Legislature(2009 - 2010)BELTZ 211

02/12/2009 01:30 PM LABOR & COMMERCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
Heard & Held
Bills Previously Heard/Scheduled
                    SB 1-ALASKA MINIMUM WAGE                                                                                
1:36:53 PM                                                                                                                    
CHAIR PASKVAN announced SB 1 to be up for consideration.                                                                        
SENATOR WIELECHOWSKI, sponsor  of SB 1, said he  would talk about                                                               
issues  brought up  in the  last Labor  and Commerce  meeting. He                                                               
said a  question was  raised about the  impact of  increasing the                                                               
minimum wage  on small business  owners and business  in general.                                                               
This  question was  posed last  year in  this committee  when the                                                               
minimum wage bill discussed. An  expert testified at that time by                                                               
the  name  of Dr.  Paul  Wolfson  of  Dartmouth College,  and  he                                                               
described  a  study   by  David  Card  from   the  University  of                                                               
California Berkley  and Alan Kruger of  Princeton University that                                                               
examined   fast  food   restaurants   on  either   side  of   the                                                               
Pennsylvania/New Jersey  border, comparing employment  before and                                                               
after a minimum wage increase in  New Jersey. That study found no                                                               
evidence  that  employment  in  New  Jersey  declined  after  the                                                               
SENATOR  WIELECHOWSKI said  that Dr.  Wolfson also  quoted Robert                                                               
Solow, an MIT  economist and Nobel Prize winner,  who did similar                                                               
research and concluded that the evidence  of job loss is weak and                                                               
that suggests  that at the  most job  loss is small.  Dr. Wolfson                                                               
also  talked about  the work  of  Dr. Alan  Blinder, a  Princeton                                                               
economist  and  former  vice president  of  the  Federal  Reserve                                                               
System, who after much study,  stated "What's changed in the last                                                               
10  to  15  years  is   an  accumulation  of  evidence  that  the                                                               
employment problem is not very significant."                                                                                    
1:40:17 PM                                                                                                                    
SENATOR  BUNDE said  he mentioned  that one  report said  poverty                                                               
levels fell after the increase in  minimum wage and asked if this                                                               
bill passes and  the minimum wage become $8.74,  would that bring                                                               
Alaskan people above poverty level.                                                                                             
SENATOR  WIELECHOWSKI answered  yes; poverty  level for  a single                                                               
person is  roughly $14,000/yr.; this  will increase that  wage by                                                               
roughly $1500/yr. or $2000/yr.                                                                                                  
CHAIR PASKVAN said  there are three components to  this bill: the                                                               
rate, the cost  of living allowance, and whether or  not there is                                                               
a tip credit provision.                                                                                                         
1:41:39 PM                                                                                                                    
SENATOR  WIELECHOWSKI  explained  that  historically  Alaska  has                                                               
always had  a higher minimum  wage than the federal  minimum wage                                                               
by about  0.50 cents.  Prior to  2003, we were  at 0.50  cents or                                                               
$1.00  above minimum  wage.  In  July Alaska  will  be below  the                                                               
federal minimum  wage for the  first time in the  state's history                                                               
and we'll  be 40  in  the nation. This  is one of the  reasons he                                                               
felt strongly  about having some sort  of an index that  at least                                                               
keeps us  in line with  the federal  minimum wage. When  this was                                                               
discussed  in  2003, Alaska's  minimum  wage  was increased  from                                                               
about  $5.00 to  $7.15, and  we  were several  dollars above  the                                                               
federal minimum wage. And it had little impact on jobs.                                                                         
On the  cost of living  allowance, Senator Wielechowski  said the                                                               
problem we have  is that costs for everyone  increase every year,                                                               
particularly  for low  income Alaskans,  and we  know since  2003                                                               
costs have increased dramatically for  fuel and food. If the cost                                                               
of  living allowance  adjustment been  kept  in, we  would be  at                                                               
$8.78 next year,  and he wouldn't be here today.  Now in going to                                                               
$8.78 people  are saying that's too  big of a jump.  "And so, you                                                               
are never  able to  keep pace with  inflation with  that circular                                                               
1:44:01 PM                                                                                                                    
SENATOR WIELECHOWSKI  said he didn't  support the tip  credit. "I                                                               
don't support  taking wages  out of the  pockets of  hard working                                                               
tip earners.  It's not something I  philosophically support; it's                                                               
not something  that is found  in many  of the west  coast states,                                                               
for instance."   Washington, which next year will  have a minimum                                                               
wage  at $8.78,  does  not have  a tip  credit  and neither  does                                                               
1:44:43 PM                                                                                                                    
SENATOR MEYER asked if most states have a tip credit.                                                                           
SENATOR WIELECHOWSKI replied yes.                                                                                               
SENATOR MEYER  asked if the  federal minimum  wage is tied  to an                                                               
SENATOR WIELECHOWSKI answered no; the  federal minimum wage has a                                                               
