Legislature(2009 - 2010)BELTZ 211
02/05/2009 01:30 PM Senate LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| SB83 | |
| SB1 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 83 | TELECONFERENCED | |
| *+ | SB 1 | TELECONFERENCED | |
SB 1 ALASKA MINIMUM WAGE
1:47:44 PM
CHAIR PASKVAN called the meeting back to order at 1:47 p.m. and
announced SB 1 to be up for consideration.
SENATOR WIELECHOWSKI, sponsor of SB 1, gave a brief history of
the minimum wage in Alaska. In 2002 about 47,000 Alaskans signed
petitions to raise it. Alaska has historically been at least
0.50 cents higher than the federal average. The signatures were
presented to the Lieutenant Governor; the initiative was
certified and was placed on the ballot in 2003. Had it passed,
it would have increased the minimum wage to $7.15 cents, which
it currently is, but it also had a provision for a cost of
living allowance.
The legislature found that 80 percent of Alaskans supported
increasing the minimum wage, which at $7.15/hr in 2003 was the
highest in the nation. Alaska has among the highest cost of
living in the United States; so it only stands to reason that we
should have among the highest minimum wage, if not the highest.
The legislature passed the bill, but the issue came back the
next year and the cost of living increase provision was stripped
out. Had that provision, which the voters surely would have
voted for, been in effect then the minimum wage in 2010, when
this bill takes effect, would be $8.78. "That's the starting
point for this piece of legislation."
1:53:05 PM
SENATOR WIELECHOWSKI estimated this bill will affect 22,254
Alaskans. No one wants to hurt small businesses, but the reality
is that according to 650 economists, including five Nobel Prize
winners and six past presidents of the American Economic
Association, who signed a letter in 2006, said that federal and
state minimum wage increases "can significantly improve the
lives of low income workers and their families without the
adverse affects that critics have claimed."
The federal minimum wage was tiered to increase in three
different steps with the third step going into effect this July.
So, for the first time in Alaskan history the federal minimum
wage is going to actually be higher than the state of Alaska's.
th
In July Alaska will have the 40 lowest minimum wage in the
United States. Eighty percent of his constituents support
raising the minimum wage; many small businesses realize it will
not have the damaging impacts that people project, because the
more money that people have to spend, particularly the lower
income people, they spend it in the economy. They do not hoard
it.
SENATOR WIELECHOWSKI argued that some people say that minimum
wage only applies to kids who work at McDonalds or fast food
restaurants, but the research does not support that. He found
that 46 percent of all families with affected workers rely
solely on the earnings from those workers; and about 25 percent
of people who earn the minimum wage have families.
When you look at the absolute minimum people can live on in
Alaska - heating for instance - the annual average cost for
heating is $924. But in Fairbanks, people are probably paying
that per month. The state minimum wage right now earns someone
about $14,000 per year and you can't live on that; increasing it
to $8.75/hr. is not the panacea, but he is saying that the state
should adopt a policy and try to give these people a little bit
of help in getting by. The cost of everything in our economy has
risen dramatically since 2003 when the minimum wage was last
raised.
1:56:51 PM
SENATOR BUNDE said this measure would increase the minimum wage
from $14,000 to only $17,000/yr. and asked why not make a more
substantial change.
SENATOR WIELECHOWSKI asked him to propose a higher one.
1:57:45 PM
SENATOR THOMAS said his figures show Senator Wielechowski's
figures comport with Juneau figures for renting just a room -
$660 to $1000/mo. One bedroom condos and apartments average in
excess of $1000 and two bedrooms were anywhere from $1500 to
$2500.
1:58:51 PM
He found in the course of discussion in other committees that
the Mental Health Trust came up with the figure of 85 percent of
minimum wage is consumed by housing.
1:59:42 PM
SENATOR BUNDE referenced the letters of support the committee
members had received and he wanted to know who organized the
campaign because the forms were all the same.
CHAIR PASKVAN didn't know the answer, but hoped to find out.
2:00:52 PM
SENATOR THOMAS asked if Senator Wielechowski had any
demographics on the 22,000 impacted folks - age, race and where
they live.
