02/23/2007 03:00 PM House LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| HB42 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 42 | TELECONFERENCED | |
| += | HB 14 | TELECONFERENCED | |
| + | TELECONFERENCED |
ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
February 23, 2007
3:06 p.m.
MEMBERS PRESENT
Representative Kurt Olson, Chair
Representative Mark Neuman, Vice Chair
Representative Carl Gatto
Representative Jay Ramras
Representative Robert L. "Bob" Buch
Representative Berta Gardner
MEMBERS ABSENT
Representative Gabrielle LeDoux
COMMITTEE CALENDAR
HOUSE BILL NO. 42
"An Act increasing the minimum wage; creating an annual
adjustment to the minimum wage based on the rate of inflation;
and providing for an effective date."
- FAILED TO MOVE CSHB 42(L&C)
HOUSE BILL NO. 14
"An Act relating to the purchase of alcoholic beverages and to
access to licensed premises; relating to civil liability for
certain persons accessing licensed premises; requiring driver's
licenses and identification cards to be marked if a person is
restricted from consuming alcoholic beverages as a result of a
conviction or condition of probation or parole and relating to
fees for the marked license; and requiring the surrender and
cancellation of driver's licenses under certain circumstances."
- SCHEDULED BUT NOT HEARD
PREVIOUS COMMITTEE ACTION
BILL: HB 42
SHORT TITLE: ALASKA MINIMUM WAGE
SPONSOR(s): REPRESENTATIVE(s) GARA, CRAWFORD, GARDNER, BUCH,
DOLL, DOOGAN, HOLMES, GUTTENBERG, KERTTULA, GRUENBERG
01/16/07 (H) PREFILE RELEASED 1/5/07
01/16/07 (H) READ THE FIRST TIME - REFERRALS
01/16/07 (H) L&C, FIN
02/09/07 (H) L&C AT 3:00 PM CAPITOL 17
02/09/07 (H) -- Meeting Canceled --
02/23/07 (H) L&C AT 3:00 PM CAPITOL 17
WITNESS REGISTER
REPRESENTATIVE LES GARA
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented HB 42.
VINCE BELTRAMI, Executive President
Alaska State AFL-CIO
Anchorage, Alaska
POSITION STATEMENT: Testified during hearing on HB 42.
DOROTHY WILSON, Business Owner
Juneau, Alaska
POSITION STATEMENT: Testified in opposition of HB 42.
PAUL WOLFSON, Statistical Research Associate
Tuck School of Business
Dartmouth College
Hanover, New Hampshire
POSITION STATEMENT: Answered questions during hearing on HB 42.
CHIP WAGONER, Executive Director
Alaska Conference of Catholic Bishops
Juneau, Alaska
POSITION STATEMENT: Testified during hearing on HB 42.
REPRESENTATIVE HARRY CRAWFORD
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Spoke as a joint prime sponsor of HB 42.
ACTION NARRATIVE
CHAIR KURT OLSON called the House Labor and Commerce Standing
Committee meeting to order at 3:06:05 PM. Representatives
Neuman, Gatto, Gardner, Buch, Ramras, and Olson were present at
the call to order.
HB 42-ALASKA MINIMUM WAGE
3:06:46 PM
CHAIR OLSON announced that the first order of business would be
HOUSE BILL NO. 42, "An Act increasing the minimum wage; creating
an annual adjustment to the minimum wage based on the rate of
inflation; and providing for an effective date."
3:07:25 PM
REPRESENTATIVE NEUMAN made a motion to adopt CSHB 42(L&C),
Version 25-LS0226\K, Chenoweth/Wayne, 2/9/07, as the working
document.
REPRESENTATIVE RAMRAS objected for discussion purposes.
3:07:57 PM
REPRESENTATIVE LES GARA, Alaska State Legislature, joint prime
sponsor, began by explaining that the minimum wage in Alaska has
not been raised since 2002. Prior to this, it was raised twice
in 15 years. He explained that living costs have increased
significantly since the most recent minimum wage increase. The
current minimum wage is $7.15 per hour. Congress is currently
considering an increase in the federal minimum wage. He opined
that this reflects the reality that currently, the minimum wage
is a "poverty level wage," earning a full-time employee $14,300
per year. He pointed out that a single parent whose rent is
$800 per month would have $100 left over for other monthly
expenses. He explained that the original version of HB 42
increased the minimum wage to $8 per hour. This proposed
increase would be adjusted for inflation over time.
