Legislature(2001 - 2002)
04/26/2001 01:50 PM Senate L&C
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SB 46-INCREASE MINIMUM HOURLY WAGE
SB 132-MINIMUM WAGE
CHAIRMAN PHILLIPS announced they would take up Senator Davis' bill
first, SB 132.
MS. SHEILA GARDNER, Staff to Senator Davis, explained that SB 132
seeks to raise Alaska's minimum wage, currently $5.65 per hour.
Washington, Oregon and California all have minimum wages that are
set higher than Alaska's. While Alaska's minimum wage has risen in
terms of actual dollars, it has failed to keep up with the rate of
inflation. Over time, this has dramatically hurt Alaska's working
poor. "CSSB 132, while not inflation proofing Alaska's minimum wage
will require that employers pay employees at a rate of not less
than $6.90 an hour or $1 an hour more than the prevailing federal
minimum wage. By making this change, Alaskans currently working at
the minimum wage will have a chance at making livable wages.
She said further:
Why increase Alaska's minimum wage? In 1999, Alaska had
approximately 47,000 men, women and children living on
minimum wage incomes. The myth is that minimum wage
earners are mostly teenagers who work to earn pocket
money. Yet, according to statistics released by Alaska's
Department of Labor, most minimum wage earners are
adults. In 1996, U.S. Labor Secretary, Robert Rice,
remarked the vast majority of time the majority of us are
content to allow the market to dictate who should get
what and how much. Capitalism works best when it is
unfettered, but there are times and there are conditions
when we insist on minimum standards of fairness. Alaska
can and should do more to help our fellow Alaskans live
with respect and dignity by helping them attain a level
of economic independence. Raising the minimum wage will
help achieve the goal. I would respectfully ask for your
support of SB 132.
COMMISSIONER ED FLANAGAN, Department of Labor and Workforce
Development, said this is an important issue that should be acted
upon by the legislature. He said when the Governor first raised
this issue, there was a gratifying consensus that something needed
to be done and 106 days later, they are "almost stuck on go."
He said further that Senator Davis's staff had covered the larger
issues, but he wanted to mention a couple of particulars:
Anybody working at the minimum wage in the State of
Alaska, and there are people that do this, working at a
level that would keep that at poverty even with a
substantial raise. This is not right and we hope we can
address, through the legislation, getting our minimum
wage more on track to represent some basic standard of
sustainable living for folks that are in the low income
brackets.
We have some survey data from 1998 that approximately
14,000 workers or 5.5 % of wage and salary employment in
this state received hourly wages under $6.75. We have
ranges and that's the best we could do as far as how
particular between $5.65 and $6.74. That was in a fourth
quarter, so those numbers would presumably be higher
during the seasonal summer quarter. There has been a lot
said and I would certainly be available…
COMMISSIONER FLANAGAN said the main reason the bill has been held
up is opposition from primarily the restaurant industry over the
issue of a tip credit which was before the legislature a couple of
years ago. He said:
It is true that a majority of states have a tip credit.
There are few, if any states on the west coast, Alaska
has never had it. Governor Knowles, who speaks with some
authority with 30 years of meeting the payroll and
employing people in the food service industry is
adamantly opposed to a tip credit and feels that it's not
a proper thing to include in any legislation and ask your
consideration…
He said the Governor's bill proposes a tie to the consumer price
index to keep the wages from falling. "Right now the only indexing
is a tie to the federal minimum wage. We're 50 cents over the
federal. That was set in 1959 when the federal minimum wage was $1.
So, we had a 50 percent differential for Alaska and now we're down
to less than a 10 percent differential."
Number 2300
MR. JOHN BROWN, President, Fairbanks Central Labor Council, said he
supported SB 46. "Many people who come to work every day and work
hard deserve a living wage. It's the right thing to do. At the
current minimum wage, that's just not happening. This is a level
wage. It doesn't make any business any less competitive. Everyone
comes up together."
TAPE 01-24, SIDE B
MR. BROWN urged the committee to pass the bill containing indexing
to the consumer price index, which would hopefully keep them from
having to address this again. He supported the Governor's bill, but
said that SB 132 would be better than nothing.
