Legislature(2003 - 2004)

05/19/2003 08:03 AM L&C

Audio Topic
* first hearing in first committee of referral
+ 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                                                               
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                                                               
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                                                               
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                                                                    
     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                                                                    
     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                                                                    
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                                                               
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                                                               
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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