Additionally, HB 42 would require that the Alaska minimum wage
remain $1 higher than the federal minimum wage. He explained
that Version K was drafted by the House Labor and Commerce
Standing Committee, and would increase the minimum wage to $7.15
per hour, or 50 cents higher than the federal minimum wage,
whichever is greater.
3:09:45 PM
CHAIR OLSON explained that if Version K is reported from the
House Labor and Commerce Standing Committee, the original
version of the bill may be brought up at some point during the
remainder of the committee process.
REPRESENTATIVE GARA, referring to the original version of HB 42,
explained that increasing the minimum wage to $8 per hour would
result in a $16 thousand salary. With the addition of a
permanent fund dividend (PFD), this would put the wage earner
"slightly above" the poverty line. In Washington State, the
minimum wage is close to $8 per hour, and in California, the
minimum wage will reach $8 per hour in 2008. Currently, 15
percent of employees in Alaska earn less-than $10 per hour. He
opined that if the wage is increased, wages would also be
increased for the 10-15 percent of employees working slightly
above the minimum wage.
3:12:26 PM
REPRESENTATIVE RAMRAS inquired as to whether increasing the
minimum wage may retard wage growth for those employees earning
between $10 and $15 per hour, as employers attempt to satisfy
the minimum wage increase.
REPRESENTATIVE GARA, referring to a report by the Economic
Policy Institute explained that this report suggests that
increasing the minimum wage will result in an equivalent
increase for employees earning above the minimum wage.
REPRESENTATIVE RAMRAS restated his question regarding how the
increase would effect employees earning between $10 and $15 per
hour.
REPRESENTATIVE GARA replied that he has never seen a study that
addresses this question. He reiterated that the studies he has
seen generally show an equivalent wage increase for those
employees earning slightly above the minimum wage. He said:
My belief is that it's a competitive pressure. For
the least skilled workers - if their wages are going
to go up, starting at a minimum wage, that forces the
wages to go up for more skilled workers, as well. I
can't guarantee ... that that's true, I can't
guarantee ... anything about economics.
CHAIR OLSON explained that Version K was drafted in an attempt
to "meet both sides part way."
3:16:27 PM
REPRESENTATIVE NEUMAN inquired as to how the proposed minimum
wage increase would effect workers' compensation.
REPRESENTATIVE GARA replied that he does not know.
REPRESENTATIVE NEUMAN offered his understanding that this would
increase the amount paid by the employer. He questioned what
affect this would have on an individuals ability to get a job.
REPRESENTATIVE GARA commented that [raising the minimum wage] is
a "value judgment." He reiterated his belief that the minimum
wage should be a "living wage." He noted that there is much
discussion regarding those individuals who do not work for a
living and what types of benefits should be provided to them.
For those individuals who do decide to work for a living, this
wage should allow them to live above the poverty level.
3:19:59 PM
REPRESENTATIVE GARDNER objected to the adoption of Version K.
Speaking as a joint prime sponsor of HB 42, she shared her
belief that the lower minimum wage increase included in Version
K is inadequate. She then removed her objection.
[Although not formally withdrawn, the committee treated
Representative Ramras' objection as withdrawn.]
REPRESENTATIVE RAMRAS requested a detailed explanation of the
changes made by Version K.
CHAIR OLSON explained that Version K keeps the minimum wage to
$7.15 per hour, or 50 cents above the federal minimum, whichever
is greater.
REPRESENTATIVE RAMRAS stated that he is involved in the
hospitality industry, and therefore has a conflict of interest.
