minimum wage rate effectively is reset at time B to a higher level relative to the CPI-W than was present at time A.
This approach to calculating the adjusted minimum wage rate effectively resets the minimum wage at a higher level with respect to the CPI-W each time the CPI-W falls and then recovers. In other words, the dark-shaded area representing the increase in the minimum wage
[original page 8]
above the indexed cost of living would become larger each time the CPI-W declines and rebounds, even if there were no long-term upward trend in the cost of living, as shown in Figure 3.
Figure 3. Graphical illustration of adjusted minimum wage rate using "increase-ratcheted calculation" where the CPI-W fluctuates over time. When the CPI-W decreases (times marked as A), the minimum wage is not changed. Whenever the CPI-W increases over the statutory 12-month period, the minimum wage is increased in response. The minimum wage rate effectively is reset to a higher level relative to the CPI-W each time the CPI-W begins to rise again. Over time, the adjusted minimum wage rate increases faster than the cost of living (which is measured by the CPI-W).
Accordingly, an increase-ratcheted calculation of adjusted minimum wage rate complies with the statutory directions to use the CPI-W and to avoid decreasing the minimum wage, but it fails to comply with the direction to maintain employee purchasing power. RCW
In the second alternative, which we refer to as "index-ratcheted calculation" the adjusted minimum wage rate is not increased until actual value of the CPI-W has returned to the level it had reached before it declined. As illustrated in Figure 4, the minimum wage would stay flat when the CPI-W declines (beginning at time A) and begin to increase again only when the cost of living, as measured by CPI-W, has recovered to where it was before the decline (at time B). The dark-shaded area shows how this index-ratcheted calculation temporarily decouples the adjusted minimum wage rate from the CPI-W, but then reestablishes the original mathematical
[original page 9]
relationship between the minimum wage and the CPI-W once the temporary reduction in the cost of living has ended, thereby maintaining employee purchasing power as specified in RCW
Figure 4. Graphical illustration of adjusted minimum wage rate using "index-ratcheted calculation," in which minimum wage increases only when the indexed value of the CPI-W increases beyond the value that was used to calculate the current minimum wage. Time A marks the beginning of a decline in the CPI-W in response to a period of economic decline. Time B marks the point at which the CPI-W has returned to its pre-decline level. The minimum wage rate resumes the same relationship to the CPI-W at time B that existed at time A.
As shown in Figure 5, index-ratcheted calculation avoids the "reset problem" inherent in increase-ratcheted calculation — the tendency to reset the minimum wage rate at a higher level each time the CPI-W rebounds from a decline.
[original page 10]
Figure 5. Graphical illustration of adjusted minimum wage rate using "index-ratcheted calculation" where the CPI-W fluctuates over time. The time periods marked A indicate years in which the CPI-W has declined and not yet returned to its pre-decline level. Only at the conclusion of those periods will increases in the minimum wage resume in response to increases to the CPI-W.
If the cost of living increased every year, without exception, the three alternative methods of calculating minimum wage — direct calculation, increase-ratcheted calculation, and index-ratcheted calculation — would yield the same result. Where the cost of living declines and then increases again, however, as is evident from the preceding graphs and discussion, these three alternatives may result in substantially different adjusted minimum wage rates over time. All three alternatives use the CPI-W to calculate the adjusted minimum wage rate, as directed in RCW
The first alternative, direct calculation, is not consistent with the statutory directive to "maintain employee purchasing power by increasing the current year's minimum wage rate by the rate of inflation." RCW
The second alternative, increase-ratcheted calculation, avoids an impermissible decrease in the minimum wage but it does not maintain employee purchasing power. Rather, it effectively resets purchasing power at a higher level relative to the CPI-W each time there is a period of decline and recovery in the cost of living, in which the CPI-W dips and then rebounds. As noted above, the plain meaning of the word "maintain" implies a preservation of buying power, not an increase in buying power that outpaces the cost of living and the rate of inflation over time.
Only the third alternative, index-ratcheted calculation, is consistent with the language of RCW
Having concluded that index-ratcheted calculation satisfies the directive language in RCW
You ask first whether RCW
[original page 11]
Your second question asks us to assume a factual scenario in which the CPI-W increases from 2009 to 2010, but has not increased to the level of its 2008 peak. Based upon this assumption, you ask whether RCW
The current minimum wage rate was set based on the 5.9 percent increase in the CPI-W for the 12 months ending August 2008. In August 2008, the CPI-W was 215.247. If the CPI-W for August 2010 exceeds 215.247, the statute would require an increase in the minimum wage.13 If the August 2010 CPI-W does not exceed 215.247, no minimum wage increase is authorized.
We trust that the foregoing will be useful to you.
ROB McKENNA Attorney General
ALAN D. COPSEY Deputy Solicitor General
wros
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RCW
(1) Until January 1, 1999, every employer shall pay to each of his or her employees who has reached the age of eighteen years wages at a rate of not less than four dollars and ninety cents per hour.
(2) Beginning January 1, 1999, and until January 1, 2000, every employer shall pay to each of his or her employees who has reached the age of eighteen years wages at a rate of not less than five dollars and seventy cents per hour.
(3) Beginning January 1, 2000, and until January 1, 2001, every employer shall pay to each of his or her employees who has reached the age of eighteen years wages at a rate of not less than six dollars and fifty cents per hour.
(4)(a) Beginning on January 1, 2001, and each following January 1st as set forth under (b) of this subsection, every employer shall pay to each of his or her employees who has reached the age of eighteen years wages at a rate of not less than the amount established under (b) of this subsection.
(b) On September 30, 2000, and on each following September 30th, the department of labor and industries shall calculate an adjusted minimum wage rate to maintain employee purchasing power by increasing the current year's minimum wage rate by the rate of inflation. The adjusted minimum wage rate shall be calculated to the nearest cent using the consumer price index for urban wage earners and clerical workers, CPI-W, or a successor index, for the twelve months prior to each September 1st as calculated by the United States department of labor. Each adjusted minimum wage rate calculated under this subsection (4)(b) takes effect on the following January 1st.
(5) The director shall by regulation establish the minimum wage for employees under the age of eighteen years.
Proportional difference: (207-200) ÷ 200 = 7 ÷ 200 = 0.035
Convert to percentage: 0.035 x 100 = 3.5 percent.
See generally U.S. Dep't of Labor, Program Highlights, BLS FactSheet 00-1: How to Use the Consumer Price Index for Escalation 2 (Sept. 2000),available at http://www.bls.gov/cpi/cpi1998d.pdf (last visited Sep. 15, 2010).
Tingey v. Haisch , 152 P.3d 1020 ( 2007 )
Cerrillo v. Esparza , 142 P.3d 155 ( 2006 )
Washington State Republican Party v. STATE PUBLIC ... , 4 P.3d 808 ( 2000 )
Whatcom County v. City of Bellingham , 128 Wash. 2d 537 ( 1996 )
Wichert v. Cardwell , 117 Wash. 2d 148 ( 1991 )
Cockle v. Dept. of Labor and Industries , 16 P.3d 583 ( 2001 )
Agrilink Foods, Inc. v. STATE, DEPT. OF REVENUE , 103 P.3d 1226 ( 2005 )