2:01:16 PM
MICHELLE SYDEMAN, aide to Senator Wielechowski, said a paper
prepared by the DOLWD breaks down the 22,000 not by demographics
such as age or sex, but by industry in which they work.
CHAIR PASKVAN remarked that his heating bill for the month of
January was over $800. He then opened public testimony.
2:02:12 PM
GRAY MITCHELL, Director, Labor Standards and Safety, Department
of Labor and Workforce Development (DOLWD), said he was
available to answer questions on SB 1 and said that the
department had a neutral position on it.
BRIAN RAY, Economist, Division of Research and Analysis,
Department of Labor and Workforce Development (DOLWD), said he
manages the occupational information unit.
2:03:54 PM
SENATOR BUNDE asked Mr. Ray, as an economist, what raising the
minimum wage would do. Many studies have found both conclusions.
MR. RAY replied that many studies have found everything from no
impact, negative impact and shifts in the demographics of the
people who are later employed after the imposition of the
minimum wage, but it is difficult to reach a reasonable
conclusion based on a review of those studies. So, he tries his
best to look at the facts and history. The minimum wage
increased in Alaska in 2003; he reviewed that and saw certain
types of movements in the employed labor force, but didn't see a
decrease in employment.
He worked with the Division of Labor Standards and Safety and
found a slight decline of about 20 percent in applications for
youth work permits the year following the increase. He would
have to surmise from that that there was less interest in the
employment of the youth in the labor force at that point. Aside
from that, he understands that young workers who work less than
30 hours/wk. do not have to be paid the state minimum wage.
SENATOR BUNDE asked if the applications for youth work permits
come from employers and not from the young people themselves.
2:06:37 PM
MR. MITCHELL replied that is correct; the employer is required
by Alaska law to get a work permit to employ a worker who is
under the age of 17.
CHAIR PASKVAN asked since that reduction took place in 2004 had
an analysis of youth work permits been done to determine whether
there was a catch up.
MR. RAY replied that he didn't have the numbers in front of him,
but it seemed to be a stair-step movement downwards for that one
year, and then the permits came up to previous levels.
SENATOR MEYER asked if an employer hires for training purposes,
does he have to pay minimum wage.
MR. MITCHELL replied that is a federal law, and they call it the
"training wage" or the "opportunity wage" for the first 90 days,
but the state hasn't adopted it.
SENATOR MEYER wanted an example of manufacturing that pays below
$7.75 in reference to a handout labeled "Estimated Alaska 2007
Employment by Industry."
MR. RAY replied that most of the manufacturing that was in the
lower pay ranges was in the seafood processing industry.
2:09:14 PM
SENATOR BUNDE said he always assumed that whatever the minimum
wage increases to, that those costs weren't necessarily born by
business and industry, but rather passed on through to the
public. He assumed that would be correct if this bill passed.
MR. RAY answered yes. He didn't see differences in how the wages
were applied among state or across industries, but where one
might spend more on one product than another (substitution
effect), then that could potentially have an impact on
businesses' sales of goods and services that had more of an
increase because of the increased minimum wage. Manufacturing,
to the degree that it would make a product more expensive, and
someone substitutes chicken for seafood, for instance, could
impact the seafood industry.
2:11:01 PM
SENATOR MEYER said they are attempting to help the buying power
of the lower income working person, but asked if they are they
truly doing that if the cost of the goods goes up too.
MR. RAY replied if everyone's' wages went up, they could expect
to see a commensurate increase in overall prices, but to the
degree that the minimum wage is being applied to a small portion
of the workforce, they wouldn't expect the prices to go up as
much as the minimum wage. At the end of the day, the lower
income people would have more buying power.
SENATOR MEYER asked if labor wasn't typically the largest
expense.
MR. RAY replied, "Generally not." As the prices of raw
materials go up, that isn't necessarily linked to any increase
in the cost of labor to produce a product.
SENATOR BUNDE supposed that the minimum wage is a delta, and
whoever is making more than the minimum wage can say that went
up, so my wage needs to go up. He asked if Mr. Ray had
information as to whether or not that conventional wisdom was
correct.
