Legislature(2003 - 2004)
05/19/2003 08:03 AM L&C
* first hearing in first committee of referral
= bill was previously heard/scheduled
= 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 We're under the hopes that it could at least happen once before it's repealed so that we would know whether or not it works.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.