MR. STEVE JOSWIAK, United Food and Commercial Workers Local 1496,
said he supported the Governor's bill, SB 46. "There are a lot
people out there who are working, not just kids who are making
minimum wage, but adults. I think the Governor's bill is the way to
go tied in with the CPI…It's been too long to see any raises of
minimum wage. If we could have the CPI in there, we don't have to
come back to the table and do this every five or six years…"
MR. JIM SAMPSON, Fairbanks resident, supported any movement by the
Alaska legislature to increase the minimum wage for Alaska's
workers. He said he is one of three sponsors on a petition that was
recently certified and they plan on being successful in collecting
28,000 signatures to put it on the ballot in the November general
election. He said their initiative mirrors the Governor's
legislation that would increase the minimum wage to $7.15 an hour
and index it every year thereafter. "The only difference is that we
have one small change. Currently, Alaska law says that our minimum
wage will be 50 cents over federal minimum wage. Our petition pegs
that at $1 over minimum wage…"
MR. DON ETHRIDGE, AFL-CIO, said they also support increases to the
minimum wage. Their preference is the indexing method, but he said,
"We'll take what we can get at this time."
MR. MARVIN JONES, President, Hotel and Restaurant Employees Union
Local 878, opposed a tip credit for Alaskans. He personally knows a
large number of employees who work two or three jobs in order
maintain a decent life. A tip credit would lessen the quality of
life for all Alaskans.
MR. JIM CALHOUN said he worked at the Sheraton Anchorage Hotel as a
tipped employee and supported the no tip credit language in SB 46
and SB 132. He said, "As a tipped employee in the Anchorage, I have
two children and one on the way. I work two jobs to allow my family
to live a lower middle class life style. I speak for many people in
the Anchorage area when I say that we will fight passionately any
attempt to institute a tip credit or a two tier minimum wage system
for tipped employees."
MS. TORA GERRICK, Secretary/Treasurer, Hotel and Restaurant
Employees Union Local 878, supported the no tip credit language in
both of the bills. They prefer SB 46 and are supporting the
petition effort. "I want to implore the Senate and House
representatives, as well as the Governor, to please not punish
working people from doing a good job via a tip credit."
MR. JACK AMOUN, owner of Marx Brothers Café, said he is also
President of the Alaska Restaurant and Beverage Association. They
are strongly opposed to both increases in the minimum wage. He
testified:
While on the surface raising the starting wage may seem
like a simple thing to do, the effects of a mandated wage
hike are far more complex especially in regards to the
restaurant industry….I think it is important that we
dispel the misconceptions about who the minimum wage
earners are in restaurants and we should look at how it
affects the two segments of our industry, both in table
service restaurants and in quick service or fast food
operations. In table service restaurants, the only
minimum wage workers are, in fact, our tip employees who
do receive a major portion of their wages in tips. I've
described the tips as wages because to the federal
government and IRS tips are, in fact, wages and are
treated as such for withholding as payroll taxes.
Employees are required to report all tips received and
employers are required to insure compliance. We are
subject to audits and there have been cases where
employers have been held liable for unreported tips and
assessed fines and penalties by the IRS. In my
restaurant, tipped income reported by my servers averages
between $13 - $25 per hour…. Red Robin and Applebee's
servers averaged $12 - $20 per hour in tipped income. Our
hostesses and busboys are all paid above minimum wage
with prevailing wages for dishwashers and prep cooks from
$7 - $12 per hour. The federal government recognizes how
tip income works and allows employers to apply a portion
of that to offset minimum wage requirements. The tip
credit is currently law in 43 states. Alaska is one of
only seven states with no tip credit.
As written, both of these bills would force employers to
give raises to our most highly compensated employees and
the effect of this is often a freeze in the back of the
house wages. Our kitchen staff often bears the brunt of
this.
The increase in labor costs cannot be made up in sales
and price increases. After the last wage hike, La Mex in
Anchorage was forced to limit its health insurance for
its employees and Red Robin eliminated paid vacations.
Operations are often forced to freeze wages paid to
kitchen staff.
Restaurants operate on slim profit margins. According to
a National Restaurant Association industry operations
survey, net returns for successful restaurants average
between 5 - 8 percent of gross revenues. The restaurants
are labor intensive and table costs run between 25 - 30
percent of gross.
The quick service segment of the industry provides the
first job for over 60 percent of America's teenagers.
