Legislature(2003 - 2004)
05/19/2003 08:03 AM Senate L&C
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 199-DELETE MINIMUM WAGE INFLATION-PROOFING
CHAIR CON BUNDE announced HB 199 to be up for consideration.
MS. HEATHER NOBREGA, staff to Representative Rokeberg, sponsor
of HB 199, explained that this bill repeals the automatic
inflation index that was implemented last year along with the
minimum wage increase. When the minimum wage is increased,
inter-level employers eliminate jobs and reduce working hours.
With the last increase, benefits, such as health insurance and
matching 401K plans, are being cut.
Evidence indicates that constant increases don't help the poor
but eliminate their needed jobs. One restaurant in Anchorage
closed already and another is not going to expand to Fairbanks
because of the hikes in labor costs. A casual examination of the
increases indicates that they fail to target the families that
they are intended to help.
The increases should not be automatic because the industry needs
to have a seat at the table each year to discuss the economies
of what is happening in every day business.
SENATOR HOLLIS FRENCH asked her to explain why she thought the
automatic indexing fails to target the families it was intended
to help.
MS. NOBREGA answered that the theory behind the minimum wage is
that it will help families support themselves by providing an
adequate wage that will help them do that. Studies show that
when the minimum wage is automatically increased, you actually
eliminate those entry-level jobs. So, the families they are
trying to help aren't going to get help because those jobs won't
be available for them.
MR. DON ETHERIDGE, AFL-CIO, opposed HB 199 and told members the
AFL-CIO got signatures for the initiative process and was
looking forward to putting this question on the ballot, but the
legislature took action to prevent it from doing so. If it had
been put on the ballot, it could have been adjusted after two
years. He maintained:
Now, it hasn't even gone into effect and we're already
looking at repealing it. We're under the hopes that it
could at least happen once before it's repealed so
that we would know whether or not it works. We don't
know if it's going to work and they're already
hollering that everybody is going out of business
because of it. They're going out of business because
of poor locations - one of them that I know of - the
restaurant and I can understand where a $1.50 increase
on most of these businesses really hit hard. We asked
for three years running to step the minimum wage up
and there was no action taken on it. The only way we
could make it happen is through the initiative process
and we went out and gathered 50,000 signatures to get
it on the ballot....
At the current rate that we're looking at right now
for the cost of living index - it's going to be about
a 14-cents per hour raise. If you get 14-cents per
hour for a couple, three years, that doesn't hurt near
as bad as $1.50...
CHAIR BUNDE stated, for the record, that he counseled against
legislative action to preempt the initiative.
SENATOR GARY STEVENS asked Mr. Etheridge to respond to the issue
of the elimination of entry-level jobs.
MR. ETHERIDGE replied that those jobs have to be there and it's
one of those threats that can be used all the time. He said he
has seen restaurants come and go in Juneau without any raise in
the minimum wage. It's just what the economy is doing at the
time that affects those jobs and that's why they fluctuate so
much.
SENATOR FRENCH said if they are taking into consideration one
anecdotal story about a restaurant closing, they should really
look at what the economy is doing and what the total job market
is in the state.
MS. PAM LABOLLE, Alaska State Chamber of Commerce, supported HB
199. It's the Chamber's belief that the reason they have elected
representatives is that those representatives can see what is
happening in the economy and make decisions based on that big
picture.
SENATOR STEVENS asked her to comment on the issue of eliminating
entry-level jobs.
MS. LABOLLE replied that it would eliminate entry-level jobs
because employers are going to look for people with more
experience. If they are going to pay the higher wage, they are
not willing to take on people who aren't trained.
SENATOR SEEKINS asked if any other states index their minimum
wage.
MS. LABOLLE replied that she didn't have those statistics.
MR. CHIP WAGONER, Alaska Catholic Conference, said of all the
bills before the legislature this one disturbs him the most
because of the initiative that never made it to the ballot and
because he doesn't believe all the facts and figures he has
heard. He told members:
There are two different organizations out there that
do a lot of work on minimum wage and one of them is
basically paid for by the restaurant industry and the
other one is paid for by the labor unions. I have read
their studies and I don't believe them. If you read
anything from the Employment Policies Institute, not
to be confused with the Employment Policy Institute,
it's basically from the restaurant industry and they
will never say anything good about the minimum wage.