While he is not opposed to increasing the minimum wage, he
expressed concern regarding how this would effect those
employees "in the back of the house, that are earning between $9
and about $15 [per hour]." He explained that in an attempt to
meet the wage and hour requirements, the elasticity is removed
from the employer's ability to increase wages for the
aforementioned group. He said "I would like to see the state of
Alaska innovate a tip-tax credit that simply mirrors whatever
the prevailing federal minimum wage is. Or, in this case, not
go higher than the state minimum wage, for as long as the state
minimum wage is still higher than the federal minimum wage." He
opined that this would result in wage increases for the
employees in "the back of the house." He opined that the
aforementioned employees are absorbing 100 percent of the cost
for the employer to comply with state and federal minimum wage
requirements.
3:27:20 PM
REPRESENTATIVE BUCH requested that Representative Gara detail
the difference between the original version of HB 42, and
Version K.
REPRESENTATIVE GARA explained that the "citizen's initiative" of
2002 increased the minimum wage to $7.15 per hour, to be
adjusted with inflation. Had the aforementioned initiative
remained in effect, the minimum wage would currently be $8 per
hour. He reiterated that the original version of HB 42
increases the minimum wage to $8, to be adjusted with inflation.
Additionally, the minimum wage would remain $1 above the federal
minimum wage. He then reiterated that Version K proposes a
minimum wage of $7.15 per hour, or 50 cents above the federal
minimum wage, whichever is higher. He offered his understanding
that an increase to the federal minimum wage is currently being
considered. If passed, the federal minimum wage would be
increased to $7.25 over a two-year time frame. Under Version K,
this would result in a maximum state minimum wage of $7.75 per
hour.
REPRESENTATIVE GARA, in response to Representative Ramras'
concerns, pointed out that he is also a restaurant owner. He
stated that the previous minimum wage increase did not have a
detrimental impact on his business. He opined that raising the
wage for the lowest wage earners does not have to take money
away from higher wage earners. This may, instead, cut into the
profit margin. He said "I would rather have my profit margin
cut into than take money away from someone who makes $10-$12 per
hour." This may also change the businesses cost structure. He
pointed out that the minimum wage was raised for all businesses,
which then had the same "competitive disadvantage." Businesses
then had the opportunity to either cut into profit margins or
raise prices to reflect the higher wage. He went on to say that
some economists believe that raising the minimum wage benefits
the economy, while others disagree. However, he opined that
there is a growing consensus that the minimum wage does not
detrimentally impact the economy.
REPRESENTATIVE RAMRAS said:
I'm not an economist, but I'm just telling you the
facts. And I don't know how many people are on your
restaurant staff, and ... I'm not going to suggest
that yours is more typical than ... the restaurant
interest that I have, or those in the peer group that
I discuss with. But I'm just ... looking for a little
spirit of compromise. I don't hear any accommodation
at all, and ... you're gonna lose me. ... Do you
appreciate at all - that it has any impact on the back
of the house people, when you put 100 percent of the
burden of the payroll increase on the front of the
house people - as it relates to raising the minimum
wage with a tipped workforce?
REPRESENTATIVE GARA replied:
I honestly believe that if you raise the minimum wage,
you also raise the wages of the people who earn above
the minimum wage. So, I think you and I have a
different analysis on this. I'm not going to control
your vote on this committee. I want you to vote your
conscience, and I want you to vote out a bill that you
think meets your needs. I'm only here to tell you
what I believe. And ... personally, I don't believe
in a tip credit. ... I see waitresses and waiters who
work at my restaurant who earn a tip above their
minimum wage and still barely make ends meet. I would
have trouble going to those workers and telling them I
proposed a lower minimum wage for them than ... for
[those employees who do not earn tips].
3:32:58 PM
REPRESENTATIVE RAMRAS surmised that there may be a difference in
the "basic building blocks" of the two businesses.
3:33:13 PM
REPRESENTATIVE GATTO said "Sometimes when I hear 'minimum wage,'
I hear 'maximum wage.'" He opined that "anybody can pay more."
He relayed a recent conversation with local business owners. He
then offered his understanding that the aforementioned business
employs 25 individuals, each of whom earn the minimum wage. The
aforementioned employees are happy with this wage; however, none
are working to support a family. He opined that the business in
question is able to pay more than the minimum wage, and perhaps
does for some employees. Although some businesses may be unable
to remain open if required to pay a higher minimum wage, he
stated his belief that $8 per hour is not too much money.