2:14:05 PM
MR. RAY replied that he called a non-scientific random sample of
employers a couple of years ago and asked them that specific
question. They all agreed that they would feel compelled to
increase the wages of the all the workers who were making
somewhat close to the minimum as well. But that would quickly
diminish as they moved out of functional areas of the company;
for example, employees who working in a bakery and they were all
baking, and several of them were working in a range between the
old minimum wage and the new, possibly all of the bakers might
get a pay raise because of the imposition of the new minimum
wage, but the management and distributors wouldn't because they
were already above the minimum wage. "The effect is to have
incrementally smaller increases in the wages of those people who
are at or slightly above the minimum wage."
2:15:18 PM
SENATOR THOMAS asked if he could assume that whoever pays for
the study, that's how the study comes out.
MR. RAY responded that he didn't intend to say that the studies
are biased because good studies are not entered into with the
attempt to conclude one way or the other.
2:18:41 PM
NEIL MCKINNON, President, Alaska Laundry and Cleaners, said he
is a member NFIB; he has five employees who are prisoners inside
Lemon Creek Prison who do the laundry for the Bartlett Hospital
for $5/hr; prisoners doing the ferry laundry earn $1/hr. This
rate was set up when the program was created and it has been
working for years. He explained:
The prison industry has solved this problem by
whacking my paycheck to my employees for cost of
incarceration, guards - on and on until they got their
pay down to where it was an acceptable level of
difference between the $1 and the $7. So these guys
were maybe taking home $2/hr., which didn't breed
massive problems inside the prison over inequities.
Outside the prison, he said, he has other employees and none of
those are at minimum wage other than those who are high school
kids or entering into the work system. He takes a chance on them
just showing up to work, but in the real world he has to be
above $7.15 just to get a pool "that you can even want to take a
chance on." These kids pretty much make change in the
Laundromat, they basically sit there and surf the web, read a
book or start a machine if someone has a problem.
MR. MACKINNON said he has already looked at cutting this cost,
because his is a self-service Laundromat; if this bill passes he
will go to straight self-service and put some of these people
out of jobs. He explained that many of these people aren't
living on this job, but it gives them extra money and helps them
out; it gives them something to do. That could go away. He
remarked that he started a lot of jobs at minimum wage, but he
didn't stay at that rate long.
2:23:22 PM
SENATOR THOMAS asked if the people working in prison were his
employees working there or were they prisoners.
MR. MCKINNON replied they are prisoners; they are paid $7.15
(minimum wage), the prisoners doing state ferry work get paid
around $1; prisoners working right inside the prison sweeping
floors and things like that get paid 0.50 or 0.25 cents an hour.
2:24:20 PM
SENATOR BUNDE remarked that one of the "forms" they received
from constituents said if the minimum wage was increased,
teenage shoplifting would decrease. He asked Mr. MacKinnon if he
noticed that people who make less money are dishonest.
MR. MCKINNON replied no; he has found that people who are paid
less money are usually the most honest and that, "You never know
who is going to steal from you."
SENATOR DAVIS remarked that some people who are at minimum wage
are not teenagers; they have families.
2:26:10 PM
JOHN FABIANO, Red Robin, Anchorage, said Red Robin employs
approximately 200 individuals and opposed SB 1. It would
significantly impact their current operations negatively by
increasing wages of employees who are already earning $15-
$20/hr. in tips alone. So, obviously this increase is not geared
towards those who need it the most.
He said that everyone has seen significant increases in all the
utilities and commodities - some 100 percent, but 30-50 percent
on all the consumables - fuel surcharges are the norm now as
opposed to the exception.
MR. FABIANO said he would also be less apt to give merit
increases as frequently. It would create a greater disparity
between the wages earned per hour inside the restaurants between
tipped employees and non-tipped employees. It would only benefit
the individuals in his current operations who probably need it
the least.
In closing, he said he would be supportive of a minimum wage
increase provided some sort of dispensation was given to an
equitable distribution of wages among all employees, something
that is already provided for under federal law that has been
adopted in 43 other states in the form of "tip credit
legislation."
2:30:52 PM
SENATOR THOMAS asked how many of his employees are at minimum
wage now.
MR. FABIANO replied 80-90 servers in multiple stores and his
figures are based on what is declared as tips. A lot of times
servers are making a lot more than the managers.
