Legislature(2001 - 2002)
10/20/2001 10:00 AM Senate L&C
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SB 132-MINIMUM WAGE
SB 46-INCREASE MINIMUM HOURLY WAGE
CHAIRMAN PHILLIPS announced SB 132, Senator Davis' bill, and SB
46, the Governor's bill, to be up for consideration. He said they
would take up the Governor's bill first.
MS. REBECCA NANCE GAMEZ, Deputy Commissioner, Department of Labor
and Work Force Development, explained that SB 46 would increase
the minimum wage to $7.15 per hour over two years and then would
tie the minimum wage to the consumer price index of the Anchorage
area. She said the Governor would like to move forward on this
bill and there was an initiative petition that's similar to it.
She understood that they had gathered the required signatures.
SENATOR LEMAN asked how many Alaskan employees who are making
minimum wage this would apply to.
MS. GAMEZ replied that in terms of adult and temporary
assistance, there are about 300 and it affects about two or three
percent of the adult working population.
SENATOR LEMAN asked if it dealt with employees who are receiving
minimum wage and receive other compensation like tips. He is
concerned about the distribution of wages within establishments
where this bill might be nothing more than window dressing and
actually doesn't help the majority of the people they are really
trying to help.
MS. GAMEZ answered that there is no tip credit included in the
Governor's bill. "Currently there is no tip credit on the books
in Alaska statute - tip credit meaning that you could pay a lower
wage to tipped employees if they receive tip compensation…"
SENATOR LEMAN asked what it was they were trying to do, help
employees in their total compensation or trying to identify
something that's called wages that different from total
compensation. He said the legislature is trying to get income
into people's pockets so they could spend it.
MS. GAMEZ said they were trying to raise the overall standard of
living for Alaskans, particularly for those at the lower end of
the economic scale.
SENATOR LEMAN said he was concerned that, "Somebody serving
tables makes $25 per hour and somebody washing dishes makes maybe
$8, which is more than minimum wage. This doesn't affect them."
MS. GAMEZ responded that it wouldn't affect people who make more
than the minimum wage.
SENATOR LEMAN said he thought the bill needed work.
SENATOR DAVIS asked why they were hearing this bill now and she
thought there were a lot of people who would want to have input.
CHAIRMAN PHILLIPS explained that they are just getting up to
speed on these subjects. His opinion was if the initiative
secures the 30,000 signatures, that the committee has the choice
of not even dealing with it or letting the initiative seek its
own course.
SENATOR DAVIS said she believed they would have the signatures if
they didn't already have them. It would go on the ballot and it's
up to the legislature to decide what they are going to do. She
said they had this bill before them twice before and there isn't
a subcommittee and no one is doing any work on it.
CHAIRMAN PHILLIPS replied if the 30,000 signatures are certified
by the Division of Elections, it's his intent to start working on
this bill in session and he was pretty sure they would have the
signatures. He thought it was better for the legislature to write
something than to have an initiative with unintended
consequences. It was not his intention to appoint a subcommittee
today, but he would later.
SENATOR LEMAN said they need to help employees and he wasn't
convinced that they were. He though they might be creating
disincentives. He didn't want to be shifting money from those at
the lower end to those at the higher end unless there's a reason
to it and he hadn't heard a good reason.
SENATOR DAVIS responded:
There really isn't a whole lot to shift in here,
because it's really not going to give a person a living
wage. It's just going to bring it up; they're still
going to be in poverty. I don't know of anybody working
in restaurants that's making $25 and $30 an hour. If
they are, I'd like to meet a few of them.
Some of them, maybe with tips they might make pretty
good, but the tips aren't always the same. You can't
always depend on the tips. You need to have at least
enough to bring home some food, pay your utilities and
rent and things like that.
The intention of my bill and the Governor's bill is to
bring minimum wages up. We know that ours is too low.
We've had it tied in with the federal law and the
federal rates have not gone up… Should the bill at the
federal level pass, ours will automatically go up.
CHAIRMAN PHILLIPS said he thought the legislature would have to
deal with it.
MR. DARRELL PETERSON said he has several concerns. One was that
minimum wage is not enough money and is not high enough in this
bill. He said:
I am not concerned one whit about how much I pay my
waiter at a restaurant in town. That is a relationship
between the person at the restaurant who is buying a
meal and tipping his waiter or waitress. As far as I am
concerned the hotel and restaurant industry is
violating a sacred contractual agreement between the
person getting the food and the person waiting the
tables. It's an interesting philosophy, but that's the
relationship. If you don't want to tip them, you don't
have to tip them.
He said that 98 percent of the people getting minimum wage are
people who work at McDonalds and are teenagers and haven't had a
raise in nine years. Those are the people he is talking about.