REPRESENTATIVE GARA, in response to a question from
Representative Gatto, explained that the current minimum wage
pays roughly $3,000 per year less than the poverty level, for a
family of two. He explained that raising the minimum wage to $8
per hour and adding a permanent fund dividend would result in an
income that is above poverty level. He offered his belief that
$9 or $10 per hour would be more appropriate.
REPRESENTATIVE GATTO, referring to a handout in members'
packets, pointed out that certain states prospered as a result
of increasing the minimum wage. He inquired as to how raising
the minimum wage would help businesses.
REPRESENTATIVE GARA replied that in Washington State, the
minimum wage is $7.60 per hour, while in Idaho, it is below $6
per hour. He explained that the higher skilled workers
relocated to Washington State. As a result, the businesses in
"border towns" thrived, and local chambers of commerce dropped
any opposition to the minimum wage increase. He stated that he
is unable to say exactly what happens to the economy when the
minimum wage is raised, as experts do not agree. He pointed out
an economist who previously believed that increasing the minimum
wage would have a detrimental impact on the economy; however, as
a result of research done in the 1990s, no longer believes this.
He reiterated his belief that this is a value judgment.
3:38:47 PM
REPRESENTATIVE NEUMAN expressed agreement with Representative
Gatto's comments. In regard to whether the minimum wage
increase would affect profits, he suggested that businesses
would raise prices to maintain the profit margin. He opined
that it is important to maintain a certain profit margin.
REPRESENTATIVE GARA, in response to questions from
Representative Neuman, stated that he is a co-owner of Snow City
Café, LLC. He explained that he does not participate in the
management of the restaurant. Some employees earn the minimum
wage, while others earn above minimum wage. He stated that, as
an owner, he does not worry that a "modest increase in the
minimum wage" would take away from profits. All businesses
would be required to raise prices, so there would not be a
competitive disadvantage. He agreed that the customer may pay
more. In response to an additional question regarding his
business, he clarified that he is unsure whether any employees
are paid less than $8 per hour.
REPRESENTATIVE NEUMAN expressed concern regarding how this would
effect businesses ability to employ workers.
3:43:25 PM
REPRESENTATIVE GARA replied that studies have shown that an
increase in the minimum wage does not negatively impact the
ability to find employment. He commented that "the growing
consensus among economists ... is that the effects of the
minimum wage on employment are very minimal, if any." He
offered his belief that increasing the minimum wage would not
"deny people work," and reiterated that this is a value
judgment.
REPRESENTATIVE GATTO, in regard to the impact on the employer,
opined that the additional cost would be minimal. He opined
that prices may be raised accordingly, and customers would not
avoid patronizing a particular establishment.
3:47:18 PM
REPRESENTATIVE BUCH offered his understanding that these are
entry level positions. He pointed out that the minimum wage
increase would apply to all industries. He said "I'm encouraged
... that this addresses an issue [in] a very level manner." He
opined that increasing the minimum wage would provide an
opportunity to enhance the learning capabilities of employees
earning the minimum wage. He surmised that it may also have
this effect on those earning slightly above the minimum wage.
REPRESENTATIVE RAMRAS inquired as to the unintended consequences
that may occur.
REPRESENTATIVE GARA replied that this may effect the profit
margin, or cause employers to go out of business. He offered
his hope that this would not occur. He said "It rings true with
me, when I read the studies, that ... increasing the minimum
wage does not cause a detrimental impact on employment. ... But
I think, maybe [this is because] I want that to ring true." In
regard to a tip-tax credit, he said "I didn't mean to ...
dismiss it as a wrong idea, it's just ... something that I
personally disagree with."
REPRESENTATIVE RAMRAS reiterated his question regarding the
unintended consequences this might have on the employees.
REPRESENTATIVE GARA reiterated that certain studies have shown
that a minimum wage increase would result in an equivalent
increase for those employees earning slightly above the minimum
wage. He opined that this is a good result.
3:51:10 PM
REPRESENTATIVE RAMRAS stated that this is an "intended"
consequence. He reiterated his concern regarding the
"unintended" consequences.