2:31:56 PM
SENATOR THOMAS asked if they are all full-time employees.
MR. FABIANO replied that some of them have two jobs. It depends
on their schedules. Most of the time servers are considered part
time between 20-25 hours. A lot are full-time college students.
SENATOR THOMAS said that generally tips are shared, but it
didn't sound like they are shared in his establishment.
2:33:08 PM
MR. FABIANO replied that the $15-$20/hr is a net after they have
tipped out to the support staff - the busers, the host, the
mixologists, et cetera.
2:33:28 PM
KRYSTAL SCHOENROCK, Secretary, Kenai Peninsula CHARR, said she
owns a bar in Nikiski. She has three employees and herself; she
opposed SB 1. She said she has already lost business because the
liquor industry, the delivery people and everybody else keeps
raising their prices; the customers don't want to pay the price
and they are more or less buying their own stuff and going home.
Half of her workforce is part-time and she has one full-time
bartender.
2:35:11 PM
SENATOR THOMAS asked what kind of impact the closing of the
Agrium plant had on her business.
MS. SCHOENROCK replied that didn't have much of an impact; those
employees didn't frequent her establishment.
2:36:01 PM
BILL BUBBEL, owner, Pump House Restaurant, Fairbanks, said his
is a year-round business with about 45 employees in the winter
and 100 in the summer. He didn't adamantly oppose the basic
concept of a minimum wage raise, but he thought the reasoning
used for it is faulty.
Basically, he said, the 7.4 percent of the workforce earning
$8.75/hr. are tipped people; so that really skews the net effect
of the increase. No one in Fairbanks offers a minimum wage job
for a non-tipped position because you can't find anybody to
fulfill it. The basic entry wage for a fast food business now is
$10/hr. That's problem number one, he said, and number two is
that businesses that have the most minimum wage employees have
labor as their single biggest expense. People in Alaska don't
really work for minimum wage.
What concerns him most is using the CPI index, because the feds
don't use it; so why should Alaska? We are in a depression and
the people who are most affected are the small businesses. Right
now his business is down about 25 percent, a huge amount of
sales and it's strictly due to the economy. So, if he has to pay
more for a minimum wage, that has to be added to the price that
he charges his customers and right now they are having a
difficult time affording the prices that he already has had to
raise because of all the increases he has had to face.
MR. BUBBEL said the only way to offset this is a tip credit
provision. His employees average from $20/hr. in the winter to
$40/hr. in the summer; so they are highly paid. His problem is
that he can't find managers or good line cooks for what he pays,
$14/hr., because they would rather be a server and make tips.
He said that Senator Thomas worries about the foreign workers,
"J1s," coming in, but the reason they are here in the first
place is because there isn't enough people who are willing to
work at a wage that a small business can afford, $10-$12/hr. By
law he cannot pay a J1 less than the going wage for the same
kind of work. His lowest wage for a J1 is $9/hr. already and as
soon as they have learned a trade they go up.
2:41:02 PM
SENATOR THOMAS disagreed on his reason for the "J1 workers,"
particularly with the way they are couched as cultural exchange.
He didn't see any students among the group or any integration
into the community at all. They pretty much travel in their own
group, and he hadn't noticed many at Mr. Bubbel's particular
establishment. But he does know hundreds of kids in Fairbanks
when school is out and that's the justification that was always
given to him - that it does not match up with the school season,
which for college graduation is usually the first or second
weekend in May and the tourism season, which is considered the
early part of May through mid-September. School starts back late
August or early September.
2:42:50 PM
GABE ACEVES, Executive Director, Alaska Public Interest Research
Group (AKPIRG), supported SB 1 for most of the reasons the
sponsor stated earlier, especially with the adjustments for
inflation. No one has yet pointed out that not only in Alaska,
but across the nation, our minimum wage standards have been
woefully inadequate for years. In fact if you look at statistics
from economists on both sides of the spectrum, studies show that
people who are trying to earn a living today actually have less
purchasing power than their fathers did a generation ago in the
60s and 70s.