These first time employees enter the workplace with
little or no skills. Training costs are high. In fact,
studies done by the National Restaurant Association
reveal that the majority of minimum wage earners are in
fact teenagers with a household income in excess of
$50,000 per year. Employees do not stay at this starting
wage for long. Again, the federal government recognizes
the role restaurants play in starting young people in the
workforce by providing a training wage.
Federal statutes allow employers to pay new employees
under 18 a lower than minimum wage for the first 90 days
of employment. Alaska has a training wage, but the
requirements are so restrictive that it's not feasible
for employers to take advantage of it.
Another impact on the fast food industry and restaurants
in general has to do with salaried management personnel.
Under Alaska labor law, if we have a management personnel
on salary that has to do front line employee tasks for 20
percent or greater of their time, they are paid two and
half times the minimum wage. Currently, these salaries
are in the $29,000 per year range. That would force
increases to the $34,000 per year. I don't know another
industry that is paying people close to $30,000 where
they are considered minimum wage employees.
In summation, an increase in the starting wage will hit
restaurants hard. We'll be forced to raise wages for
employees currently earning between $15 - $20 per hour.
Quick service restaurants will have a tough time being
able to give young persons a start. I encourage you to
oppose both of these bills. Thank you very much and I'd
be happy to answer questions.
SENATOR DAVIS said that he mentioned he had dishwashers making $10
- $12 an hour and asked if they were full-time employees or part-
time and what kind of benefits did he provide if they were full-
time.
MR. AMOUN responded that sometimes they are full-time and sometimes
part-time. They offer a group health insurance plan that employees
can elect to participate in. Due to rising health insurance costs
and increased labor costs, they can no longer cover at 100%, so it
requires a contribution on the part of the employee. They also
offer a one-week paid vacation after anyone has been with them for
one year.
SENATOR DAVIS asked if most of the people he employees at that
level are part-time.
MR. AMOUN answered that it varies. He has a small operation. He has
a full-time prep cook, a full-time dishwasher and a part-time
dishwasher.
SENATOR DAVIS said it is true that many teenagers come into these
jobs, but in Anchorage lately, she sees more seniors work in some
of the fast food restaurants than young people. She asked if he had
that problem.
MR. AMOUN replied that was not a problem for him, but he thought
this was an important bill. He said he could have other operators
come forward like Larry Baker from Burger King, Jay Southerland who
owns Wendy's and a former McDonalds owner.
MR. ALONZO PATERSON said he represents the American Baptist Church,
the Alaska Right to Leadership Conference and other groups that
deal with low-income wage earners across the State of Alaska. He
supported the minimum wage increase, because of a number of
reasons. His church's constituents run the gamut in terms of income
wage earners. Many of them are low-income wage earners and border-
line survivors. Many people who are returning to society from
correction are forced to return to crime because the income is so
low they are unable to survive.
He said his church is at the entrance of a low-income community
where they live and work with many people. He said they see many
people who have to see people trying to survive each day. He said
further:
I think they are being used or manipulated by the society
because they are allowed to be deprived of an adequate
income. While I recognize that this increase will not
satisfy all of the needs of my constituents, it will go
far to help in alleviating much of the burden.
If you look at the rental costs, the full costs and other
costs in our society today, this kind of income set
provokes, in my opinion, criminal behavior for survival
or cheating or many other devious means that sustain the
prisoners. Again, many inmates who come out are unable to
live, as people who know they have been in the
institution use them because they are able to get away
with it. Our church is one of the work stations for the
Department of Corrections and many of those persons who
are coming out of [indisc.], we do try to help them in
getting jobs and work experience.
We also work a lot with the Brother Francis Shelter where
many of these people end up at the bottom of the rung and
again they become a breeding ground for all kinds of
behavior that is consistent with the efforts to try to
survive.
I believe that raising the minimum wage will relieve the
burden first of all on Alaska housing, particularly
Section 8 housing where many of these people who live at
the cutting edge of poverty and deprivation will have a
chance to at least get minimum housing rather than
looking to the state to provide housing.
I also believe that the passing of this legislation will
lower, somewhat, the crime rate. That may be optimistic
on my part, but I just believe that if people can get an
adequate income, they are able to get better housing and
have a better living and be less tempted to go back into
crime.