REPRESENTATIVE GARA said:
I firmly believe it will enhance the quality of life
of those wage earners. I don't believe that there
will be unintended consequences. I believe it'll
raise the wage scale of people who work for a living
and get paid very little. It's not just young workers
who earn low-end wages. It's immigrants - people who
speak English as a second language, who are not young
people, who try to raise a family, who come to this
country and start at low-end jobs. If you have an
idea of unintended consequences - I can't think of
one, but I also can't guarantee you they won't happen.
REPRESENTATIVE RAMRAS stated that while he respects this point
of view, he does not agree.
REPRESENTATIVE GARA said "I wish I could guarantee you that I
was right about this. I just believe that I'm right about this,
and I think everybody in this room believes that they're right
about this, whatever their opinion is."
3:53:05 PM
REPRESENTATIVE NEUMAN asked whether one unintended consequence
may be that less jobs are available.
REPRESENTATIVE GARA shared his belief that this would not occur;
however, he cannot guarantee this.
REPRESENTATIVE NEUMAN opined that this would have a larger
effect on smaller businesses.
REPRESENTATIVE GARA replied that while he cannot speak for all
small businesses, it would be false to assume that increasing
the minimum wage would result in profit loss, higher prices, or
that it would have no impact. He pointed out that economic
theory points to a combination of these. He offered his belief
that any detriment is offset by the positive impact of paying
employees a better wage, thus enabling him or her to afford more
than food and rent.
REPRESENTATIVE NEUMAN stated that he does not agree. He offered
his belief that increasing the minimum wage will result in
higher prices, which will negatively effect those who earn a
lower income.
REPRESENTATIVE GATTO, in regard to unintended consequences,
stated that increasing the minimum wage may result in lay-offs.
He opined that the employer may then encourage the remaining
employees to increase productivity, in order to rehire the
employees who were laid off.
3:57:04 PM
REPRESENTATIVE GARDNER stated that during a recent trip to
Denali National Park and Preserve, she noticed a great number of
international employees. She shared her belief that there are
not many workers in Alaska who are willing to work for minimum
wage. Therefore, the minimum wage increase would not result in
Alaskans losing jobs. She asked whether Representative Gara
would agree.
REPRESENTATIVE GARA replied that this has also been his
experience. Referring to the business he co-owns, he stated
that the previous minimum wage increase resulted in a delay in
dividend disbursement to owners; however, the employment levels
were not effected.
3:58:41 PM
VINCE BELTRAMI, Executive President, Alaska State AFL-CIO
[American Federation of Labor and Congress of Industrial
Organizations], stated that he is in support of HB 42. He
expressed disappointment with the changes made by Version K. He
explained that previously, the Alaska AFL-CIO gathered over 50
thousand signatures in support of adjusting the minimum wage for
inflation, in addition to maintaining a state minimum wage that
is $1 over the federal minimum wage. He opined that lower wage
earners have "lost ground," as the cost of living has increased.
He pointed out that both Washington State and Oregon have a
minimum wage that is adjusted for inflation.
MR. BELTRAMI, in regard to whether an increase in the minimum
wage would result in loss of jobs, explained that in other
states, the opposite has been true. He gave details regarding
the effect this has had on the economy in Washington State,
pointing out a 10.1 percent increase in restaurant and bar
employment.
4:03:10 PM
REPRESENTATIVE RAMRAS commented that the increase in employment
may have been higher if the minimum wage had not been increased.
He opined that this may have retarded the potential for growth
over time.
4:04:05 PM
MR. BELTRAMI replied that this is unknown. However, the
employment rate increased after the minimum wage increase was
implemented. He pointed out that there is much agreement among
economists that increasing the federal and state minimum wage
and adjusting it for inflation can significantly improve the
quality of life for low-income workers, without adverse effects.
Additionally, many of these economists previously believed the
opposite to be true. In regard to the federal minimum wage, he
stated that following the last increase, the Economic Policy
Institute did not find any significant job loss associated with
the increase. The low-wage labor market experienced lower
unemployment rates, increased family income, and lower poverty
rates.
4:05:33 PM
MR. BELTRAMI, in response to a question from Representative
Gatto, explained that there is no data to support the belief
that there would have been a higher percentage increase in
employment, had the minimum wage not been increased. He
expressed his willingness to consider data that would
substantiate this argument.
