HOUSE BILL NO. 199 "An Act removing the annual adjustment to the minimum wage based on the rate of inflation; and providing for an effective date." REPRESENTATIVE NORMAN ROKEBERG, SPONSOR, provided information regarding the legislation. He discussed the history and methodology behind the bill, which tied the minimum wage to the consumer price index (CPI) and/or one dollar above federal standard. He suggested that an annual increase in the minimum wage would have an inflationary impact on the State's economy. He speculated that the increases affected potential employers and would increased unemployment. He noted competing theories regarding minimum wage legislation. He noted that one point of view indicated that legislative action created negative impacts, but that the other side stated that increase in income had a positive impact on lower income workers. He stated that he adhered to the belief that the impact of increases were negative, and quoted research by the Ohio University, analyzing law in Washington State. Representative Rokeberg stressed that the bill would not cut the minimum wage and emphasized that Alaska's $7.15 per hour minimum wage was the highest in the country. He questioned whether businesses could afford an increase and suggested that the largest provider of jobs in this sector was the hospitality industry. He stated that the industry had been hit with a 27 percent increase. He maintained that this sent the message the Alaska was not "open for business". BENJAMIN BROWN, ALASKA STATE CHAMBER OF COMMERCE testified in support of the bill. He acknowledged the debate engendered by the legislation. He suggested de-indexing the Alaska minimum wage from the national index. He discussed economic theories, such as the "invisible hand" theory. He maintained that the "invisible hand" became visible when the minimum wage increase was implemented with a tie to the CPI index. He explained that employers were forced to pay the amount specified by the state. He stated that the bill did not reduce minimum wage, but created a system of automatically deciding the proper minimum wage, rather than allowing future debate based on the economy needs. He also noted that some believe that using the consumer price index created an artificial inflation in the economy. He added that there was a suggestion that the legislature was aggregating an earlier decision by de-indexing the minimum wage, and suggested that there was no legal implication against the State in this regard. CHIP WAGONER, ALASKA CATHOLIC CONFERENCE testified in opposition to the bill and expressed the Church's support of the minimum wage. He discussed the concept of a "living wage" to support individuals with dignity. He pointed out that the current minimum wage still placed individuals below the poverty level. He discussed the two public policy issues when evaluating the minimum wage. He first emphasized that the legislature should determine a floor below which the legislature believed was an unjust wage. Once a just minimum wage is determined by the legislature then it should remain constant with the economy in terms of inflation because below that minimum wage it becomes unjust. The second public issue is economics. He suggested that the main arguments against indexing dealt with the cost of jobs. He urged the Committee to carefully examine the source of information in this area. He noted that professionals in this area could create information to support their viewpoints. He suggested that the Employment Policies Institute was historically against the minimum wage, and the Economic Institute was historically for the minimum wage. He discussed information from the state of Alaska. He noted that according to Department of Labor and Workforce Development there are only 14,000 people in Alaska earning the minimum wage. He argued that 14,000 people earning minimum wage would not create an inflationary spiral that would affect the entire state of Alaska. Of these 14,000, about a third were in the food service/drinking industry. He noted that these industries were those against the minimum wage increase. He argued that if there were going to be a loss of jobs that it would have occurred between December and January [2003] when there was a $1.5 overnight increase in minimum wage. He acknowledged that there was a six percent drop in employment, but pointed out that the drop could be attributed to the seasonal drop, which occurred at the same time in the previous year. He stated that a similar situation occurred in Washington State. He quoted the state of Washington concluded that: "There does not appear to be a direct correlation between the index minimum wage and the number of jobs in the food service/drinking places industry." He concluded that a the raise in minimum wage was only one factor among many in terms of job loss and the numbers don't prove that there has been a job loss in the food service/drinking places industry. DON ETHERIDGE, AFL-CIO testified on behalf of his 60,000 members in opposition to the bill. He noted that his organization petitioned to achieve an increase in minimum wage. He pointed out that the subsequent increase finally raised Alaska's rank from being the lowest on the west coast. He suggested that the first CPI increase should be observed before repealing it. He noted that the first increase would be a 14-cent increase that should not impact businesses. KAREN RUGINA, ALASKA HOSPITALITY ALLIANCE testified in support of the bill. She provided information of losses experienced by restaurants and hotels due to increases in wages, and explained that hotels and restaurants operated on a narrow margin. She suggested that the increase, in combination with an increase in insurance and decrease in customers. She suggested that benefits were being cut. She gave examples of businesses that had decided not to come to Alaska due to the increase in minimum wage. She noted a natural CPI indexing occurred in the business with an increase in menu prices. She concluded that this added more uncertainty to an already uncertain climate. JAY SUTHERLAND, ANCHORAGE, testified via teleconference in support of the bill. He stated that he is a restaurant operator and noted that his business had been forced to lay off employees and suggested that there would be fewer future jobs for youth. He noted that the CPI was suggested in Washington State, and referred to its effects on the industry. He maintained that businesses invested in other states to avoid this restriction. JOHN BROWN, PRESIDENT, LABOR COUNCIL, FAIRBANKS, testified via teleconference in opposition to the bill. He noted that 50 thousand people signed a petition supporting CPI indexing, and maintained that legislators had also voted to support it. He suggested that workers needed a fair wage and that if wages were not guaranteed it would negatively affect the economy. He maintained that all businesses competed on an equal basis. JACK LEWIS, SOUR MINING COMPANY, ANCHORAGE, testified via teleconference in support of the bill. He stressed that the last increase was sizable and that, for the first time ever, he was not able to pass along the increases in menu prices. He referenced the liquor tax in addition to the minimum wage increase. He noted the need to decrease benefit programs in order to accommodate increases. He stated that he did not support an automatic increase or the legislature suggesting appropriate levels. He expressed concern over the increase since customers were already eating out less. Co-Chair Harris requested that the Department of Labor and Workforce Development should produce an additional fiscal note. HB 199 was heard and HELD in Committee for further consideration.