He proposed taking the average of Washington, Oregon and
California salaries and add 50 cents to whatever their average
minimum wage would be.
I have kids in my classes who are telling me that they
earn more in California before they came here to go to
work for less money living in this state. It's kind of
appalling. It used to be the other way around. The
easiest way to take care of the federal questions and
all the rest is to average their salaries, put a cap of
50 cents on it more than that and that would take care
of that problem.
MR. PETERSON also said he would like to see a provision that no
one under 18 years old would be required to join a union or a
closed shop and pay initiation fees or monthly dues. They are
minors and not adults. Some corporations in town require 14 and
15 year olds to pay $25 per month in union dues and initiation
fee. As an example, he said his daughter's last pay check was $80
and her take home pay was $0. "She didn't get a dime."
He said:
It is not right to take the lowest paid people in this
sector, charge them the same rates for belonging to the
union and initiation fees and they're not even 18,
legal adults. These contracts are imposed on them
without their consent or anybody else's. It should be
the state's obligation to protect them as a class and
pass legislation that says no union can impose those
fees or dues on them. Then at 18, they can join the
union and pay their monthly dues.
SENATOR LEMAN asked what kind of classes he taught.
MR. PETERSON replied that he teaches at East High School.
CHAIRMAN PHILLIPS and SENATOR DAVIS both said they would like his
comments in a letter so they could address them in the next
session.
SENATOR DAVIS said she would like further information on kids
having to pay union dues.
MR. MANO FREY, President, AFLCIO, said they sponsored the
initiative petition with regard to minimum wage. He said it has
three main points. First, it would raise the minimum wage up to
$7.15 an hour from the current rate of $5.65; secondly, it would
be indexed to the cost of living increases. Through the CPI it
would be adjusted annually to reflect that increase so that we
won't have to revisit this either through the legislative process
nor through the initiative process and it will keep pace with
inflation, which it hasn't done in any way shape or form.
The third provision of the petition requires a minimum spread of
$1.00 an hour over the federal minimum instead of the current 50
cents. So, if Congress ever comes to grips with raising the wage
for all of the United States and it was a fair amount of an
increase that Alaska's spread would be $1.00 instead of 50 cents.
He said that when Alaska was a territory, it was 50 cents an hour
over the federal minimum wage and that's not enough considering
the expense of living in this state.
MR. FREY said:
We are very satisfied with the signature gathering and
we hope to be successful unlike two years ago when we
fell short of gaining the required signatures. I'm
hopeful that won't happen again even though the
threshold is higher because of the voter turnout in the
last general election. We feel very confident that
we'll be able to have those petitions and have the
required number of valid signatures.
SENATOR DAVIS said she was sure that they would get enough
signatures. She said she plans to push her bill as a separate
bill when the legislature goes back into session because
regardless of what's going on.
MR. FREY said he appreciated that and he hoped the legislature
would take each of the three issues seriously.
SENATOR LEMAN said when they did the analysis on the escalator
clause, the Michael Boskin study of several years ago showed that
the CPI actually overstated inflation by 1.1% because of changes
in buying habits. He asked why the CPI was used for the escalator
rather than something that might be more technically accurate as
a measure of the cost of increase.
MR. FREY replied that in his years of negotiations with contracts
of every kind, the CPI has been the accepted standard within both
labor and management as a tool even though methodology has
changed. "It wouldn't matter to me which gage was used as long as
it was fairly reflective of the cost of living…CPI is recognized
as an industry standard right now, for lack of a better
definition."
SENATOR LEMAN said that he thought their efforts at working on
economic opportunities on the coastal plain of ANWR would achieve
more for workers doing than this bill, which in reality affects
very few people.
There are more important things we could be doing with
the same amount of effort…The reality is that we need
more opportunities in Alaska for more people to be
working so that this state can be more than just a
place for people to come and look at us.
MR. FREY said he appreciated his remarks and he met with Senator
Stevens in Washington D.C. on encouraging the Democratic
leadership in the Senate to allow an energy bill to be voted on.
He added regarding Mr. Peterson's remarks, that one major
employer in this state hires young people under a union contract
and it's Carrs grocery stores, but he didn't think the
legislature would want to get into labor management negotiations.
You have so many other things you have to deal with.
Comments like Mr. Peterson made are very fair. It's not
fair to end up with a $0 check. I couldn't agree with
him more, but I think it's more appropriate that the
union and management of whatever company it was hear
those same comments…If they recognize it and deal with
it, it's more appropriate than the legislature
involving itself in labor and management decisions like
that.
CHAIRMAN PHILLIPS asked how many signatures he needed.