4:07:55 PM
REPRESENTATIVE GATTO surmised that the increase in employment
would have been higher, based on the information before the
committee. He stated his preference for testimony that is
factual and substantial.
4:09:28 PM
MR. BELTRAMI replied that the information he has provided was
prepared by the Bureau of Statistics. He reiterated that he
does not have any way to show what would have occurred without
an increase in the minimum wage. While the employment increase
may have been higher without the minimum wage increase, he has
not seen data to substantiate this.
REPRESENTATIVE GATTO questioned whether the minimum wage
increase should be higher, if raising it results in an increase
in employment. He asked whether there is a number that is most
appropriate.
MR. BELTRAMI replied that he is unable to adequately address
this.
4:11:38 PM
REPRESENTATIVE NEUMAN offered his understanding that Washington
State has experienced a decline in higher income jobs. This may
have resulted in more lower-wage employees. He surmised, then,
that this may account for the aforementioned employment
increase. He inquired as to the affect this legislation would
have on members of the Alaska AFL-CIO.
MR. BELTRAMI replied that while this may not directly impact
Alaska AFL-CIO members, it would affect them eventually. He
pointed out that the Alaska AFL-CIO also represents lower wage
earners that do not have representation. He stated that
inflation adjustments would make labor costs more predictable
for employers and allow Alaskans to rise above the poverty
level, while increasing the amount of money circulating through
the economy. In conclusion, he opined that the data has shown
that increases in the minimum wage would improve the economy.
He urged the committee to support HB 42.
4:14:35 PM
DOROTHY WILSON, Business Owner, stated that she is in opposition
of HB 42. She explained that she owns two small businesses in
Juneau. An increase in the minimum wage that is adjusted for
inflation would be devastating to small businesses. She shared
her experience that employees are not willing to work at the
minimum wage. Her business currently offers a base wage of $9
per hour, which is increased after 30 days. When lower earning
employees receive a wage increase, those at higher levels
request equivalent increases. She then detailed how a $1
increase would effect her businesses.
4:17:26 PM
MS. WILSON, in response to a question from Representative
Gardner, reiterated that her employees are not willing to work
for the minimum wage. If this rate was increased, the employees
would insist on making more per hour. She opined that the
minimum wage should encourage employees to improve, and find
better jobs. She shared her experience working for minimum
wage, and offered her understanding that the majority of minimum
wage earners are youth who have not worked before, college
students, or retired persons.
REPRESENTATIVE GARDNER agreed that a minimum wage earner would
want to improve his or her life. She questioned whether an
individual working year-round for $8 per hour would be "inspired
to want to improve their life."
MS. WILSON opined that applicants would not be willing to work
for $8 per hour.
4:21:51 PM
REPRESENTATIVE GARDNER applied her question to those individuals
working for $9 per hour.
MS. WILSON shared her belief that this is true. She added that
generally, the minimum wage is considered a "training wage" and
not a "living wage."
REPRESENTATIVE GARDNER, in regard to a comment from Ms. Wilson
regarding the "marketplace requirement," opined that if the
marketplace requires that employees be paid $9 per hour, this
would support the argument for increasing the minimum wage
statewide.
MS. WILSON shared her belief that if the minimum wage was
increased, those employees who are currently making $2 above the
minimum wage would wish to remain at this level. Therefore, the
aforementioned employees would request a raise to maintain a
wage that is $2 above the minimum wage. Additionally, the
employees who are making a higher hourly wage, who have been
employed by the company longer, would request an equivalent
raise.
REPRESENTATIVE NEUMAN inquired as to whether businesses
typically increase wages after the completion of a training
period.
MS. WILSON reiterated that her business increases wages after 30
days. She explained the process that occurs regarding seasonal
employees versus permanent employees.
4:24:26 PM
PAUL WOLFSON, Statistical Research Associate, Tuck School of
Business, Dartmouth College, began by giving a brief history of
his education and experience. In order to determine who would
be affected by the minimum wage increase, he looked at the
Current Population Survey (CPS), a monthly survey of 50 thousand
households conducted by the U.S. Census Bureau. He explained
that 25 percent of the households are asked detailed questions
regarding wages and salaries. He looked at this sample for each
month of 2006. This sample is drawn from households around the
country, with an equal number of households from each state.
