Legislature(2001 - 2002)
01/29/2001 03:15 PM House L&C
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
January 29, 2001
3:15 p.m.
MEMBERS PRESENT
Representative Lisa Murkowski, Chair
Representative Andrew Halcro, Vice Chair
Representative Kevin Meyer
Representative Pete Kott
Representative Norman Rokeberg
Representative Harry Crawford
Representative Joe Hayes
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
HOUSE BILL NO. 81
"An Act extending the termination date of the Board of Dental
Examiners."
- HEARD AND HELD
HOUSE BILL NO. 56
"An Act relating to minimum wages."
- HEARD AND HELD
PREVIOUS ACTION
BILL: HB 81
SHORT TITLE: EXTENDING BOARD OF DENTAL EXAMINERS
Jrn-Date Jrn-Page Action
01/19/01 0130 (H) READ THE FIRST TIME - REFERRALS
01/19/01 0130 (H) L&C, FIN
01/19/01 0130 (H) REFERRED TO LABOR & COMMERCE
01/29/01 Text (H) L&C AT 3:15 PM CAPITOL 17
BILL: HB 56
SHORT TITLE: MINIMUM WAGE
Jrn-Date Jrn-Page Action
01/12/01 0071 (H) READ THE FIRST TIME - REFERRALS
01/12/01 0071 (H) L&C, FIN
01/12/01 0071 (H) REFERRED TO LABOR & COMMERCE
01/16/01 0104 (H) COSPONSOR(S): HARRIS
01/19/01 0134 (H) COSPONSOR(S): MULDER
01/29/01 Text (H) L&C AT 3:15 PM CAPITOL 17
WITNESS REGISTER
REPRESENTATIVE HUGH FATE
Alaska State Legislature
Capitol Building, Room 416
Juneau, Alaska 99801
POSITION STATEMENT: Sponsor of HB 81.
ROGER WORTMAN, Staff to Representative Pete Kott
Alaska State Legislature
Capitol Building, Room 204
Juneau, Alaska 99801
POSITION STATEMENT: Spoke for Representative Kott, sponsor of
HB 56.
ED FLANAGAN, Commissioner
Department of Labor & Workforce Development
P.O. Box 21149
Juneau, Alaska 99802-1149
POSITION STATEMENT: Spoke on various aspects of the department
with respect to HB 56 and Governor Knowles' proposed minimum
wage legislation.
JOHN BROWN, President
Fairbanks Central Labor Council
819 1st Avenue
Fairbanks, Alaska 99701
POSITION STATEMENT: Spoke about HB 56 and the governor's
proposed minimum wage legislation.
ROXANNE SMITH, Waitress
Hangar on the Wharf Restaurant
4020 Deborah Drive
Juneau, Alaska 99801
POSITION STATEMENT: Testified on HB 56 and the proposed minimum
wage with regards to wait staff.
JACK AMON, President
Alaska Restaurant and Beverage Association
627 W. 3rd
Anchorage, Alaska 99501
POSITION STATEMENT: Spoke about HB 56.
FRED ROSENBERG, Owner
Red Robin Restaurants of Anchorage
4450 Cordova Street
Anchorage, Alaska 99503
POSITION STATEMENT: Spoke about HB 56.
BILL PARGETTER, Owner
Applebee's Restaurant of Anchorage
4331 Credit Union Drive
Anchorage, Alaska 99503
POSITION STATEMENT: Spoke about HB 56.
ACTION NARRATIVE
TAPE 01-7, SIDE A
Number 0001
CHAIR LISA MURKOWSKI called the House Labor and Commerce
Standing Committee meeting to order at 3:15 p.m.
HB 81 - EXTENDING BOARD OF DENTAL EXAMINERS
Number 0040
CHAIR MURKOWSKI announced the first bill to be heard would be
HOUSE BILL NO. 81, "An Act extending the termination date of the
Board of Dental Examiners."
REPRESENTATIVE HUGH FATE, Alaska State Legislature, sponsor of
HB 81, introduced the bill and had the following testimony:
Under Alaska Statute 08.03.101 (c) (7), the Board of
Dental Examiners will terminate on June 30, 2001. A
report released by the legislative budget and audit
committee recommended that the legislature extend the
board's date to June 30, 2005. This is what House
Bill 81 accomplishes. The regulation and licensing of
qualified dentists and hygienists benefits the
public's safety and welfare. The board contributes to
the safeguarding [of] the public interests by ensuring
competences and integrity of dentists and dental
hygienists. As a retired dentist, I believe the board
provides an invaluable service and should continue to
do so.
REPRESENTATIVE FATE said the Board of Dental Examiners and the
Dental Society would like to make some amendments to HB 81
regarding the Dental Practice Act itself. He asked that the
bill be held until the amendments are available, and he would
then introduce them to the committee.
CHAIR MURKOWSKI stated the committee received a copy of the
audit on Friday. She understood that Representative Fate had
not had an opportunity to see the letter or understand that
there were some potential amendments until this morning. She
said that the committee would like to give the board an
opportunity to consider the suggestions and proposals.
CHAIR MURKOWSKI said that since the bill had been introduced to
the committee, when the amendments to HB 81 are ready, it can be
rescheduled and would fall under bills previously heard. [HB 56
was held over.]
HB 56 - MINIMUM WAGE
Number 0339
CHAIR MURKOWSKI announced that the next item of business would
be HOUSE BILL NO. 56, "An Act relating to minimum wages."
ROGER WORTMAN, Staff to Representative Pete Kott, sponsor of HB
56, stated that HB 56 increases the minimum wage from $5.65 to
$6.40 per hour the first year, and then to $6.90 per hour the
second year.
MR. WORTMAN stated that Alaska lags behind other West Coast
states, while the cost of living in Alaska is equal to or higher
than in those other states. He said the last minimum wage
increase was in October 1997, and with increased inflation and
cost of living, it is time for wage adjustments. He asked the
committee to support HB 56.
Number 0464
REPRESENTATIVE HALCRO referred to page 2, section 2, subsection
(c), which addresses school bus transportation for bus drivers
with the Department of Education and Early Development (EED).
He said bus drivers' wages are tied to twice the minimum wage;
if the minimum wage is raised, the bar will be raised for school
bus drivers. This will have a direct impact on the cost of
transportation for education.
REPRESENTATIVE KOTT said he had not seen a fiscal note from EED
to determine how this increase in minimum wage will affect its
[department's] cost. He said that right now, school bus drivers
are at a premium and are paid more than minimum wage; they are
having a hard time getting drivers in various areas around the
state. He said there would be adjustments to their minimum wage
based on this bill, but it was passed into law a few years ago
[tying school bus drivers' wages to twice the minimum wage].
MR. WORTMAN referred to an occupational survey done two to three
years ago by the former Department of Labor. He said according
to data from the fourth quarter of 1998, there were roughly
14,500 workers with wages between $5.65 and $6.50 per hour and
the survey did not list specific occupations.
REPRESENTATIVE MEYER explained that "we" don't know how many
people are working at the $5.65-an-hour wage because the 14,500
workers refer to the range [between $5.65 and $6.50]. He asked
if it was known how many of these 14,000 people were heads of
households, high school kids, or people just wanting part-time
jobs.
