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 increase. 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 th 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 argument." 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 Oregon. 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 index. 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 work. 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 paycheck. 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.