Another thing that hasn't been mentioned is that along with the
exorbitant increases in the cost of living and workers'
purchasing power being lower, workers' productivity has
increased over the past 20 years by 50-70 percent. So some large
companies who have employed people for 20-30 yrs have dragged
their feet on things like the minimum wage while their workers
are actually producing more for them today than they ever were
before. But they are getting paid less in terms of real dollars.
2:46:42 PM
MR. ACEVES read a passage from "The Wealth of Nations," written
by Adam Smith, published in 1776. It says:
A man must always live by his work and his wages must
at least be sufficient to maintain him. They must even
upon most occasions be somewhat more otherwise it
would be impossible for him to bring up a family and
the rates of such workmen could not last beyond the
first generations.
It seems certain that in order to bring up a family,
the labor of the husband and wife together must, even
in the lowest species of common labor, be able to earn
something more than what is precisely necessary for
their own maintenance.
He remarked that Adam Smith's work is the "fountain head for
free market economies all over the world." His approach to
economics was hands off and no government involvement, but even
he recognized 200 years ago that people have to able to earn not
only what is absolutely minimally required for them to earn a
living, but somewhat more in order for them to carry on.
2:48:13 PM
SENATOR BUNDE asked what would be an adequate minimum wage.
MR. ACEVES didn't have a specific number to recommend.
2:49:42 PM
TERRY WANZER, Alaskan Hotel and Lodging Association, said he is
co-owner of the Best Western Landing Hotel and Restaurant,
Ketchikan. He opposed SB 1 as currently drafted. He disagreed
with previous speakers that the cost of living would be impacted
negatively if this passed. Secondly, the said he employs 70-100
people depending on the season and no one in any departments
other than serving positions make the minimum wage. You cannot
find employees who will work for less than $10-$12/hour, he
said.
He agreed with the other 42 states that have tip credits. It is
true that a lot of these are students or entry level people, but
a lot of his employees who do make minimum wage have been with
him for 17 yrs. or longer. Raising the minimum wage doesn't
increase buying power, he stated. These costs cannot be passed
on to the public like a freight surcharge. "We can't increase
the cost of a hamburger.... You can't concurrently raise the
cost of your menu, because you won't have any customers." These
should be merit increases built into the American way of hard
work equals higher pay. Business owners take the risk to create
the jobs in the first place.
2:53:31 PM
BUSTER MARTIN, United Food and Commercial Food Workers Union,
Anchorage, said he represents grocery workers around the state,
who have to start at minimum wage and he supported SB 1 along
with the inflation-proofing language. He said he gets a
"phenomenal" amount of phone calls from people who need help and
can't afford to take care of their families, especially in the
last five years. He gets calls from people who can't make it on
$12-$13/hr. in places like Ketchikan and Juneau where the cost
of living is higher.
SENATOR BUNDE asked how much higher the minimum wage should be.
MR. MARTIN replied that he is not an economist, but the problem
with starting wages being so low is that workers can't survive
for the 3-5 months it takes for the employer to grant an
increase. Contracts make the increase based on hours.
2:57:27 PM
JENS NANNESINS, owner, Southside Bistro/City Diner, opposed SB
1. He employs 100 employees and 60 of them work for minimum
wages, but they make good tips.
SENATOR BUNDE asked if the committee would consider inserting a
tip credit provision in this bill.
CHAIR PASKVAN said he thought the sponsor would consider it.
2:58:41 PM
JOHN BROWN, Fairbanks, supported SB 1. He understands when the
minimum wage is raised that he will have to pay a little bit
more when he goes out to eat, but it's essential that wages keep
up with inflation and they haven't for 40 years. "I think it's
part of the structural deficiency in our economy right now."
CHAIR PASKVAN closed the public testimony. He held SB 1 for next
Thursday.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB01 - Alaska Minimum Wage - Bill Packet.pdf |
SL&C 2/5/2009 1:30:00 PM SL&C 2/12/2009 1:30:00 PM SL&C 2/17/2009 1:30:00 PM SL&C 2/24/2009 1:30:00 PM |
SB 1 |
| SB83 - State Voc Rehab Cmte - Bill Packet.pdf |
SL&C 2/5/2009 1:30:00 PM |
SB 83 |