Also, if you look at the economic opportunity
institute - again, not to be confused with the
economic policy institute, this is primarily from
labor and they will never say anything bad about the
minimum wage.
So, what I did is that I went to those states that do
have indexing and there [are] three to my knowledge -
Oregon, Washington and Alaska.
I'll start with Washington State. I talked with Bob
Wagner, Manager of the Research and Analysis Unit for
the Unemployment Insurance Division of the Employment
Security Department of the State of Washington and he
said, "There does not appear to be a direct
correlation between the indexed minimum wage and the
number of jobs in the food service, drinking places
industry."
I picked that industry because that's primarily the
one - the fast food people and others - who are
against this automatic indexing.
I also talked with Art Air, the State Employment
Economist for the Oregon Employment Department. He
said it's probably impossible to identify an increase
in the unemployment rate and tie it to the minimum
wage at least at the state level. He said at a local
level, you may be able to identify specific employers,
such as the Red Robin, who have reduced employment due
to a variety of factors including minimum wage. Those
companies are probably already on the ropes. So, I
also looked at the figures from our own Department of
Labor and in that particular industry, you would think
if jobs were going to be lost, they wouldn't be lost
because of indexing, which would have increased the
wages by 14 cents. You would have thought they would
have lost the jobs when the minimum wage in January
shot up by $1.50 because what happens is, without
indexing you have the purchasing power of our unseen
working poor continue to drop, drop, drop until
finally the legislature or by initiative it jumps
up....
That's not good for business and it's not good for the
working poor who see their purchasing power decrease.
So, you would think that is where the jobs would have
been lost. And jobs were lost in December of 2002 till
January of 2003. When it took effect, we lost 1,000 in
the food service restaurant industry. But, if you look
at a year ago, when there was no minimum wage
increase, the drop is just about the same. It dropped
from 16,100 to 15,200. In other words, they ramp up
for the holidays with their employees and then they
ramp down after the holidays and now if you look at
the figures, they've probably started to ramp up for
the tourism season...
It's the total economy that affects the jobs in this
industry....
MR. WAGONER said there is a flip side to allowing the industry a
seat at the table; the unseen working poor would also like a
seat at the table. He said the legislature could address
indexing every year if it wanted to. He told members, "This bill
really, really bothers me; it's just unfair."
MR. JAY SUTHERLAND, President, Alaska Restaurant and Beverage
Association, said it's a little bit more than a 5% increase to
pay for the 26% increase in the cost of labor. Employers would
look at closing restaurants and laying off staff. Slowly, but
surely, they have been looking at how to do more with less. Job
loss last year was similar to this year. 9-11 brought tourism to
a crashing halt in 2001 and the tourist seasons have been slim
since then. Folks will be looking at investments in technology
and different restaurant equipment to replace labor. He pointed
out that people just entering the work force need to be trained
to do even the simplest things and he thought it is unfair that
industry has to take on that additional burden. He noted the
other two states with a CPI are taking very huge hits in the
restaurant industry. That could be due to the economy or to the
CPI.
SENATOR SEEKINS commented that his experience as an employer is
that most of his minimum wage employees are students just
getting started and he has a hard time keeping anybody worth
their salt if he tries to keep them at a minimum wage. He
doesn't get a lot of people who are really trying to raise a
family on minimum wage. He stated, "If they are, there is
another serious problem somewhere...."
SENATOR SEEKINS moved to pass HB 199 from committee with
individual recommendations.
SENATOR FRENCH objected and said that he felt the legislature
should let this law go into effect at least once to see what
happens - out of good faith. Testimony has indicated that the
CPI would produce about a 14-cent increase in the minimum wage
and that's fairly miniscule. Some people think the legislature
passed this law to preempt the initiative and keep a lot of
lower income people from going to the polls to vote last year.
He questioned, "I have to wonder today whether that initiative
has been preempted had this inflation-proofing not been in the
law."
He said this law takes into account a possible deflationary
economy. This is a flexible tool that the legislature passed
just one year ago.
SENATOR SEEKINS said he doesn't think it is right to kill this
bill in committee and that he didn't see anything wrong with
allowing it to go to the entire body for discussion.
CHAIR BUNDE said he shares the concern that the public did not
get a chance to vote on this issue.
SENATORS SEEKINS, STEVENS and BUNDE voted yea; SENATOR FRENCH
voted nay; and HB 199 passed from committee.
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