REPRESENTATIVE RAMRAS inquired as to whether this is
representative of the population of each state.
MR. WOLFSON replied no. He explained that if done in this
manner, it would be difficult to "get a large enough sample to
say anything sensible about Alaska." Continuing on, he
explained that he focused on those individuals earning between
the current wage and the proposed $8 per hour minimum wage.
These individuals would be the most likely to be effected by a
minimum wage increase. He offered the following findings:
About 4.5 percent of those employed are in the aforementioned
wage range; slightly fewer than half were male, slightly more
than half were female; about two-thirds are Caucasian, while
about one-eighth are Alaskan Native or American Indian; about 40
percent are teenagers, 60 percent are adults; 40 percent of the
adults are over 25 years of age. He pointed out that the
average age of the adults is 38 years of age. Additionally, 25
percent of those in this wage range are parents. Nearly half of
these individuals live in households where the family income is
less than $30 thousand per year, while 25 percent live in
households where the income is less than $15 thousand per year.
MR. WOLFSON, in summary, stated that those individuals most
affected by the minimum wage are: less white, more female,
predominantly adults, and predominantly low income. He
explained that a great deal of research has been done regarding
this issue, and referred to a report done by David Card and Alan
B. Krueger regarding the effects a minimum wage increase in New
Jersey had on fast food restaurants on both sides of the
Pennsylvania/New Jersey border. Based on the analysis done, no
evidence was found to show a negative impact on employment in
New Jersey.
4:31:05 PM
REPRESENTATIVE RAMRAS reiterated his earlier question regarding
whether the minimum wage increase resulted in less elasticity in
funds available to make payroll increases to employees "in the
back of the house."
MR. WOLFSON replied that this is possible; however, studies have
not considered this.
REPRESENTATIVE RAMRAS inquired as to why this was not studied.
He opined that this is an "unintended consequence."
MR. WOLFSON replied that the main question in economics has been
"does employment take a hit when minimum wage goes up," which
has ramifications throughout the field. Additionally, the
information required for this analysis would be difficult to
gather.
REPRESENTATIVE RAMRAS inquired as to whether New York, New
Jersey, or Pennsylvania currently has a tip-tax credit in place.
MR. WOLFSON replied that he does not have this information, as
he is not familiar with the details in this area. He explained
that he is speaking as an economist, and is not intimately
acquainted with the restaurant industry.
REPRESENTATIVE GATTO questioned how a conclusion can be drawn
regarding employment, when all groups are not included.
MR. WOLFSON replied that in the aforementioned study, no
distinction was made between low and high wage workers. All
workers were considered, before and after the New Jersey minimum
wage increase.
REPRESENTATIVE RAMRAS reiterated his earlier question regarding
how increasing the minimum wage affects payroll increases for
the "back of the house."
MR. WOLFSON replied that the increase may come from various
sources, and agreed that this may be one of them. However, he
does not have evidence that shows this. Continuing on, he
stated that there is no official consensus on employment. He
noted that there is no strong evidence that a minimum wage
increase is bad for employment. He pointed out that the minimum
wage increase in Washington State resulted in employees on the
Idaho border seeking jobs in Washington State, thus causing
businesses on the Idaho border to offer equivalent wages. He
explained that this may be related to higher quality workers, as
a result of the higher minimum wage; it may also be due to the
workers' willingness to work more efficiently. Most studies
also report a reduction in employee turnover. He said "I don't
mean to imply that the minimum wage never reduces employment."
In regard to a comment made by Representative Gatto questioning
whether the minimum wage should be increased to $15 or $20, if
increasing the wage would result in a better economy, he stated
that this is not necessarily the case. Historical data suggests
that small increases of 10 percent or less, or when fewer than
10 percent of those working are directly impacted, there is
little likelihood that this will have a detectable negative
impact on employment.