Finally, I believe that the raising of this minimum wage
would give families more pride in themselves because they
do not have to live as beggars of our society and they
will have the opportunity to hold their heads up, buy
adequate cloths for their children, adequate food for
nourishment and will at least be able to live with their
neighbors without having to drop their heads. I fully
support this bill.
CHAIRMAN PHILLIPS asked if he liked one bill better than the other
or just liked the concept.
MR. PATTERSON replied that he came to support SB 132, but at a
minimum, he fully supported SB 46.
MR. MEE SON CHUNG said he is a housekeeper. He used to have two
jobs, but now he is older and has one. When he sees people working
in restaurants, he knows they cannot survive like that. He thought
they needed to raise the minimum.
MR. MANO FRY, President, AFL-CIO, asked Dr. Patterson if he would
help them with their petition initiative to get enough signatures
to get the issue on the ballot in 2002. He then thanked the
committee for hearing this bill and strongly supported the effort
to raise the minimum wage. "It's critically important to this
state."
He said that in SB 46 the Governor mentions at the current level,
if a single parent of a family of three works full-time at the
current minimum wage, they're at 66% of poverty level.
Under the same scenario, if it increases his rate of pay
to $7.15 an hour, it would take that same person up to a
bit below 84% of the poverty level, still well under the
poverty level for a person working full-time. It's not
like we're trying to shoot for the moon. The Governor's
effort is a two-step process as is Senator Davis'…
MR. FRY said their petition effort is similar to what they did in
1999 when their signature numbers fell short of qualifying for the
ballot. They have mirrored the governor's effort of pegging the
minimum wage at $7.15 an hour. The biggest difference between the
governor's bill and Senator Davis' bill is that his is indexed to
the consumer price index after the second raise.
MR. FRY explained:
Those employees that receive tips, the more the tipped
employees earn, the better off the owners have to be. And
if the tipped employees are making $50 an hour, it can't
mean anything but good for the owner, because it means
that people are being taken care of and you're being able
to reward those that mean the most to your establishment
in not just bringing in additional business, but having
repeat business. It boggles my mind not paying tipped
employees at least a minimum wage…
MS. GARDENER clarified that a CS had been offered on SB 132 and
those were the statistics she quoted in her presentation.
SENATOR DAVIS said that she appreciated Mr. Fry's testimony and she
also supported the governor's bill. Her bill was supposed to be 50
cents above the federal level, which hasn't been raised in a long
time ('60s). This has made our state one of the lowest paying
states in the Northwest.
MS. FAY GAVIN said that she works at the Sheraton in Anchorage and
wanted to go on the record as opposing any tip credit in any bill,
but she agrees with a living wage. "I do not agree with a minimum
wage, because a minimum wage keeps people in poverty."
Number 960
MR. RAY LACEY said he works at the West Coast International Hotel
as a porter and said, "I'm adamantly opposed to the tip credit.
I've seen too many waiters and waitresses actually loose money
working an eight-hour shift."
CHAIRMAN PHILLIPS asked if he supported the concept of the bills.
MR. LACEY said he does.
MS. SUE BAILEY said she works at the Hotel Captain Cook and is a
member of Local 878 and she fully supported the governor's bill.
She adamantly opposed any introduction of a tip credit. It's not
right to let the customers pay for the wage. "We're tipped because
of good service!"
MS. ANGELA LIPTON, Director, Department of Justice, Catholic
Archdiocese of Anchorage, said, "There is a concern that both bills
maintain families at a poverty level, particularly now that we work
so diligently to move families from welfare to work. It's hardly
fair to then maintain those families in poverty."
However, Ms. Lipton said that SB 46 seemed to be the more long-term
solution.
By indexing the wage to the consumer price index
employees have the security of knowing they needn't
depend on politics of the day to maintain a decent wage
and it also allows businesses to project their labor
costs in modest increments. We feel that employment is
the first line of defense against poverty, but makes no
sense at all if workers are maintained below the poverty
level. I encourage you to act on behalf of low-income
workers and support SB 46. Thank you.
MS. MARY JO AUDECTE said she is a part-time server at the Sheraton
Hotel and has worked in a state that has a tip credit. She said,
"It is very disheartening to work in that situation. I am very
supportive of the governor's minimum wage bill and very opposed to
the tip credit."