MR. FREY replied a few more than 28,000 signatures were needed
and they have at least that many right now. They are trying to
get a margin.
CHAIRMAN PHILLIP asked what his feelings would be if the
legislature drafted an exemption for under 18 year olds to pay
union dues in a minimum wage bill.
MR. FREY replied that they have many members who are under 18
years old, kids who work with their parents for instance, in
construction. He didn't think it was appropriate for the
legislature to do anything there. He said there would be a lot of
resistance to the concept.
CHAIRMAN PHILLIPS asked what the unions would do if they get a
request from individual groups of people to exempt their children
under 18.
MR. FREY replied that there wouldn't be just a simple exemption.
The Laborers Union…
TAPE 01-29, SIDE B
MR. FREY said they provide flexibility with contractors and
employers who they deal with with a sense of fairness to those
people who may not be making a construction wage and may not be
working full time. Every union has a concern about the kind of
example Mr. Peterson just brought up. "If they realize it is a
problem, they will deal that."
CHAIRMAN PHILLIPS said this would probably come up as a public
policy issue if the legislature deals with the minimum wage
issue.
MS. KAREN RUIGINO (ph), Alaska Hospitality Alliance, said she
represented the Alaska Restaurant and Beverage Association and
the Alaska Hotel and Motel Association. She opposed any minimum
wage increase, but preferred that the issue go through the
legislative process rather than the ballot initiative process
because the general public is largely unaware of the negative
impacts of minimum wage increases. Their opposition is based on
the following reasons:
A minimum wage increase hurts those employees that it's
intended to help. Someone earlier said that the main
goals is to help the employee. Every time the minimum
wage increases, the employers are faced with having to
offset the significant increase to their costs. I am
speaking specifically on the food and beverage and
hotel side of the business.
In the restaurant industry, profit margins average
three to five percent, which doesn't leave much room to
absorb a minimum wage increase. So, since profit
margins are slim, employers will reduce the benefits to
their employees such as vacation pay or health
insurance or they reduce the number of employees or cut
their hours. It's actually disabling the work force.
We just heard earlier that 98 percent of minimum wage
earners are teenagers or tipped employees, so there's
very few people who are actually earning minimum wage
without either gaining valuable work experience, as is
the case of teenagers, or they are tipped employees
whose average with tips includes $12 - $15 per hour
when you include tips with their wage.
The other thing about tipped employees is that it
already includes a natural cost of living indexing
because as the cost of living increases, menu prices
are rising at a higher rate than the cost of living.
So, this year for example, menu prices are rising at a
rate of 3.1 percent while inflation is rising at a rate
of 2.7 percent. So, as restauranteurs increase their
prices, tips are based on the menu total check, so the
tip goes up. So, you have a natural CPI indexing right
now. A very small percent are primary wage earners in a
household and that's really a misnomer that the general
public thinks that it's a divorced mother with three
children trying to earn a living. It really isn't. It's
teenagers earning valuable work experience and it is
tipped employees who are earning well over the minimum
wage.
Federal law recognizes tips as wages. The employees
that make tips pay federal income tax on them. We're
one of only three states that does not recognize tips
as wages. We believe that state law should also
recognize tips as wages. We would be interested in
perhaps something that allowed for a conditional tip
credit where if an employee earned less than $8 or $9
with tips, that they would be subject to a minimum wage
increase. If they earned with tips over $8 or $9, then
their tips would be included and the employer would not
need to be giving them a minimum wage increase. So that
would mean that those employees that are just making a
few dollars in tips that they would have the
opportunity to get the minimum wage increase.
Finally, we do believe that if the state is going to be
putting something forward to help the employees that
are making minimum wage, with the labor market that we
have today, we believe that money should be dedicated
toward training these people so that minimum wage
becomes as largely as it is now an entry level wage. So
these employees are better equipped to deal and
contribute to the labor market and grow into a more
challenging position.
SENATOR LEMAN asked if she had done any analysis on what the
impacts would be on either the governor's proposal or the
initiative, which is comparable in terms of loss of jobs for
people at this minimum wage level.
MS. RUIGINO replied that they didn't have any numbers for the
state of Alaska, but there were national numbers on the impact to
the hospitality industry of minimum wage increases. She said she
could get those numbers for the committee.
SENATOR LEMAN said he would appreciate that and asked if she had
any idea of what percentage of minimum wage earners worked in
those industries.