Number 0723
REPRESENTATIVE KOTT responded by saying that those numbers are
not available by age group. He said the report was from the
fourth quarter of 1998, a select quarter which may not be truly
indicative of the number of Alaskans earning minimum wage.
REPRESENTATIVE KOTT said many of those low-end wage earners work
in part-time positions in the fishing or tourism industries and
in the canneries. He said he suspects the number of part-time
personnel would be larger based on the number of college
students who work in those various fields.
REPRESENTATIVE MEYER said he would like information on how many
of those 14,000 people making between $5.65 and $6.50 work in
the restaurant industry. He said the restaurant industry pays
closer to minimum wage and tips are added on top of that. So to
say they are getting minimum wage probably isn't totally
accurate.
REPRESENTATIVE KOTT said in the report [occupational survey done
by the former Department of Labor] stated that 32 percent were
working in the restaurant and beverage industry; it was broken
down to that extent. He said he wasn't aware of a breakdown for
age group or single-parent workers.
REPRESENTATIVE CRAWFORD informed the committee that according to
the governor's report, 70 percent of those receiving minimum
wage are adults, with many employed in seafood processing, food
service, daycare, retail, security, and delivery services.
Number 0949
REPRESENTATIVE ROKEBERG said the committee does not have the
information before them to make a decision on who is really
being impacted. He said the department had indicated there were
14,500 people, but of those, 6,000 are in the hospitality or
restaurant industries. He asked whom it is that "they" are
trying to help.
REPRESENTATIVE ROKEBERG stated that the passing of this bill [HB
56] might help the state budget significantly by reducing the
number of people receiving Alaska Temporary Assistance Program
(ATAP) benefits; keeping people moving forward in the program.
MR. WORTMAN said this [legislation] would affect the quality of
life for those 14,500 people who struggle with basic necessities
including food, shelter, clothing, fuel, and transportation. He
said the information regarding the percentage of young people or
first-time job holders [earning minimum wage] was not available.
REPRESENTATIVE ROKEBERG said it is possible that 6,000 [of the
14,500] people earning minimum wage work in the restaurant
industry. He said these people are actually making more than
minimum wage when tips are factored in. He said Alaska is not
one of the 43 states that allow a tip credit. He asked Mr.
Wortman if the actual number of people earning minimum wage
might be more like 8,000 [people], instead of 14,500.
MR. WORTMAN answered by saying, "If indeed the 6,000 is
correct."
REPRESENTATIVE ROKEBERG reiterated that he would like to hear
more information about whom they are trying to help [by raising
the minimum wage]. He said the job market, in the crucible of
free enterprise, is setting wages to a large extent. He said
this is found not only in Alaska but also in Washington [State],
Oregon, and California, which like Alaska don't have a tip
credit and do have minimum wages that are similar to [those
proposed in] the bill that Representative Kott introduced.
Number 1146
CHAIR MURKOWSKI pointed out that the purpose of having this bill
heard early is to get some of the questions out on the table.
She was pleased to see Jim Nordlund, Director, Division of
Public Assistance, Department of Health & Social Services
(DHSS), here to talk about the ATAP component of minimum wage.
She said this is the first hearing on minimum wage and it is
important to let the DLWD know what the committee's information
needs are.
REPRESENTATIVE KOTT revisited the question of whom "they" are
trying to help. He said he would submit that "they" are trying
to help all people who are making $5.65 [an hour], whether they
are on one of the state's assistance programs or are high school
seniors, because they have the same cost of living. He said
they probably wouldn't have the same conditions as others in
that category. He said that while there could be 6,000
employees in the restaurant and beverage industry receiving some
substantial amounts of monies in tips, they don't know how many
fall within that 14,000 because many are making well above
minimum wage and well above the $6.50 [dollars an hour].
REPRESENTATIVE ROKEBERG referred back to subsection (c) [of HB
56] regarding bus drivers and asked if it was the sponsor's
intention to reconfirm, as a matter of state policy, or if the
drafters put the bus driver provision in the bill because it
includes minimum wage.
MR. WORTMAN said he assumes the school districts fund the bus
drivers and get the contracts, which have certain rules and
regulations. He said he, too, would like to know, and could
bring that up at the next meeting.
Number 1392
REPRESENTATIVE KOTT answered by saying it is a reconfirmation of
established policy; the legislature established a minimum wage
and [the provision that states] that bus drivers should be paid
double. He said "they" are just elevating them to that standard
based on the policy that was set three to four years ago.
REPRESENTATIVE ROKEBERG said bus drivers handle children and
should be adequately paid. He said some smaller communities in
the state have a hard time finding bus drivers. He said if he
were a commercial fisherman in the summer and wanted to drive
bus in the winter, he might be willing to do it for less than
double the minimum wage.
REPRESENTATIVE ROKEBERG suggested the committee might want to
revisit the topic [double minimum wage for bus drivers] since
it's included in the bill. He said the cost of transportation
might be going up due to fuel increases.
REPRESENTATIVE KOTT said he did not know of a bus driver
anywhere [in Alaska] making less than $12.00 per hour, and he
recalled seeing LaidLaw advertising for bus drivers in the paper
and paying well above $11.30.
Number 1500
REPRESENTATIVE HALCRO stated that if bus drivers are not
attracted for less than $11.30 per hour, the same would apply to
the normal minimum wage; an employer would not be able to hire a
skilled person for $5.65 an hour but would need to pay them what
the market would bear. He said if one accepts the argument for
school bus drivers, it would be the same for the rest of the
occupational lines as it relates to minimum wage.
REPRESENTATIVE KOTT agreed and said that in his trade he can't
pay someone minimum wage but must pay a fair market wage that is
well above that.
REPRESENTATIVE MURKOWSKI asked about the rationale for changing
Alaska statutes. She said that traditionally Alaska has been
tied to the federal minimum wage, which is .50 cents over
[minimum wage], since 1959. She asked why Alaska doesn't
continue to be tied to the federal minimum wage.
REPRESENTATIVE KOTT explained that the rational was that Alaska
ought to control its own destiny and not rely on the federal
government to dictate what the minimum wage should be. He said
this gets Alaska out from underneath [the federal government's
control] so that in times of economic well-being, we can adjust
it accordingly.
REPRESENTATIVE ROKEBERG said there was legislation introduced in
Congress that would accomplish much of what [HB 56] would,
except the [Alaska] legislature would not regain control of
setting minimum wage.
REPRESENTATIVE KOTT commented that Congress introduced
legislation that would increase the federal rate to $6.15, which
is a $1.00 increase. He said the situation is different up here
[in Alaska], and we don't need to tie minimum wage to the
federal minimum wage.
ED FLANAGAN, Commissioner, Department of Labor & Workforce
Development (DLWD), said he and the governor both appreciate the
committee taking this legislation up. He said it is important
legislation for Alaskan workers, particularly those that need
help the most.
COMMISSIONER FLANAGAN said he would like to talk about some of
the differences between Representative Kott's bill and the
governor's for minimum wage.