4:38:17 PM
CHIP WAGONER, Executive Director, Alaska Conference of Catholic
Bishops, began by noting the difficulties involved in deciding
on the appropriate minimum wage rate. He commented that each
individual deserves protection and dignity. He opined that for
an individual to maintain dignity and "a decent life," he or she
must earn enough money to provide food, clothing, shelter, and
medical needs. He explained that a person does not need the
ability to make extravagant purchases, but rather the ability to
earn a living wage. He agreed with the testimony provided by
Mr. Wolfson. He surmised that there are different ways for
businesses to deal with an increase in the minimum wage.
4:42:50 PM
MR. WAGONER, in regard to union jobs, stated that bus drivers
currently make twice the minimum wage. He opined that there is
no reason for this requirement, and suggested that members'
consider changing this. In response to Representative Ramras'
question regarding elasticity, he shared his belief that this is
a "false choice." He opined that this assumes that the employer
must take money from one employee group to cover the cost of the
minimum wage increase. However, there are other options. He
opined that increasing prices is the most logical. He stressed
that employers have choices. He stated that the restaurant
industry is very difficult to succeed in, and offered his
understanding that when the economy is good, restaurants
prosper, as patrons have more discretionary income. He opined
that this is a bigger issue than an increase in the minimum
wage. He offered statistics to support this.
4:46:08 PM
REPRESENTATIVE RAMRAS shared his experience in the restaurant
industry.
4:48:17 PM
REPRESENTATIVE GATTO inquired as to what hourly wage is required
to earn a "living wage."
MR. WAGONER replied that in Juneau, this wage is around $19 per
hour.
REPRESENTATIVE GATTO commented that a person cannot raise a
family on $8 per hour. He inquired as to the goal behind
raising the minimum wage.
MR. WAGONER replied that $8 per hour is a step in the right
direction. In response to additional comments from
Representative Gatto, he explained that the majority of
individuals earning the minimum wage are adults, 40 percent of
whom are the sole wage earners in their families.
4:51:29 PM
REPRESENTATIVE GARDNER brought attention to previous testimony
that 25 percent of those earning minimum wage live in households
with a household income of less than $15 thousand per year.
Additionally, 50 percent of those earning minimum wage live in
households where the income is less than $30 thousand. She
pointed out that earning $19 per hour equals around $40 thousand
per year. Additionally, only 40 percent of those individuals
earning the minimum wage in Alaska are teenagers.
MR. WAGONER then discussed inflation indexing. He pointed out
that since 1959, individuals earning a minimum wage have seen a
31 percent decrease in purchasing power. He opined that
adjusting the wage for inflation is fair to workers.
REPRESENTATIVE NEUMAN pointed out that currently, 8 percent of
the workforce is earning minimum wage. He opined that in 1959,
this figure was higher.
4:54:12 PM
REPRESENTATIVE HARRY CRAWFORD, Alaska State Legislature, joint
prime sponsor, stated that previous the minimum wage increase
resulted in an increase in employment rates. Businesses
prospered as a result, and there was no measurable displacement
of workers. In regard to minimum wage increases resulting in
less employment, he stated that this has not borne out. He
stated that this has actually expanded the economy.
4:56:28 PM
REPRESENTATIVE GARDNER, speaking as a joint prime sponsor of HB
42, agreed that in order to have dignity, an individual must be
able to earn a living wage. She opined that the minimum wage
should supply this. She shared her experience earning the
minimum wage, and pointed out that she is a small business
owner. She said "I kind of see from a variety of points, but
what it comes down to is values...."
4:57:53 PM
REPRESENTATIVE GARDNER moved to report CSHB 42, Version 25-
LS0226\K, Chenoweth/Wayne, 2/9/07, out of committee with
individual recommendations and the accompanying fiscal notes.
REPRESENTATIVE NEUMAN objected.
A roll call vote was taken. Representatives Buch, Gardner, and
Olson voted in favor of moving CSHB 42, Version K, from
committee. Representatives Neuman, Gatto, and Ramras voted
against it. Therefore, CSHB 42, Version K, failed to be
reported out of the House Labor and Commerce Standing Committee
by a vote of 3-3.
4:58:41 PM
ADJOURNMENT
There being no further business before the committee, the House
Labor and Commerce Standing Committee meeting was adjourned at
4:58:46 PM.
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