CS FOR SENATE BILL NO. 1(FIN) "An Act increasing the minimum hourly wage; and providing for an effective date." Co-Chair Hawker announced that public testimony for SB 1 would commence. He felt that the proposed tip credit amendment was appropriate for the legislation. MARIE DARLIN, AMERICAN ASSOCIATION OF RETIRED PERSONS (AARP) CAPITAL CITY TASK FORCE, testified in favor of SB 1. She highlighted points from the letter submitted by AARP (copy on file). She expressed concern for older Alaskans working part-time at the minimum wage. She articulated the importance of a living wage for elderly Alaskans. She pointed out to the committee that the number of elderly workers earning the minimum wage was growing in size, and that policies should be implemented to insure that elderly employees are earning enough to cover essential living expenses. 5:18:27 PM DALE FOX, PRESIDENT, ALASKA CABARET, HOTEL, RESTAURANT AND RETAILERS ASSOCIATION (CHARR), ANCHORAGE testified via teleconference. He stated that CHARR supports the minimum wage increase, provided the legislation includes a comprehensive tip credit proposal. He detailed several ways in which the tip credit would help employers. He explained that the proposed tip credit would provide incentives to businesses that provide an environment for highly compensated tipped employees. He stressed that the tip credit proposal that CHARR suggests differs from similarly titled laws in other states. For example, the tip credit proposed by CHARR would not reduce the tipped employee's wage of $7.25. The tipped employee would need to make at least $14.50 per hour in order for the employer to qualify for the credit. Co-Chair Hawker commented that the legislature was not prepared to move forward on the CHARR tip proposal legislation. 5:21:49 PM ROBERT MCCORMICK, FINANCIAL MANAGER, GLACIER BREW HOUSE/ORSO RESTORANTE, ANCHORAGE, testified via teleconference. He stated that the majority of his employees make the minimum wage. In addition to paid wages, the employees also earn tips. In 2008, tipped employees averaged as much as $13.99 per hour in tips. When added to the average hourly wage of $7.83, the total hourly wage was 21.83. He stated that only the highest paid restaurant workers would benefit from the legislation. He explained that the tip credit proposed by CHARR would affect only persons making $7.25 per hour or more in tip income. He opined that the restaurant industry has been burdened by challenges brought on by the current economic crisis. He stressed that if the minimum wage increase is to be considered it must include a tip credit amendment. 5:24:57 PM Representative Gara shared that he understood the difficulties faced by the restaurant industry. He reasoned that it made sense to adjust the minimum wage to reflect the rising cost of living. He noted that the prices on restaurant menus have risen while the wage paid to servers has not. Mr. McCormick contended that the average percentage tipped employees receive for their service is based on sales, and therefore, rises with inflation. He felt that because of this, the raising of the hourly wage would be unnecessary. Representative Gara asked if Mr. McCormick's employees were currently making the same wage of $7.15 per hour now, as in 2006. Mr. McCormick said that was correct. 5:27:51 PM BILL BUBBEL, OWNER, PUMP HOUSE RESTAURANT, FAIRBANKS testified via teleconference. He inquired about the proposed amount of the minimum wage increase. Co-Chair Hawker replied that the legislation would raise the minimum wage by $.50 after January 1, 2010. Mr. Bubbel felt that the amount was acceptable. He stressed that Department of Labor and Workforce Development (DOL) statistics, which state that 22 thousand Alaskans are currently earning minimum wage, do not take into account tipped employees. He felt that the statistics on restaurant employee earnings were flawed in various ways. He explained that restaurant employers pay a 10 percent tax on employee tips. For example; when his employees earn a total of $400,000 a year in tips, he is responsible for paying $40,000 in taxes on those tips. This is comparable to a yearly wage that he was unable to pay to another employee. The tip credit is a way to mitigate the extra expense to employers. He expressed concern for the possibility of a financially unsuccessful tourist season. He reiterated Mr. McCormick's rhetoric about the rise of tip percentage with inflation. 5:32:40 PM JACK AMON, OWNER, MARX BROTHERS CAFÉ, ANCHORAGE testified via teleconference. He stressed that most restaurant employees already make well over the minimum wage. He added that for all financial purposes, tipped earnings are wages. He shared that he average earnings for tipped employees in the restaurant industry are $25,000 to $40,000 per year. He stated that the structure of minimum wage laws in the state unfairly restrict the restaurant industry from receiving compensation for tipped employees. He felt that the intent of the bill was unfair and contrary to law. 5:34:42 PM Representative Gara pointed out that the minimum wage has not gone up in six years. Mr. Amon questioned the logic of forcing the restaurant industry to pay a higher minimum wage. Representative Gara countered that only the tip portion of the employee salary has risen with inflation. 5:36:07 PM BRUCE BURNETT, OWNER, TGIFRIDAYS, ANCHORAGE, testified via teleconference. He stated that none of his employees make less than $9.00 per hour. He said that the bartenders and waiters that work for him make $30.00 to $40.00 per hour, including tips. He felt the tip credit was necessary to balance a raise in the minimum wage. 5:39:24 PM Representative Kelly summarized that Mr. Burnett didn't want the government controlling employer ability to set pay scales for their establishments. Mr. Burnett felt that he amount employers would be asked to spend on the raises could be excessive. 