COMMISSIONER FLANAGAN explained that the DLWD does not have age
and household status data by wage category; the 70 percent
figure [mentioned by Representative Crawford] was from a
national survey which showed that 70 percent of minimum wage
earners were adults. He said the best state-specific
information the DLWD has is from the occupational employment
survey; the most recent is from the fourth quarter of 1998. He
said it is a good measure but shows actual wages in ranges. He
said they don't have the number [of people] making $5.65 [per
hour], but the survey shows 14,400 people making between $5.65
and $6.74, not $6.50.
COMMISSIONER FLANAGAN said according to the survey, 32 percent
represents [minimum wage employment in] eating and drinking
places, not 6,000 [people] but 4,664, and includes untipped
employees. He said the DLWD might be able to break down some
information by occupation for wait staff personnel in the
average annual jobs by monthly average. He said the DLWD could
try to refine some of that data for the committee.
COMMISSIONER FLANAGAN said when considering an increase to the
minimum wage, it is important to not just consider those at
minimum wage right now, because it will help all people under
the new proposed increase. He said the $6.74 cutoff, under the
second year of Representative Kott's bill, represents the low
number for the people who got a raise. He said the occupational
employment survey is only done in the fourth quarter, which is
not likely to be the high quarter for low-wage employment
because that would be October through December. He said the
actual number of people making less than $6.75 per hour would
most likely be higher in the third quarter.
COMMISSIONER FLANAGAN explained that doing an ad hoc survey to
look at the third quarter would be pretty expensive. He stated
"they" [the DLWD] looked at job orders last week in the
Anchorage and Mat-Su Valley job centers and found 454 open job
orders. He said employers could have been looking for one
employee or for four employees. He said only 12 of the 454 were
paying the minimum wage; 146 didn't state a wage but were listed
as "depending upon experience." Out of 308 [job orders] that
listed the wage, 12 said $5.65 and 25 said $6.40 per hour and
under.
COMMISSIONER FLANAGAN said the Anchorage job center had 4,000
total job orders for the second half of [year] 2000; one third
did not state a wage, and of the 3,000 that did state a starting
wage, approximately 150 or 1.5 percent paid $6.40 per hour or
less. He said of those 150, about 50 were paying minimum wage.
He explained that employers are listing jobs with the DLWD that
pay minimum wage; many are in the beverage industry, but in
other industries too.
COMMISSIONER FLANAGAN said the breakdown from that fourth
quarter of 1998 [from the occupational employment survey] for
the 14,400 people earning minimum wage included: 32 percent in
eating and drinking places; 8.75 percent in amusement and
recreation services; 5 percent in educational services; 4
percent in government; and 4 percent in food and kindred
products, which includes mostly seafood workers.
COMMISSIONER FLANAGAN addressed the differences between
Representative Kott's bill [HB 56] and that of the governor. He
said the governor's bill has earlier effective dates, with the
increase [in minimum wage] to take place on October 1 of each
year in question. He said Congress does not address the issue
of increasing the minimum wage as often as it should. He said
it was done fairly regularly prior to 1981, and the federal
minimum wage kept pace pretty well with inflation, which was a
bipartisan effort. He said between 1981 and 1990 there was no
increase in the federal minimum wage and thus no increase in
Alaska's minimum wage.
COMMISSIONER FLANAGAN said the [Alaskan] administration had not
introduced this legislation for the past two to three years
because there was supposed to be federal legislation that would
make an increase. He said after the 1996 and 1997 increases,
the Alaskan legislature didn't want to confuse the issue if it
was going to happen.
COMMISSIONER FLANAGAN said Congress seems incapable of taking
care of minimum wage, and there is a proposal in at the moment,
but the administration has said that it would only support it if
the states could opt out. He said this doesn't make sense for a
federal minimum wage because the states can set their own wages
for non-federal "stuff" now.
COMMISSIONER FLANAGAN said the governor did introduce this bill
now because it doesn't look like Congress can get around to
doing it. He said Alaska's minimum wage should be $6.50 per
hour, which is what it would have been, had the initiative been
successful. He said the initiative failed by 1,000 signatures
last year to be put on November's ballot.
COMMISSIONER FLANAGAN said "we" need to give employers time to
prepare [for increases in minimum wage] and to phase in the
increase, in two steps, to get to a minimum of $7.15 per hour.
He said if the federal government ever did increase [minimum
wage] to $6.15, Alaska would be $1.00 over the federal wage.
CHAIR MURKOWSKI asked how the minimum wage numbers in the bills
were derived.
COMMISSIONER FLANAGAN said a four-member family with the two
parents working 60 hours per week and making $7.15 [per hour]
would be at 105 percent of the poverty level for 2000. He said
by the time the $7.15 [proposed minimum wage] kicks in, they
would be around or just under the poverty level.
Number 2227
COMMISSIONER FLANAGAN said the proposed minimum wage increase
puts Alaska pretty much in line with what other West Coast
states are paying. He said 30 percent of those migrating to
Alaska come from California, which has a minimum wage of $6.25
that will rise to $6.75 next year. Washington [State] has just
gone to $6.72 with its first Cost of Living Allowance (COLA).
COMMISSIONER FLANAGAN said the low-wage employers would get
advance notice, but October 1 is a more appropriate [start date]
than January 1 for the raises. He said:
The other difference is, of course, ... not only the
$7.15 but in the out years, the cost of living
increase. Now, people have a lot of different
opinions about COLA, when you are applying a COLA to
someone who makes $50,000 or $75,000. Well maybe
there is a point in taking issue with that. I don't
know. But the Consumer Price Index (CPI) has been
readjusted federally in the last couple of years to
more accurately reflect differences in purchasing
power and replacement items and things like that. ...
It has been toned down somewhat in its impact, and
when we look at what we are applying the standard of
living [to], we are applying the CPI to somebody at
the poverty level, at best, if we go to $7.15. I
don't think that it is unreasonable. It also lets
everybody know what to expect, as far as we can
project future increases.
COMMISSIONER FLANAGAN commented that last year's legislature
addressed the problem with workers' compensation benefits, which
hadn't gone up for 17 years and that tied compensation benefits
to the average weekly wage in Alaska; the minimum and maximum
benefits will go up some, with time.
COMMISSIONER FLANAGAN reiterated that the primary differences
[between Representative Kott's bill and the governor's] are the
effective dates, the different amount, and the CPI. He urged
the legislature to look seriously at a CPI adjustment to keep
pace with basic inflation.
CHAIR MURKOWSKI said the [proposed minimum wage of] $7.15 per
hour would put Alaska at the top.
COMMISSIONER FLANAGAN affirmed that on October 1, 2002 Alaska
would have the highest minimum wage, with Washington's reaching
$7.08 in January 2003. He said Alaska has been at the top for
30 years because Alaska has paid .50 over the federal [minimum
wage].
CHAIR MURKOWSKI said it is no longer as expensive to live in
Alaska as it once was, and it is far more expensive to live in
metropolitan areas such as San Francisco, Seattle, or other
places in the Lower 48. She asked how the drop in cost of
living was being adjusted for, in increasing the minimum wage.
COMMISSIONER FLANAGAN said the cost-of-living differential is
the counterweight to the per-capita income not being the top of
the heap like it was for years. He said if the federal
government didn't go up to $5.15 and Alaska is up to $7.15, it
would represent a 40 percent increment. He said in 1959 Alaska
was saying that Alaskans should make 50 percent more; now it's
10 [percent].
