Legislature(2007 - 2008)BELTZ 211

01/31/2008 02:00 PM Senate LABOR & COMMERCE


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Please Note Time Change --
*+ SB 153 PEACE OFFICERS/FIRE FIGHTER RETIREMENT TELECONFERENCED
Heard & Held
*+ SB 187 ALASKA MINIMUM WAGE TELECONFERENCED
Heard & Held
*+ SB 197 PAYMENT DATE FOR CREDIT CARD PAYMENTS TELECONFERENCED
Heard & Held
+ HB 226 REPEAL TERMINATION OF STEP PROGRAM TELECONFERENCED
Heard & Held
Bills Previously Heard/Scheduled
                   SB 187-ALASKA MINIMUM WAGE                                                                               
2:57:50 PM                                                                                                                    
CHAIR ELLIS announced SB 187 to be up for consideration.                                                                        
                                                                                                                                
2:58:03 PM at ease 2:58:44 PM                                                                                               
                                                                                                                                
SENATOR WIELECHOWSKI,  sponsor of SB  187, said Alaska's  cost of                                                               
living is  one of the  highest in the  nation. The cost  of food,                                                               
housing,  utilities,  transportation  and  health  care  are  far                                                               
greater here  than in most  states. Despite this, Alaska  has the                                                               
lowest  minimum  wage  on the  west  coast.  Oregon,  Washington,                                                               
California and Hawaii all have  higher minimum wages, as do seven                                                               
other states. In addition, in  2009 the federal minimum wage will                                                               
increase to $7.25, surpassing Alaska's rate of $7.15.                                                                           
                                                                                                                                
SB 187  will increase  Alaska's minimum  wage from  $7.15/hour to                                                               
$8/hour  in  2009  and  adjust  it  annually  for  inflation.  If                                                               
Alaska's minimum  wage, last  raised in 2003,  were to  have kept                                                               
pace with  the rate of inflation,  it would be more  than $8/hour                                                               
today. At least 10 states  adjust their minimum wage annually for                                                               
inflation,  including Arizona,  Colorado, Montana,  Nevada, Ohio,                                                               
Oregon, Washington and Wisconsin.                                                                                               
                                                                                                                                
In  2009,  federal  minimum  wage  will  increase  to  $7.25/hour                                                               
surpassing Alaska's,  the first time since  statehood that Alaska                                                               
minimum wage will  be below the federal minimum  wage. Since 1962                                                               
until 2003, Alaska's  minimum wage was required by  statute to be                                                               
at  least $.50  above the  federal  level in  recognition of  our                                                               
higher cost of living.                                                                                                          
                                                                                                                                
3:00:01 PM                                                                                                                    
About  14,000 Alaskans  (or almost  5 percent  of the  workforce)                                                               
earn  the minimum  wage,  most are  in  accommodation and  retail                                                               
services  as  well  as  food   service,  education  services  and                                                               
manufacturing. A  full time  worker that  makes the  minimum wage                                                               
earns less  than $14,000/year  - barely  above poverty  level and                                                               
$3,000  below poverty  level  for a  family  of two.  Twenty-five                                                               
percent of those who earn  between $7.15 and $8/hour are parents.                                                               
Many  are the  sole wage  earners  in their  household. About  58                                                               
percent  of minimum  wage  earners are  adults,  the average  age                                                               
being 38. So, statistics don't  support the often-heard statement                                                               
that minimum wage is for teenagers.                                                                                             
                                                                                                                                
3:02:14 PM                                                                                                                    
SENATOR WIELECHOWSKI explained that  Alaska law currently exempts                                                               
employees under 18 years of age  who are working 30 hours or less                                                               
per  week from  the state's  minimum wage.  New economic  studies                                                               
show little  to no impact  on small businesses  regarding minimum                                                               
wage.  Recently,  over 650  economists  including  5 Nobel  Prize                                                               
winners  and   6  past  presidents   of  the   American  Economic                                                               
Association  signed  a statement  stating  that  the federal  and                                                               
state minimum wage increases can  significantly improve the lives                                                               
of  low income  workers and  their families  without the  adverse                                                               
effects that critics have claimed.                                                                                              
                                                                                                                                
He mentioned that Senator Joe Thomas is a co-sponsor.                                                                           
                                                                                                                                