MS. RUIGINO replied that they hadn't been able to get those
numbers from the Department of Labor. She heard earlier that 98
percent of people getting minimum wage are teenagers. "From what
we can gather, the other percent are a very high percent of
minimum wage earners are tipped employees. The Department of
Labor has been unable to furnish us with information on who or
how many or what percent of the workforce is actually earning a
bare minimum wage. Even dishwashers and bus people, because of
the labor shortage, are being hired either at minimum wage and
escalated within weeks or they are hired above minimum wage well
over the 50 cents above minimum wage today.
CHAIRMAN PHILLIPS said he assumed that the proponents of this
legislation would secure their signatures and the legislature
would be faced with one or two decisions as public policy. He
asked them to take a good look at this initiative and let the
committee know what their bottom lines are.
MS. RUIGINO said she could provide that. She also said that the
hospitality industry is looking at a bigger picture or impacts to
the bottom line of business owners:
With minimum wage increases proposed on the state level
and the federal level, unemployment tax increases, a
proposed 300 percent liquor excise tax increase;
there's proposed bed taxes and every year we're looking
at in the hotel industry, there's a proposed head tax
on the cruise ship industry that decreases the
occupancy statewide, decreasing funding from the State
of Alaska for tourism marketing and terrorism impacts.
That is the impact on the hospitality industry of the
events of the last several weeks. Next to the airline
industry, the hospitality industry has been impacted
the most with recent acts of terrorism…
She said that the minimum wage increase is one small item in a
large picture that is threatening to cripple the industry.
SENATOR DAVIS asked her to elaborate on the training for
employees that she mentioned earlier. From her standpoint, she
thought her industry should do on the spot training, but she
didn't know what incentives the legislature could provide to them
for incentives to help them increase that. She thought employers
should be doing that ongoing.
MS. RUIGINO said she understood in the past that the unemployment
insurance fund is very large and it has been suggested that money
from that could go toward a work opportunity credit. Employers
certainly understand that they need to be providing on the job
training and also that less experienced teenage workers require
more on the job training. Some kind of work opportunity credit
would provide employers with resources to invest more training in
workers.
MR. RICHARD BENAVIDES, Staff to Senator Davis, said he wanted to
bring up some new information. He explained that in SB 132, the
minimum wage would remain at 50 cents an hour above any changes
to the federal minimum wage, at least for the remainder of 2001
and then it would increase to $6.40 an hour on January 1, 2002.
It would increase to $6.90 on January 3, 2003.
He said if you make $5.65 per hour for a 52 week year, you would
make $10,848 or approximately $7,000 under the federal poverty
level if you are a single parent with two kids. This makes things
much more difficult along with the cuts to the food stamp and
other assistance programs.
He said that people who deliver car parts, for instance, for
different kinds of warehouses, get minimum wage and don't get
tipped. Also, if you're working at a smaller restaurant, you
don't get the same kind of tips you get working at the Captain
Cook or some other place where meals are more. He said that
living on tips is a hit and miss kind of thing.
In 1999 in the State of Alaska, approximately 47,000 men, women
and children were earning minimum wage incomes. "The bulk of
those people making minimum wage were above the age of 20."
MR. BENAVIDES said there was the argument that any increase would
hurt entry level workers, but there was a study in 1998 at
Princeton University that found that higher wages actually
resulted in better motivated more stable workers with higher
productivity levels and lower turnover rates. Another study
looked at how many people lost their jobs due to having higher
costs for employees, but they found that was a very minimum
impact. He said:
It depends on the industry. Obviously, if things are
going well, it doesn't matter if you're paying $5.65 or
$7.75, if your restaurant is doing well, you're going
to need more people to work there and you'll pay them,
because you're making more money anyway. If your
restaurant is not making money, you're going to cut
back. It doesn't matter what the wages are that you're
giving those people…
SENATOR LEMAN said the numbers he is reporting are different than
what Ms. Gamez and others reported. He said there is an exemption
in the minimum wage law for certain people involved in
agriculture. He asked if he was including everyone in the exempt
category as well.
MR. BENAVIDES deferred to Ms. Gamez, but his study said
specifically minimum wage and it was from the Department of
Labor.
MS. GAMEZ said she would follow up on that for the committee. She
also needed to get with Ms. Ruigino to find out who she was
dealing with and get her the information she requested.
SENATOR LEMAN asked her to separate her numbers into minimum wage
earners to which the law applies and those who may be minimum
wage earners that the law doesn't apply to, like a baby sitter or
whatever the exemptions allow for.
MS. GAMEZ said she would work on getting everyone the same
information. She wanted also to talk with Ms. Ruigino about
worker opportunity tax credits that exist primarily for welfare
recipients and unemployment insurance training that she may be
able to take advantage of.
CHAIRMAN PHILLIPS asked if there was anyone else who wanted to
testify about the minimum wage issue. There was no response and
he held the bill.
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