Number 2433
COMMISSIONER FLANAGAN explained that most of Alaska's basic
costs have not gone down when compared with the rest of the
country except for certain areas like Boston, San Franscisco, or
Seattle. Responding to another question, he stated that the
DLWD does not track individual wage files and the length of time
an individual works at minimum wage.
REPRESENTATIVE MEYER said it is realistic to think some
employers will start employees out at minimum wage and then
boost them up once they have proven themselves and look like
they are going to work out. He said it would be good to know
how long people stay at minimum wage.
REPRESENTATIVE MEYER said he also believes that "we" need to
help those that need the help the most. He said if there are
heads of households making minimum wage, they need some help.
He explained that some employers are willing to hire handicapped
people and start them out at minimum wage knowing that they are
not going to perform as efficiently [as others might].
Tape 01-7, SIDE B
COMMISSIONER FLANAGAN said the research and analysis section of
the DLWD does not track people who make sub-minimum wage, but
the Division of Vocational Rehabilitation (DVR), DLWD, might,
since there is a provision in the law for a sub-minimum wage for
people in certain types of programs.
COMMISSIONER FLANAGAN said the legislature should keep in focus
that it is a minimum that is being set. He recognized that the
market determines the vast majority [of wages], but over the
years it has become obvious that government has a place in
setting the floor; the floor is not being set very high even at
$7.15 [per hour] two years from now.
COMMISSIONER FLANAGAN stated there is a basic equity for an 18-
year-old kid or a disabled person who might not otherwise have a
job, and he asked, "What is that time out of their life worth?"
COMMISSIONER FLANAGAN said the last time the minimum wage went
up, people said it would kill jobs in the beverage industry; but
that didn't happen, and the monthly average employment in the
food and beverage industry in 1997 went up 4 percent, the year
the second of the last two increases took effect. [Average
monthly employment] went from 1.3 percent the next year to 3
percent the following year, which is well in excess of the
averages for statewide employment for all jobs.
COMMISSIONER FLANAGAN said there is much less debate about the
job-eliminating effects of a minimum wage increase [now].
REPRESENTATIVE MEYER asked if the increased cost of the minimum
wage was passed on to the consumer by increasing the cost of
living.
COMMISSIONER FLANAGAN said much of the cost probably was passed
on to the consumer, which he thought was justified.
CHAIR MURKOWSKI returned to the issues of sub-minimum wage for
people who might be handicapped and exemptions from the minimum
wage in statute that relate specifically "to physical or mental
deficiencies, age or injury." She said it also states that
"they are subject to the restrictions and for the period of time
that are fixed by the commissioner." She asked Commissioner
Flanagan about those restrictions and the periods of time.
COMMISSIONER FLANAGAN said in his two years as commissioner, he
does not believe there have been any petitions of that nature.
He said there might be some ongoing [petitions] that predate
him, and the DLWD could provide the information.
CHAIR MURKOWSKI referred to subsection (2) and (3) of AS
23.10.070 which states: (2) an apprentice at the wages that are
approved by the commissioner; or (3) a learner at the wages and
subject to the restrictions and for the periods of time that are
fixed by the commissioner.
COMMISSIONER FLANAGAN said that section was pretty much obsolete
because it goes back to when the minimum wage was higher and
construction wages were lower. He said, "You could have had an
apprentice." He said he thought she was referring to law from
the 1960s. He referred to the youth provision in effect. If an
employer has an employee under the age of 18, and they work 30
hours or less per week, the employer is exempt from [paying] the
employee Alaska's minimum wage. He said employers can create
opportunities for youth under this provision and are bound by
the federal minimum wage. He said that after age 18 the
employer would be bound by the Wage and Hour Act.
REPRESENTATIVE ROKEBERG referred back to the exemptions to
minimum wage and verified with Commissioner Flanagan that he did
not recall signing any requests which would allow an employer to
pay an employee the learner wage.
COMMISSIONER FLANAGAN reiterated that the learner request is
basically obsolete and transitioned in the direction of
apprenticeships. He said the DLWD could check the
administrative and legislative history.
REPRESENTATIVE ROKEBERG said [Tom Cashen], the former Department
of Labor's commissioner, indicated there had never been an
approval by the DLWD's commissioner for any form that would
approve a learner's wage. He said Alaska Statute 23.10.070
provides for an exemption for a learner wage but historically
there has never been an approval by the commissioner of labor
for one. He said last year this committee had legislation on
the subject.
Number 2147
REPRESENTATIVE ROKEBERG emphasized that he would like to see
this area of legislation be addressed since it is germane to the
exemptions under minimum wage and how they work, particularly in
relationship to the disabled community. He wasn't sure if the
disabled community was aware that there is the possibility of an
exemption under the law.
COMMISSIONER FLANAGAN said the DVR branch could address the
federal legislation that allows for handicapped exemptions in
certain cases, which he believes is utilized in Alaska.
REPRESENTATIVE ROKEBERG mentioned the occupation employment
survey [which referred to the minimum wage ranging from $5.65 to
$6.74] and said it is conceivable that some [of those 14,500]
people are being paid above the minimum wage. He said the
committee is not sure what the numbers are. He said Alaska does
not have good statistics on a lot of things.
REPRESENTATIVE ROKEBERG referred to Commissioner Flanagan's
advocacy of the CPI, which he said is very inflationary, and he
asked:
Isn't it true that [one of] the basic tenets of
organized labor [is] that collective bargaining is
something that is sacrosanct and kind of a key
principle to organized labor and its relationship to
business?
COMMISSIONER FLANAGAN said he didn't see the relevance in
this context. He went on to say that in this regard they
are talking about people that are almost, without
exception, unrepresented by a union.
REPRESENTATIVE ROKEBERG said as a legislative body, "they"
are to act on the law to allegedly protect the interest of
workers. He said to him it goes against the whole concept
of collective bargaining where labor and management are at
the table bargaining; politicians and government are
bargaining on behalf of workers with business only
marginally represented.
COMMISSIONER FLANAGAN explained that if labor and
management were involved, as in a collective bargaining
relationship, the workers would probably be making well in
excess of the minimum wage, so it wouldn't be an issue. He
said it is entirely appropriate for government to establish
a floor for workers whether they are unionized or not; this
has been the policy of our country since 1934.
COMMISSIONER FLANAGAN referred back to the eating and
restaurant component [of the industry] that has been
growing at 3 to 4 percent and the issue of the lack of
effect from the last minimum wage increase. He said there
have been more high-end eateries in Anchorage over the last
four years, which seem to be doing pretty well. He said
not a lot are going out of business, as projected would
happen if the businesses weren't spared the $.40 minimum
wage increase. He said the growth supports the contention
that it has not had an adverse effect on businesses, but he
admitted that there had not been a survey done.
REPRESENTATIVE ROKEBERG communicated that in Juneau many
restaurants have gone out of business in the last four or
five years. He said the tourism industry has been one of
the only areas of growth in the economy during the last
couple of years, and he thinks the eating and restaurant
are tied directly to that particular industry.
COMMISSIONER FLANAGAN said the average monthly employment
over the course of the year has gone up; many sectors
besides tourism have enjoyed employment growth over the
last six years.