stair-step approach to the point where in July it will be $7.25.                                                                
1:46:18 PM                                                                                                                    
MARIE  DARLIN,   Coordinator,  AARP  Capital  City   Task  Force,                                                               
supported SB 1.  She pointed out that Alaska's cost  of living is                                                               
the  highest  in  the  nation   and  it's  becoming  increasingly                                                               
difficult to  get by on the  minimum wage. Seniors are  having to                                                               
go back in  to these minimum wage positions, and  that is another                                                               
reason to support higher wages.                                                                                                 
1:48:38 PM                                                                                                                    
JACK  AMON,  owner,  Marx  Brother's   Café  and  Marx  Brother's                                                               
Catering,  had  serious concerns  about  how  SB 1  would  affect                                                               
restaurants.  While the  intentions  behind SB  1  are good,  the                                                               
benefit would accrue  only to the highest  paid employees because                                                               
they are the  servers and already make at least  $20/hr. in tips.                                                               
While the perception  is that a minimum wage  increase would help                                                               
back-of-the house employees such  as dishwashers, the opposite is                                                               
true.  Hourly rates  are not  their main  source of  income; what                                                               
shifts  they work  are. It's  more important  than how  long they                                                               
MR. AMON said he felt there  is a lack of understanding of tipped                                                               
income. The  federal government has  included a tip  credit since                                                               
the enactment of the Fair Labor  Standards Act. It is required to                                                               
be   reported  and   is  subject   to  matching   FICA  and   ESC                                                               
contributions. One-third of his taxable  wage base is from tipped                                                               
income. Nationally, restaurants net  between 7-9 percent of gross                                                               
sales; labor is a more  significant expense comprising an average                                                               
of 20-30 percent  of gross sales. The impact  of this legislation                                                               
will be disproportionately borne  by the restaurant industry, and                                                               
"Saying the  increased costs can be  passed on to consumers  is a                                                               
fallacy. In these uncertain and  troubling economic times, dining                                                               
out is  considered a  luxury and  increasing prices  can directly                                                               
lead to declines in business."                                                                                                  
1:51:24 PM                                                                                                                    
CHAIR  PASKVAN asked  if one-third  of  his income  base is  from                                                               
declared tipped income, where the $7.15 fits in.                                                                                
MR. AMON replied that  $7.15 is the wage he pays,  but he is also                                                               
required to pay matching taxes  on his employee's tips. "It often                                                               
happens  that  the  tipped  income is  so  great  that  employees                                                               
generate a negative  paycheck." Most servers make  three times as                                                               
much in tips as their minimum paid wage of $7.15.                                                                               
1:53:51 PM                                                                                                                    
DAVE  LAMBERT, Fairbanks,  said he  contracts with  nonprofits to                                                               
raise money  for them. The maximum  price he can charge  per item                                                               
is fixed by  state law; so he cannot raise  prices. His employees                                                               
survive on tips; he has employees  at minimum wage who claim they                                                               
make $80,000/yr. There  needs to be some way to  credit for tips;                                                               
39 states have a tip allowance. He  said he would like his job to                                                               
be guaranteed inflation-proofed,  too, and if they  do that, they                                                               
would do it for all state contracts, too.                                                                                       
1:55:32 PM                                                                                                                    
BOB CARL,  Wasilla restaurant owner,  said he employs  27 people.                                                               
He  has been  hammered this  past year  by raising  costs -  a 30                                                               
percent  increase in  freight costs  and  utility expenses  going                                                               
through  the roof  - and  he  didn't know  how he  could bear  an                                                               
increase in  labor costs. Eighty  percent of his  employees still                                                               
live at  home. You  are not supposed  to be able  to live  on the                                                               
minimum wage;  it is  a learning wage.  "Somebody's got  to teach                                                               
kids   how   to   get   into   the   workforce....accountability,                                                               
responsibility, how to report to a  job."  People get moved up as                                                               
they  become  more  proficient.  A  lot of  these  jobs  are  not                                                               
intended to be career jobs; his  industry can't pass the costs on                                                               
and  he  has  already  absorbed   other  costs.  He  will  likely                                                               
eliminate 5-7 jobs if this  passes. But if this ultimately drives                                                               
him out of business, all 27 jobs will be lost.                                                                                  
1:59:22 PM                                                                                                                    
BRUCE  BURNETT,  owner,   T.G.I.  Friday's  Restaurant,  Wasilla,                                                               
supported having  a tip credit.  He said it is  misconstrued that                                                               
Alaska has  the highest cost of  living; at least Hawaii  and San                                                               
Francisco are  higher; also,  46 other  states have  tip credits.                                                               
Fuel  costs went  up  30  percent last  year  and  he is  already                                                               
working on a small margin. This  bill would cost him 2 percent of                                                               