MS. LUCY VINCENT said she works for the Anchorage Sheraton Hotel
and supported SB 46 and opposed the tip credit.
MR. DARRELL TSEU, Inlandboatmen's Union, supported SB 46. He said:
In a past life, I also worked just above minimum wage
with a wife and a child. I had about 45 cents more than
minimum wage. Unfortunately, that wage did not support my
family. I was on rent subsidy and food stamps and it was
really embarrassing for me as a Republican to be in that
position…
He said that his philosophy is that an employee is not a liability
to a business; he's a resource. As a food and beverage manager of a
hotel, he realized that it costs the company money every time it
loses an employee. "Whenever you pay someone a lower wage, they're
always going to be seeking a higher wage…"
He said it takes up more of his time to train someone new and
setting up their accounts, etc. He talked with state officials and
found that the average marine employee costs the state about $3,000
to train in keep in employment.
CHAIRMAN PHILLIPS asked him how he came to testify today.
MR. TSEU replied that he is interested in both the governor's and
Senator Davis' bills. "Because I have experienced it myself at
first hand, it is important for me."
MS. CAREN ROBINSON, Alaska Women's Lobby, supported both SB 46 and
SB 132. She said the most important thing from their standpoint is:
The single mother who, either through domestic violence,
divorce, or death in the family is back into the
workforce and I don't think any of us should be under any
notion that even at the rate we're raising this that it's
going to bring women and children in this state out of
poverty.
She said that as an owner of three small businesses, she never paid
her staff just the minimum wage. She understands that any kind of
increase adds to the cost of doing business, but she has seen that
she spends a lot of time and energy on retraining and recruiting
and starting all over again. "I can see how keeping someone happy
in the workforce really makes a difference in keeping your costs
down."
MS. BERIT ERIKSSON, Inlandboatmen's Union, said that previously she
worked as a waitress for many years and worked in a state with tip
credit. She is very much in favor of the governor's bill and
opposed tip credits.
Working under a tip credit system, I was working seven
days a week, split shifts and hardly making ends meet.
Not everyone works in a high-ticket restaurant. Most
people work in your average everyday restaurant and it's
very hard to make ends meet under those circumstances.
MS. PAM LABOLLE, President, Alaska State Chamber of Commerce, said
that she did a survey of the membership on this issue and
discovered of the respondents that only six percent of them pay the
minimum wage for a starting wage; 69 percent pay $8 an hour or more
for starting employees.
So, this was not as critical an issue to them as it is to
some other organizations with a different kind of
membership. They were surveyed on the governor's bill and
were evenly split; one-third felt that we should increase
the minimum wage to $6.40 next year, 32 percent said no
we shouldn't and 28 percent were undecided. As far as
raising it to $7.15 the next year, 49 percent did not
agree with that…
MS. LABOLLE said that the State Chamber does not like the idea of
tying things to an index. They feel that the legislature should
make those decisions with input from the public based on conditions
of the day. They would like that to continue.
MR. JIM NORDLUND, Director, Division of Public Assistance, DHSS,
supported both bills. He said:
As you know, Alaska has gone through a remarkable
transformation in welfare services in the past six years.
Based on the law that was passed in 1996 under the banner
of welfare reform, we replaced the old AFDC program with
the Alaska Temporary Assistance Program (ATAP) and in
doing that we ended the entitlement to cash assistance
benefits for poor people. We require them to go to work
and we added a provision in law that made work pay. The
result of that over the past six years has been quite
remarkable. We have seen the caseload come down by 42
percent; we've saved millions of dollars in benefits that
would have otherwise been paid out to recipients. We have
shown over the years that we can effectively move people
into the workforce and it is our hope to continue to do
that and to help people stay off of welfare…
TAPE 01-25, SIDE A
He said that this is still 36 percent below the poverty level. Mr.
Fry's used last year's figures, he was using this years'. Their
fiscal note is based on Senator Davis' legislation, but they figure
there are about 300 ATAP recipients that earn between $5.65 - $6.40
an hour. That would mean a savings in welfare benefits of about
$376,000 per year. The governor's bill has savings in the fifth and
sixth years approaching $1 million. He said they would prefer the
governor's inflator, but they support Senator Davis' bill if it
would pass without the inflator.
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