REPRESENTATIVE ROKEBERG asked if there is any way to
measure the effect that raising the minimum wage has on
cutting benefits.
COMMISSIONER FLANAGAN said the DLWD does not have
information on benefits because they only survey wages. He
said it could be the case [that business might have to cut
back on benefits]. He conjectured that the bulk of
employers paying under the $6.50-per-hour range don't
provide benefits.
Number 1857
REPRESENTATIVE HALCRO said government does have a role [in
affecting change in the minimum wage], but he is concerned
that the committee is being asked to make a major policy
change, which will have a significant impact on employers,
with only anecdotal evidence. He referred back to the
sponsor's testimony, the governor's press release, and
Commissioner Flanagan's testimony that included information
from Jim Nordlund, Director of Public Assistance. He said
that numbers are being thrown around but he is not sure if
there is anything concrete.
COMMISSIONER FLANAGAN said the percentage of poverty level
someone makes at this wage [minimum wage] is the main issue
for him, and one could [even] argue the [validity of the]
poverty level set by the federal government. He said:
But $20,000 for a family of four in this state, I
don't care where you live and how much the prices have
gone down compared to other places in the state, and
that if a single mom with two kids is making this
wage, whether she is making it for three months or a
year or two years - is making 66 percent of that
poverty level - I think that is unconscionable. I
think that these statistics are plenty to hang our hat
on, and we will certainly ... try and refine them as
much as we can without getting into any voodoo
numbers. We are trying to give you the best real
numbers we have. And I don't think federal studies,
in terms of a percentage, ... that 70 percent are
adult, are necessarily meaningless when they are
applied to Alaska. We are different, but we are not
all that different. We are providing the best
information we have. We will certainly try and do
better.
REPRESENTATIVE ROKEBERG asked the committee how many businesses
would close if the minimum wage were raised. He also asked how
many of those 14,000 people are actually the heads of
households. He said the vast majority of these people [making
minimum wage] are young and are just starting out.
COMMISSIONER FLANAGAN said he did not think that young people
just starting out represented the vast majority. He then
referred to a survey of the National Federation of Independent
Business (NFIB) members; the majority who responded didn't like
it [an increase in minimum wage], but two-thirds didn't think
that it would have an impact on their businesses.
CHAIR MURKOWSKI referred to the NFIB survey conducted on January
24, 2001, and said there were a fair number of people who did
not respond to all of the questions. She referred back to
Representative Halcro's concern about whom the 14,500 includes
[receiving minimum wage]. She said the survey indicates that of
those surveyed there were more people in the 15-to 18-year-old
age bracket than any others, and 31 percent were not heads of
households. She said "we" have limited hard and fast numbers in
Alaska, but the current ones from Alaska indicate the very
opposite of what Commissioner Flanagan has said.
COMMISSIONER FLANAGAN said the DLWD would get the committee the
best information possible.
Number 1564
REPRESENTATIVE CRAWFORD said he started out at minimum wage, and
when he left there were more adults working at minimum wage than
kids coming to work. He said earning minimum wage is part of
the social contract that people in organized labor have fought
for, like [other employee protection] issues such as workers
safety, unemployment insurance, and workers' compensation. He
said this is the basic floor under the people at the bottom end
of the employment force.
REPRESENTATIVE CRAWFORD said Roxanne Smith, an employee of The
Hangar on the Wharf Restaurant ("The Hangar"), was present and
is a good example of a person who would benefit from an increase
in the minimum wage; she is the head of household with two kids,
and her total wages for last year totaled $11,000. This
[proposed wage increase] would help her get out of poverty. He
said he is disappointed the committee is not going with the
higher bill but would go along with HB 56 if it were a sure
thing. He said it is absolutely essential to raise the minimum
wage as soon as possible.
REPRESENTATIVE HALCRO said the committee, before making a policy
change, wants to ensure that the minimum wage increase will help
those that need it the most. He went on to say that a
percentage of the workforce is seasonal, with people making
minimum wage but taking that employment understanding there will
be tips. He reiterated that the committee needs more
information.
Number 1347
JOHN BROWN, President, Fairbanks Central Labor Council, spoke in
favor of the bill. He urged the committee to consider some of
the points in the governor's bill as it relates to earlier
effective dates, a tie to the CPI, and a higher [minimum wage]
rate. He said "we" owe Alaska due consideration of this bill
because we owe it to the people making these wages; that they
have the essential needs for their quality of life.
MR. BROWN said he did not know how Roxanne Smith, the woman
working at The Hangar, could even come close to meeting her
needs. He said the minimum wage needs to be raised soon.
Number 1189
ROXANNE SMITH, Waitress, The Hangar on the Wharf Restaurant,
said people in the industry do make minimum wage and not
everyone makes tips. Many people think that making tips allows
one to continue to live. Many people from Europe and Canada do
not tip but the workers still get charged 8 percent of the sale;
this is taken out no matter what, and paid to the government.
She said:
This doesn't count for people who walk out on their
tickets. Lots of people come in, eat, leave. We pay
for that because most of the time wait staff is also
in charge of the money. So we have a report [and]
everything is computerized at the end. It gives us a
report, which is what we owe that company. And if
there is a walkout, it is our responsibility to pay
it.
We do not get health insurance. Our ... employers
most of the time don't provide health insurance
because it is too expensive and we are not fulltime
employees. A lot of times, especially in the
wintertime, we usually get maybe 25 hours a week, and
that is if you've worked there long enough and [have]
proven that you can stay and you are a good worker.
So a lot of people, they have their kids on Denali
KidCare, food stamps [and] things like that in order
to compensate. ... I couldn't imagine my wage being
less.
MS. SMITH said with children she could not live on less, and
with her children now she does not live on her check. She said
she has been a waitress for 11 years making minimum wage, and
wait staff usually never get raises. She said the only way to
move up in the business is to become a manager, which requires
working 50 to 60 hours a week and being on salary. She said it
would not be worth it for her to leave her children for 60 hours
a week.
MS. SMITH said she tries to keep her children out of childcare
as much as possible, to raise them herself. She reiterated that
she works between 20 to 25 hours a week and grossed $11,000 in
2000, which included tips. She said sometimes in the winter she
works fewer hours because the restaurant is not as busy, so they
cut back her hours, but in the summertime she works more hours
because there is a need.
MS. SMITH said they [wait staff] have to share 15 to 20 percent
of their tips with the bar staff and 10 to 15 percent with those
that bus the tables. The paperwork that someone completes to
work in a restaurant states that the hours are varied and the
employee will be paid minimum wage. She said there is no
probationary period in the restaurant business, and people hired
as wait staff never get a raise.
Number 0830
REPRESENTATIVE CRAWFORD asked if it is common for wait staff to
get health care or retirement of any sort.
MS. SMITH said she was not aware of that happening, but that a
larger company might offer it. She said nine times out of ten
with the health care industry an employee would have to work a
minimum of hours, usually a 30-hour work week, to get health
benefits. If an employee doesn't have this number of hours, the
company can't provide insurance and the worker would be more
expensive for the company. If the company does offer it, the
employee pays it out of his or her check, which usually runs
around $300 dollars a month with a $1,000 dollar deductible.