5:40:57 PM FRED ROSENBERG, OWNER, RED ROBIN, ANCHORAGE testified via teleconference. He echoed the previous testimony. He spoke in support of raising the minimum wage, but emphasized the need for a tip credit. He said that the federal government recognizes all wages as income. Waiters in his restaurant average $22 per hour in reported tip income, in addition to the hourly wage. The tip credit is recognized in forty-three states across the country as way to balance the wages of all restaurant employees. It provides the employers with a way to pay non tipped employees a comparable wage. 5:44:12 PM BOB WINN, CHARR, ANCHORAGE testified via teleconference, agreed with the previous testimony. He felt that the tip credit was crucial to ensure the survival of small businesses in the current economic climate. Representative Gara commented that as a restaurant owner, he is aware that restaurant profit margins are not large; however, as a policy maker, he is advocating for the employee. 5:47:45 PM TRINA JOHNSON, OWNER, LAMEX, ANCHORAGE testified via teleconference. She agreed with the previous testifiers. She shared her experience in the restaurant industry. She said that the minimum wage increase of five years ago forced her to close one of her restaurants. She referred to a letter she submitted to the committee (copy of file). She related that she no longer is able to provide any benefits to her employees. She testified strongly in support of the addition of a tip credit to the legislation. 5:51:23 PM Co-Chair Hawker solicited further public testimony. There being none, public testimony was closed. Representative Gara shared his decision not to offer Amendment 2, which had been handed out to the committee for discussion. He referred to the Legislative Research Report on the deletion of the inflation proofing provision on the minimum wage (copy on file). He explained that under the Murkowski administration the inflation proofing provision was deleted from the minimum wage, stalling the minimum wage at $7.15 per hour. Had the provision remained and the minimum wage kept up with inflation it would now be $8.50 per hour. He maintained that there would be no significant employee impact if wages were raised a maximum of 10 per cent a year. He spoke in favor of raising the minimum wage to make up for the inflation losses that workers have incurred since 2003. The amendment would have increased the minimum wage by 70 cents per year for the next 2 years. He pointed out that 10,000 people earn less than $8 per hour in the state. He thought fair pay for hard work was important. He related that the wage increase was necessary for employees that might not be courageous enough to demand wage increases, which are necessary to offset the rise in the cost of living. 5:54:51 PM Representative Fairclough voiced support for the minimum wage increase. She requested an expansion of the conversation to include global business issues. She informed the committee that the United States is currently indebted to China for $3 trillion. She asserted that people in America can't afford to buy American made products. She stressed that increasing labor costs would force companies to raise prices on goods and services. She emphasized the importance of supporting a tip credit in order to save American jobs. She felt the minimum wage increase, without the tip credit, was inappropriate given the current economic climate. 5:58:24 PM Vice-Chair Thomas spoke of his experience as a commercial fisherman. He felt with the current price of fish being low, an increase in the minimum wage could harm the commercial fishing industry. He expressed alarm that 10,000 people in the state were making less than minimum wage. He asserted that DOL distributes a substantial amount of money to train Alaskans for jobs that pay above the minimum wage and wondered why there were so many low paid residents throughout the state. 6:00:25 PM Representative Crawford commented that the proposed $.50 rise of the minimum wage was inadequate. He felt that the lack of benefits and low wages presented to the workforce were appalling. He spoke against the tip credit and stressed that the minimum wage should be higher. He also stressed the need for employees to receive health care benefits from their employers. He expressed frustration with the legislation. 6:03:43 PM Co-Chair Hawker referred to a document distributed to the committee by Representative Gara's office entitled, "Estimate Alaska 2007 Employment by Industry and Below Certain Wages" (copy on file). The numbers, provided by DOL, show that approximately 9,000 workers in the state earn $7.75 per hour. About 22,000 earn less than $8.75 per hour. Representative Gara commented that Alaska used to have the highest minimum wage in the country, and now has the lowest minimum wage on the West Coast. Vice-Chair Thomas requested that DOL provide a report on how many of Alaska's unemployed workers have been offered job training. 6:05:23 PM Co-Chair Hawker noted the zero fiscal note represented the impact to the State of Alaska as an entity, but not to private employers. 6:05:31 PM Representative Kelly expressed disappointed that there had not been more support for including the tip credit in the legislation. Vice-Chair Thomas MOVED to report CSSB 1 out of Committee with individual recommendations and the accompanying fiscal note. There being NO OBJECTION, it was so ordered. CSSB 1 (FIN) was REPORTED out of Committee with the attached zero fiscal note and the recommendations of individual members. 6:07:36 PM