3:03:22 PM                                                                                                                    
VINCE BELTRAMI, President, AFL-CIO, supported  SB 187. He said it                                                               
seeks  to restore  the annual  inflation-proofing  and bring  the                                                               
minimum wage up to $8/hour or  $1 dollar over the federal minimum                                                               
wage, whichever  is greater. He  added that other  states, Oregon                                                               
and  Washington being  the closest  examples, have  minimum wages                                                               
over  $8/hour  and  have  an  inflation  adjuster  equal  to  the                                                               
consumer price index (CPI). Washington  voters approved that by a                                                               
2:1  margin, but  before that  in  1998 when  Washington had  the                                                               
increase  on  the ballot,  a  lot  of corporate  lobbying  groups                                                               
warned of  catastrophic consequences  if an indexed  minimum wage                                                               
were   passed.  Greg   Weeks,  Director,   Washington  Employment                                                               
Security  Department,  said  that the  Washington  State  economy                                                               
right now is  a job engine drawing people from  the sidelines and                                                               
into  the  job  market.  Job  growth  reports  showed  Washington                                                               
outpacing the  nation with a  3.5 percent gain over  the previous                                                               
year.  Since Washington  began regularly  increasing the  minimum                                                               
wage in 1999  employment in sectors that traditionally  pay at or                                                               
near minimum wage have posted  sustained job growth. For example,                                                               
eating  and drinking  establishments, the  ones that  often times                                                               
are  worried about  these  types of  increases,  have added  jobs                                                               
every single year in the state  even after the post 911 recession                                                               
began. The  state increased  10.1 percent  in the  restaurant and                                                               
bar employment, and overall non  farm employment increased by 7.9                                                               
percent.                                                                                                                        
                                                                                                                                
He  said another  study in  1998  failed to  find any  systematic                                                               
significant  job   loss  associated  with  the   1996/97  federal                                                               
increase of $.90/hour, which amounted  to more than 21 percent. A                                                               
recent  fiscal  policy institute  study  of  state minimum  wages                                                               
found  no  evidence  of  negative  employment  effects  on  small                                                               
businesses as a result of increases in the minimum wage.                                                                        
                                                                                                                                
3:07:07 PM                                                                                                                    
In  Anchorage,   since  2003  when  Alaska's   minimum  wage  was                                                               
increased to $7.50/hour the cost of  living has gone up more than                                                               
15  percent.  So the  lowest  of  the  state's wage  earners  are                                                               
loosing ground.  Had the legislature left  the inflation-proofing                                                               
in in  2003, we would  be at $8.50/hour and  at that rate  a full                                                               
time worker would  have an annual income of  about $16,600, about                                                               
$1,000  below  the  federal  poverty  level.  He  said  inflation                                                               
adjustments  would make  labor costs  predictable for  employers,                                                               
help to  get more  Alaskans closer  to being  off of  the poverty                                                               
rolls and would  increase the amount of money  circulating in our                                                               
economy, which should stimulate  our consumer markets. "It's very                                                               
clear that increases to minimum  wage won't hurt our economy, but                                                               
in fact will help it," he concluded.                                                                                            
                                                                                                                                
3:07:35 PM                                                                                                                    
SENATOR  JOE THOMAS,  co-sponsor  of SB  187,  added the  current                                                               
minimum wage creates a net  income of $13,068/year or $1089/month                                                               
and the  basics of living every  month puts an average  family of                                                               
three   in  the   hole  by   about  $740/month.   This  obviously                                                               
contributes  to  the situation  where  somebody  else is  somehow                                                               
supporting  those  folks,  and  that   needs  to  be  taken  into                                                               
consideration in looking  at the impact. Making  people more self                                                               
sufficient  takes  less  money  from  the  welfare  agencies,  he                                                               
emphasized.                                                                                                                     
                                                                                                                                
CHAIR  ELLIS  noted that  Grey  Mitchell,  Director, Division  of                                                               
Labor  Standards and  Safety, Department  of Labor  and Workforce                                                               
Development (DOLWD), was available to answer questions.                                                                         
                                                                                                                                