his bottom line, and he would  have to let one manager and others                                                               
go if SB 1 passes.                                                                                                              
2:02:35 PM                                                                                                                    
CHAIR PASKVAN asked what he has in mind in terms of tip credit.                                                                 
MR. BURNETT answered  that Texas and Florida have  a minimum wage                                                               
of $2.13 for tipped employees  and he would suggest starting with                                                               
that. They  should at least freeze  wages where they are  for the                                                               
hospitality industry.                                                                                                           
2:03:17 PM                                                                                                                    
GLORIA BURCELL,  restaurant owner,  Fairbanks, opposed SB  1. She                                                               
said the wait staff are the  only employees who make minimum wage                                                               
and  they are  the  highest  paid in  her  establishment. It  was                                                               
already hard enough to get through  the winter and she would have                                                               
to cut jobs; there isn't any other way to make it.                                                                              
2:05:04 PM                                                                                                                    
TAMMY GRIFFIN, Chair, Alaska Hotel  and Lodging Association, said                                                               
she  is  the  director  of  operations  for  a  hotel  management                                                               
company. She is  a life-long Alaskan, and when  she first started                                                               
out in  the industry she lived  on tips, alone; she  didn't get a                                                               
MS. GRIFFIN  looked at  the Wage  and Hour  Division of  the U.S.                                                               
Department  of Labor  website that  indicate on  January 1,  2009                                                               
forty-three states  offered a definition of  tipped employees and                                                               
a minimum dollar amount they can  make so that no tipped employee                                                               
would ever  go below a  minimum wage. Most states  have specified                                                               
$20/hr.-$30/hr.  The  2007 Wage  Watch  Survey  sponsored by  the                                                               
Alaska  Hotel Alliance  indicated  there are  literally zero  job                                                               
classifications within  the hotel  industry that  are at  or even                                                               
close to minimum  wage other than tipped employees  who are often                                                               
the highest paid.                                                                                                               
2:08:42 PM                                                                                                                    
DALE FOX,  President and CEO, Alaska  Cabarets Hotel, Restaurants                                                               
and  Retailer  Association (CHARR),  opposed  SB  1. There  is  a                                                               
national crisis out  there, he said, and some people  feel it has                                                               
passed Alaska by. But he cited  how all tourism bookings are down                                                               
and  said that  retail sales  are down  to the  lowest in  years.                                                               
Unemployment is  the highest  in five  years and  restaurants are                                                               
seeing their seventh consecutive  month of declines. Revenues are                                                               
down  significantly and  expenses are  up. He  said most  minimum                                                               
wage earners in  Alaska are tipped employees or  young people who                                                               
are  growing  job skills.  He  has  heard  from members  that  an                                                               
average wait person in a  restaurant earns $40,000-$60,000/yr. in                                                               
tips alone. He asked them  to consider inserting tip credits into                                                               
SB 1.                                                                                                                           
2:12:13 PM                                                                                                                    
LARRY HACKENMILLER,  National Federation of  Independent Business                                                               
(NFIB), said  he is also a  small business man. He  opposed SB 1.                                                               
He said he  couldn't understand why in this  particular bill, the                                                               
sponsors are  so against tipping  credit, but they are  using the                                                               
poverty level as their argument to increase the minimum wage.                                                                   
Economists made  these statements in  2006 and they  are probably                                                               
the  same ones  who have  been  at the  helm for  the last  three                                                               
years;  so he  wouldn't put  a  lot of  credit in  that. He  also                                                               
stated that the  consumer price index (CPI)  is inflationary, and                                                               
he didn't  know why the minimum  wage had to be  connected to it.                                                               
He would  have to  pay more  Workers' Compensation  (CPI) because                                                               
that  is based  on gross  salaries, along  with more  federal and                                                               
state  taxes.  The  only  reason  this came  up  is  because  the                                                               
sponsors wanted to attach the CPI  to the minimum wage years ago.                                                               
When it  comes to poverty  level, you  aren't dealing with  the 7                                                               
percent  that they  say makes  the  minimum wage  or less.  Those                                                               
economists are  dealing with the  93 percent of workers  who make                                                               
good money and they have no idea of how to run a small business.                                                                
2:15:01 PM                                                                                                                    
CHAIR PASKVAN  ended public testimony and  encouraged letters and                                                               
email on SB 1; he then held SB 1 for further work.                                                                              
2:15:32 PM                                                                                                                    
CHAIR PASKVAN called an at ease at 2:15.                                                                                        

Document Name Date/Time Subjects
SB01 - Alaska Minimum Wage - Bill Packet.pdf SL&C 2/5/2009 1:30:00 PM
SL&C 2/12/2009 1:30:00 PM
SL&C 2/17/2009 1:30:00 PM
SL&C 2/24/2009 1:30:00 PM
SB 1
SB23 - Restore Defined Benefit - Bill Packet.pdf SL&C 2/12/2009 1:30:00 PM
SL&C 2/19/2009 1:30:00 PM
SL&C 2/26/2009 1:30:00 PM
SB 23