She said she currently has major medical insurance with a $1,000
deductible.
MS. SMITH said her children are currently on Denali KidCare
because she can't afford to have insurance for them and she
receives no child support.
MS. SMITH said if she had more money due to an increase in the
minimum wage, she could do more with her children, and childcare
would be easier to pay for.
REPRESENTATIVE KOTT asked Ms. Smith if there is a rate of pay
that is below what she would work for and that would cause her
to quit.
MS. SMITH said if the minimum wage were reduced to $2.80 per
hour, there would be no way she could work because she wouldn't
be able to afford childcare, which is $35 dollars a day. She
said when the topic of minimum wage comes up, people start
talking within the industry [referring to a comment she made
about tip credit].
Number 0570
REPRESENTATIVE ROKEBERG said there was a tip credit bill a few
years ago, and a rumor was started that the minimum wage would
fall to $2.13 an hour. He said the bill up here [in Alaska]
actually made an increase; no one got his or her wages cut.
MS. SMITH said she worked in Washington [State], where the
minimum wage was reduced to $2.70 or $2.33 per hour and she was
supposed to make up for it in tips; this was a few years ago
when she first started working.
REPRESENTATIVE HAYES asked Ms. Smith if she knew how many 15-to
18-year-old people work at The Hangar.
MS. SMITH said most of the people who work at The Hangar are
around 25 to 30 years of age; they support themselves and go to
college.
Number 0360
JACK AMON, President, Alaska Restaurant and Beverage
Association, stated the hospitality industry is severely
impacted by increases in the starting wage. He said it is
important to address who is working at this wage. He said there
are two segments within the industry: the table service
segment, which includes tipped employees; and the quick-service
segment, which includes the fast food operators.
MR. AMON said according to their industry records, including
payroll records, tipped employees in the industry generally
range in salaries from $12 to $25 dollars per hour. He said a
tip to them is not just an incidental amount of money because
tips count as wages with the Internal Revenue Service (IRS). He
said tips count as wages when paying payroll taxes. He said the
quick-service industry includes many young people; their
employers have to train them because they are just learning how
to work.
MR. AMON said dishwashers, prep cooks, and so forth would be
helped by [an increase in the] minimum wage. He said in Alaska
they are paid substantially above the minimum wage. He said in
the industry a successfully run restaurant might net between 5
to 8 percent of gross receipts; an increase in the labor cost
has a significant impact on industry.
Number 0204
REPRESENTATIVE ROKEBERG asked Mr. Amon if he recalled testimony
a couple of years ago regarding the La Mex Restaurant chain that
had to forgo the health insurance program for over 300 employees
because of the last minimum wage increase.
MR. AMON said it was an effect of the last minimum wage
increase, and there was another operator who cut out vacation
pay. He said it often affects the ability to give raises to
people working in the back of the house such as dishwashers and
prep cooks, those making $7, $8, and $9 dollars per hour. He
said he knows from personal experience that this can cause
friction between staff working in the front and back of the
house; the most highly compensated employees get minimum wage
increases when they are well above minimum wage.
Number 0117
REPRESENTATIVE KOTT asked Mr. Amon to elaborate on what
employers pay on the reportable tips, because he had mentioned
the payroll tax. He asked if there were other [employer
payments] like Medicaid, Medicare, and Social Security.
MR. AMON said they [the restaurant industry] pay "matching" on
all of those programs. He said employees are required by
federal law to report 100 percent of tips; employers can be
subject to IRS audits and held liable on social security taxes.
He referred to the Bubble Room [Restaurant] in Florida where
employees were assessed penalties on unreported tips; he said
employers become liable whether the employee is honest or not.
He said that credit cards [machine receipts] are a good way to
track reported tips.
TAPE 01-8, SIDE A
Number 0029
REPRESENTATIVE KOTT asked Mr. Amon if the bill [HB 56] includes
a tip credit provision, and if so, would it offset any minimum
wage increase passed on to the employer.
MR. AMON said it would mitigate things for the table service
industry but cautioned not to forget the fast food component
that employs largely teenagers. He said there is a federal
provision that allows an employer to employ someone under 18
years of age, for the first 90 days, and pay them less than
minimum wage. He said this would greatly help that segment of
the industry.
MR. AMON said the 30-hour [learner wage] provision exists in law
but he has heard from the fast-food operators that the
compliance is difficult and oftentimes not worth the risk. He
reminded the committee, when looking at the 18-year-olds and
their first jobs, not to forget about the fast-food segment of
the industry.
Number 0118
REPRESENTATIVE ROKEBERG asked about the enforcement of the 30-
hour rule.
MR. AMON said he had heard [that it's not worth the risk] from
operators in the fast-food segment but he does not fall under
that segment and couldn't give personal experience. He said the
food segment of the industry was unable to be at this hearing.
He thanked the committee for studying the issue and said "they"
could provide testimony from the fast-food segment of the
industry.
REPRESENTATIVE ROKEBERG asked Mr. Amon if he could supply the
committee with the amount of payroll tax burden per dollar of
increase [of the minimum wage].
MR. AMON said the Alaska Restaurant and Beverage Association
would provide that information and also supply information on
low check averages from a wide range of operators, to show
payroll records of what the actual tip income is from an actual
payroll, not just anecdotally.
Number 0212
REPRESENTATIVE ROKEBERG asked Mr. Amon about the Alaska
Restaurant and Beverage Association membership and reaching out
in the state. He asked Mr. Amon if he knew whether the 4,600
[people on minimum wage] in the eating and beverage area seemed
consistent with his figures.
MR. AMON said that number sounded low for tipped employees; he
generally sees that amount in Anchorage alone. He said there
are many restaurants that give long-serving, tipped employees
raises, which may also include added responsibility. He said
many operators try to offer health care, which does get cut back
with mandated increases.
MR. AMON said there is an ongoing struggle in the industry to
provide health care for employees as an association, to be able
to pool and offer an association-based health care plan
(indisc.). He said there are other reasons why it is becoming
more difficult, but many employers would like to offer their
employees a plan.
REPRESENTATIVE HAYES asked Mr. Amon if the mean age in his
organization is above the 15-to-18 range, excluding the fast-
food sector. He asked if Mr. Amon had any numbers that he could
provide to the committee.
MR. AMON said he didn't know if they could provide those
numbers, but operations serving alcoholic beverages have more
employees over 18 years of age. He said those are the tipped,
back-of-the-house employees, whether they are 18 or not. He
said it is difficult to find a dishwasher who will work for
$5.55 an hour.
Number 0551
MR. AMON said people who work in his organization for a period
of time are motivated to take on responsibilities even if they
are not asked. He said good wait staff earn their increases by
their value to the organization. He said the organization could
survey its membership to provide information on wage increases
based on merit. He said tipped employees are motivated more by
keeping a restaurant's seats full than by a one-dollar-an-hour
raise.
Number 0617
FRED ROSENBERG, Owner, Red Robin Restaurants and Kid Zone of
Anchorage, stated he has no employees making minimum wage other
than [food] servers. He said there are some tipped employees
that make in excess of minimum wage; they hire people that are
better at their job and are paid more money.