3:09:27 PM                                                                                                                    
PAT LUBY,  Advocacy Director, AARP,  supported SB 187 and  said a                                                               
living wage  should be their  target, not just the  minimum wage.                                                               
Each year Alaska  has an increase in older workers.  Many of them                                                               
want to  work and  draw salaries. A  second significant  group is                                                               
retirees  who  find  that  inflation   increases  in  health  and                                                               
utilities  or the  loss  of a  spouse force  them  back into  the                                                               
workplace.  This trend  will likely  increase in  the future  and                                                               
many of  these retirees can only  find jobs at the  minimum wage.                                                               
He said the  new federal government's poverty level  for a single                                                               
person  in Alaska  is $13,000.  None of  these folks  are getting                                                               
rich, he  said; they are  only going to  get by and  he supported                                                               
helping them.                                                                                                                   
                                                                                                                                
3:10:52 PM                                                                                                                    
PAUL  WOLFSON, Tuck  School of  Business, Dartmouth  College, New                                                               
Hampshire, said he received a PhD  in Economics from Yale in 1989                                                               
and  he  had  been  employed in  many  good  positions.  Michelle                                                               
Sydeman  [staff  to  Senator  Wielechowski]  asked  if  he  would                                                               
testify  on the  minimum wage.  He  said he  had published  three                                                               
papers on the minimum wage. While  he hadn't had a chance to look                                                               
at  specific  data  for  Alaska,  he wanted  to  talk  about  the                                                               
economic profession's view of the current minimum wage.                                                                         
                                                                                                                                
He  said before  1990, almost  all economists  would have  agreed                                                               
that the  minimum wage would  reduce employment, but in  the last                                                               
20 years  a great deal of  research has indicated that  might not                                                               
be correct. The most prominent  research, by David Card and Allen                                                               
Kruger  (professors at  Berkeley  and  Princeton), examined  fast                                                               
food  restaurants  on  the  Pennsylvania/New  Jersey  border  and                                                               
compared employment  before and after the  minimum wage increased                                                               
in  New Jersey.  They found  no  evidence the  employment in  New                                                               
Jersey responded badly to the  minimum wage increases there. More                                                               
recently similar work  has been published by  three economists at                                                               
Berkeley;  one looked  at restaurants  in San  Francisco in  2004                                                               
when it  imposed a  minimum wage  of $8.50  and compared  them to                                                               
restaurants  elsewhere  in  the   Bay  area.  Even  though  their                                                               
estimate was more precise, they  weren't able to detect an effect                                                               
that was different than zero.                                                                                                   
                                                                                                                                
In another study,  the same three authors, instead  of looking at                                                               
restaurants  in the  same  area, looked  around  the country  and                                                               
noticed a  number of counties  that were adjacent to  each other,                                                               
but  in neighboring  states.  One  of those  states  at one  time                                                               
raised the  minimum wage  while the  other one  did not.  So they                                                               
looked  at  what  happened to  employment  in  those  neighboring                                                               
counties, but they, too, were not  able to find any effect of the                                                               
minimum wage  on employment. However,  they were able  to explain                                                               
how other  people found  raising the  minimum wage  defective and                                                               
their explanation was  that they were able to  control for trends                                                               
in  the  regional  economy  that other  people  weren't  able  to                                                               
because they didn't have the same data structure.                                                                               
                                                                                                                                
MR. WOLFSON  concluded that it is  fair to say that  the economic                                                               
profession  no longer  has a  consensus view;  economists can  be                                                               
found  on both  sides of  the issue,  which is  quite surprising.                                                               
Opponents of the  two increases in the federal  minimum wage that                                                               
occurred  in 1996  and  1997 predicted  massive  job losses,  but                                                               
instead  the employments  rates of  the least  advantaged workers                                                               
soared to unprecedented levels.                                                                                                 
                                                                                                                                
3:16:09 PM                                                                                                                    
SENATOR BUNDE said  he would like to know where  Alaska ranks for                                                               
cost of  living and how many  people in Alaska are  calculated to                                                               
work at minimum wage and if  they are one or two-earner families.                                                               
He  also  wanted  Mr.  Wolfson to  explain  his  suggestion  that                                                               
raising the  minimum wage  expanded jobs  and if  that encouraged                                                               
people  to stay  at  that level  rather than  to  move on.  Often                                                               
minimum wage jobs are considered a starter job and you move on.                                                                 
                                                                                                                                
SB 187 was held for further work.                                                                                               

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