MR. ROSENBERG said he submitted payroll records with reported
tips to this committee a couple of years ago. "They"
arbitrarily pulled names off a list, whited out the names, and
submitted the documents at a prior hearing. He said at that
time, the lowest person was making roughly $12.00 [an hour] in
tips, and the highest person was making between $18 and $20
dollars per hour, which was in addition to earning minimum wage.
He said it was found that anyone working for the company at
least three months was making more than $17 per hour on the low
side, which is reasonable compensation.
MR. ROSENBERG said tipped employees need to be segregated into
two areas: tipped employees like waiters and waitresses that
get direct tips; and the tipped pool group like the bartenders
and hosts. He said they are all making far in excess of minimum
wage. He said the issue of (indisc.) affects their industry
only in a negative way. He said [raising the minimum wage] is
inflationary, which drives the customer's cost up and results in
less profit for the business, so the business attempts to find
ways to cut expenses. He said vacation pay, medical benefits,
and profit-sharing plans will have less employer contribution,
especially in the cases where the employer can control the
contribution.
MR. ROSENBERG said he is sympathetic to Ms. Smith's situation
with two children and making her yearly wage. He said:
I have young children; I am concerned about them also.
But what she was telling us sounded to me like she was
a part-time worker, working in an area that has strong
seasonal fluctuations. She talked about working 20 or
25 hours a week. If that is all that that restaurant
can afford to have her, I am sympathetic with both the
restaurant - not having enough business - and
sympathetic with her not having the proper amount of
hours necessary for her to make a wage that would
enable her to live the lifestyle that she would like
to. I wish she could get more. But, if she's a part-
time worker with strong seasonal fluctuations, that is
not a minimum wage issue. There are some other things
that were mentioned there about people not tipping.
Even Americans don't tip sometimes, whether by virtue
of ... being cheap or [from] getting poor service.
But the reality is, the numbers I gave you, with
respect to wages, actually taken from our payroll
records, were actual wages, meaning that some people
tip 2 percent - or don't tip at all - and some are
tipping 20 percent or 25 percent.
MR. ROSENBERG explained that looking at credit card charges is a
guideline to see what people tip. He said generally what is
found is that tipped employees are doing pretty well. He went
on to say the law doesn't allow a business to deduct an [unpaid]
check from the server; by law, the server is not obligated to
pay and the business is required to absorb it. He said the
committee has to balance many issues that don't necessarily
apply to any one employed person. He added that Washington
[State] has not had tip credit since he could remember.
MR. ROSENBERG said "they" do give raises to minimum-wage servers
after they have been there awhile or take on additional
responsibilities. He said most do make minimum wage because
they are compensated very well with tipped income. He also said
many people work two jobs in order to work full time. He said
the restaurant business, by its own nature, has fluctuations
with meal periods. He said if there are servers making tips,
they are probably making a "darn good wage" and are not anywhere
near the poverty level.
MR. ROSENBERG said if teens and handicapped people are not being
employed because of these [exemptions to minimum wage], it hurts
the group.
Number 1017
MR. ROSENBERG, responding to a question from Representative Kott
about the changes his business had faced in going through three
to four minimum wage increases, said after the [minimum wage]
increases they had to discontinue the paid vacation policy for
employees starting [work] after that period. He said medical
benefits have been reduced down from a co-pay or shared pay to
having the employees provide it themselves.
MR. ROSENBERG referred to Ms. Smith's testimony about health
insurance costing $300 per month; he said health insurance is
running about $150 to $180 per month for one person, and would
be more expensive with children. He said the $300 per month
would be just about right with any number of children.
MR. ROSENBERG said the decisions he made after the last
increases were made at the local level, and were not franchise
policies; all of the businesses operate independently.
MR. ROSENBERG, responding to a questions posed by Representative
Kott about amending the bill to include a tip credit and what
effect it would have on hourly wage for tipped employees, stated
the policy would probably remain much like it is with respect to
the direct-tipped employees; they can get time-in-service
raises. He explained that adding the tip credit to the bill [HB
56] would allow there to be more money to pay the people making
$8, $10, and $12 dollars per hour.
Number 1183
MR. ROSENBERG commented that his company does not participate in
the training wage provision because the monitoring
[requirements] seem be more than they are willing to bear.
REPRESENTATIVE ROKEBERG said he does not see any requirements in
state law [for monitoring].
MR. ROSENBERG answered by saying that the deterrence included
the record keeping and the risk of not being in compliance. He
went on to say that even if the requirements were easier, he
doesn't feel they would employ anyone at that wage since they
are paying more than that today. He said he didn't think they
had any position starting at less than $7 dollars per hour.
Number 1245
REPRESENTATIVE HAYES asked Mr. Rosenberg if the people who are
making $17 to $25 dollars an hour [referring to the tip income
survey done by Mr. Rosenberg] are holding two jobs.
MR. ROSENBERG assured the committee that what he quoted came
right from actual payroll records for people that worked for the
company. He said many of these people work another job and he
assumes they make similar wages there. He said these numbers
weren't averages but actual payroll records drawn at random.
Number 1304
BILL PARGETTER, Owner, Applebee's Restaurant of Anchorage, and
former owner of the McDonald's Restaurants of Anchorage, said he
sold the McDonald's Restaurants in 1986 after 15 years of
ownership. He said the average rate [of pay at Applebee's] is
$11.04 per hour including (indisc.) and excludes tip income. He
said he employs 75 to 80 people: 50 are in the tip
classification, and 75 percent of those 30 to 40 are in the
$5.65-an-hour minimum wage classification. He said they also
receive $8 to $10 per hour in direct tips, which they pay taxes
on.
MR. PARGETTER said the credit card tips in year 2000 equaled
13.43 percent [for his company], with cash tips possibly being a
little lower. He said the company encourages employees to
report tips, and employees at $5.65 per hour are making
considerably more than the minimum. He said he does not have an
employee outside of this group that makes $5.65 an hour.
MR. PARGETTER stated the fast-food business has entry-level jobs
that employ people with little work experience. He said the
minimum wage "we" paid in those days [when he worked in the
industry] could keep employees working for the company up to six
months. He said the company employed 850 entry-level employees,
and some would remain at minimum wage because of their value.
He said perhaps the committee could look at what type of job
and/or training credits can be given, instead of worrying about
the minimum wage to give people a positive approach when
considering entry-level positions.
MR. PARGETTER reiterated that no one is being paid close to
minimum wage now. He said as additional costs are incurred in
wages, representing roughly 30 percent of base costs and the
number-two cost next to food and beverages, it is the lower paid
employees that get cut from the company, and the company is
cutting out the very person that [the minimum wage] is targeted
to help.
Number 1517
MR. PARGETTER said their company has a medical plan that went
from paying 100 percent to paying 50 percent; it is a high-end
cost that continues to climb, and when getting squeezed
[financially] they would look at it again. He said the company
had vacation pay at his three other independent restaurants [in
Anchorage]; two he closed due to cost problems. Harry's
Restaurant, the last one he had, had full vacation pay. He said
he has not adopted it at the current restaurant because he knew
there were some costs coming up in 2001.
MR. PARGETTER closed his testimony be using examples of
Applebee's in California, which has a minimum wage with no tip
credit like Washington [State] and Oregon do. He said 42 of the
50 states have tip credit programs, not all as tough as
California's, which has had it the longest. He relayed that the
Applebee's in Southern California are having a tough time
because the minimum wage has tightened the situation such that
they can make better money in another industry. He said it
doesn't take much when a company is netting 5, 6, or 7 percent
for those things paternally.
MR. PARGETTER said the wait staff make $5.65 per hour and also
do some housekeeping routines. He said the training position is
paid $1.00 an hour more and requires additional education, test
passing, and duties including training new employees.
REPRESENTATIVE HALCRO asked Mr. Pargetter if there was ever a
time, as the owner of McDonald's [in Anchorage], when the market
conditions didn't allow him to hire a person at minimum wage
because no one would work for that.
MR. PARGETTER said they were not paying employees minimum wage
in 1986 either. He said today an employee would not work for
less than $7 dollars per hour. He said there is competition
with the fast-service restaurants for hostess type positions;
tipped employees that make an additional $3 to $4 dollars on the
base wage.
Number 1700
REPRESENTATIVE ROKEBERG asked Mr. Pargetter what he pays for the
training program and if he has employees under 18 years of age
utilizing the 30-hour provision of the Wage and Hour Act.
MR. PARGETTER said his companies in Anchorage have not used the
training program provision but said he would look into it. He
said in his restaurants that serve alcohol, having someone under
the age of 21 becomes a liability, which they haven't been
willing to take.
MR. PARGETTER said they like [to hire] people with a little
experience, which is different from a fast food establishment.
He said in the fast service restaurant business you are getting
kids that have never worked in their lives and one becomes a
second parent; problems that one doesn't have as a normal boss.
However, he said they would consider it [use of the learner's
wage]. He said when he was in the fast food service business
before he thought he looked at some of the potential programs to
help with labor costs. He said with 850 employees it would have
been an area that the company would have taken advantage of.
However he said sometimes those [cost saving] programs on a
small scale are not worth the headache.
Number 1820
REPRESENTATIVE KOTT referred back to Mr. Pargetter's comment
that increases in the minimum wage would hurt those that it was
trying to help. He verified that he had heard that correctly.
MR. PARGETTER said that was correct. He said a business going
from 85 employees to 75 because of costs would most likely leave
off the least-experienced people and ask the other 75 to work a
little more. He said across the country, over the years, and
from what he's read, every time there is an increase in the
minimum wage, the low-skilled people are the losers and the
highest-skilled employees benefit.
MR. PARGETTER explained that an experienced server could handle
five tables with some ease, and an inexperienced server is not
able to go over three tables initially. If he had to lay off
workers, he would keep the veteran [employee].
Number 1983
REPRESENTATIVE KOTT said he thought it was good that Mr.
Pargetter encourages all of these employees to report tips. He
asked what happens when employees don't report tips, when there
is a certain amount of sales, and it shows 1 percent of
gratuities associated with that amount of sales. He asked if
Mr. Pargetter, as an employer, is able to charge an 8 percent
gratuity to wait staff in their monthly or weekly checks.
MR. PARGETTER said as an employer he doesn't have the authority
to do that. He said they use the credit card tips as a guide
[of what should be reported]. He said he has "one-on-ones" with
employees, and if they don't want to report at least 10 percent,
then they can look for a new job. He said the IRS would come
back to the employer, not the employee, if tips were being under
reported.
MR. ROSENBERG added that they [business owners] are required by
law, under tip allocation, to report tips. He concurred with
Mr. Pargetter that "they" routinely encourage employees to
report all tips, and some do and some don't. He said they don't
know what the actual amount is, but if the employee reports less
than 8 percent, the employer is required by law, to report to
the federal government as though 8 percent of their sales were
received in tips.
MR. PARGETTER said the 13.43 percent that was mentioned is from
the allocation-of-tips formula on the recently filed 48027
[business tax form]. He added that an underage employee has
tips allocated back to him or her by the employer and it appears
on that person's W2s.
REPRESENTATIVE ROKEBERG referred back to the effect that an
increase in minimum wage would have on businesses. He asked if
it would be fair to say that since Alaska has not changed its
minimum wage in a long time, the decisions are being made by
politicians in Washington D.C?
MR. PARGETTER said he thought it was, although he really hadn't
given it much thought. He said "they" are willing to pay what
is necessary, but it would be nice to be involved when it
affects them.
MR. ROSENBERG echoed what Mr. Pargetter had said and added that
"they" would like to give input so that a proper and equitable
decision could be made for everyone.
Number 2172
CHAIR MURKOWSKI asked Commissioner Flanagan to present the
committee with additional information on specific exemptions
regarding learners, apprentices, and people with physical or
mental handicapped. She said she understood that "they" are
subject to restrictions or conditions that are set. She also
asked for help in accessing accompanying regulations to help the
committee understand what is available.
CHAIR MURKOWSKI said Commissioner Flanagan would provide the
committee with a breakdown of occupations from the fourth
quarter of 1998. She said, too, that she understood it may be
impossible to get statistics on certain things such as the
number of people at minimum wage now and how many are heads of
households, their ages, and the length of time on minimum wage,
but she said any information would be helpful.
CHAIR MURKOWSKI said the committee would also appreciate
information from the industry testifiers that could be used for
review.
CHAIR MURKOWSKI said she has spoken with Representatives
Rokeberg and Kott about forming a subcommittee to look into some
of the more dense issues that were discussed and specifically
the tip credit. She said she is not sure the committee is ready
yet to engage in a subcommittee at this point but knows these
issues will take some time outside of committee; Representatives
Crawford or Hayes will join Representatives Rokeberg and Kott at
that point.
CHAIR MURKOWSKI proposed rescheduling the hearing on HB 56 in a
couple of weeks and mentioned that she would like to get
testimony and perspective from Jim Nordlund, Director, Division
of Public Assistance, DHSS.
Number 2320
REPRESENTATIVE KOTT said he understood the tip credit was to be
used against a person's hourly wage as a reduction.
REPRESENTATIVE ROKEBERG clarified that the tip credit bill
before the legislature two to three years ago kept the concept
of the existing wage in statute, and the increase to $5.65 was
the baseline. He said he believed the [tip credit] federal law
to be $2.13 an hour. He said this legislature could legally
lower the minimum wage to $2.13 an hour for the tipped
employees. He said many states have done this, including
Hawaii, which recently established the baseline in the tip
credit.
Number 2357
REPRESENTATIVE ROKEBERG said it would be up to the legislature
to establish the basic minimum wage that would be paid to
everybody, whether the $5.65 [per hour] or an additional wage.
He said:
And then in the future those people hired, everybody
hired, would have to be paid the minimum wage, but ...
the credit would be based on those wages above it, so
that [if a] person receives that - in other words, say
we went the $6 an hour, established the base tip
credit (indisc.), that would be the minimum wage they
would receive. If there are any further increases at
other times, that would be locked in. If the minimum
wage for other people went up, like, for example under
the current formula, [it would be] tied to the federal
law.
REPRESENTATIVE KOTT said the majority of states that have tip
credits have reductions in the hourly wage. [HB 56 was held
over.]
ADJOURNMENT
There being no further business before the committee, the House
Labor and Commerce Standing Committee meeting was adjourned at
5:40 p.m.
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