HB 28-EQUAL PAY & MINIMUM WAGE ACT    4:18:50 PM CO-CHAIR FIELDS announced that the final order of business would be HOUSE BILL NO. 28, "An Act relating to an annual report concerning the payment of equal pay for comparable work; increasing the minimum wage; and providing for an effective date." 4:19:59 PM ANDREW BEANE, Vice President, Service Employees International Union (SEIU) 775, relayed that SEIU 775 is a labor union representing 45,000 homecare and nursing home workers across the states of Washington and Montana. He offered that after the $15 minimum wage law was passed at Seattle-Tacoma ("Sea-Tac") International Airport in 2013 and in Seattle in 2014, he directed an organization called "Working Washington" to organize airport and fast food workers regarding the demand for a $15 minimum wage. MR. BEANE began his PowerPoint presentation, entitled "$15 Minimum Wage in Seattle." Turning to slide 2, entitled "Overview of Seattle Minimum Wage," he said that the Seattle minimum wage law was the first in the country to pass; there was broad demand from the public. There was a faster phase-in of the law for large employers - those with over 500 employees - to achieve the $15 minimum wage by 2017 and a slower phase-in for smaller employers. MR. BEANE relayed the information on slide 3, entitled "Dire Predictions about the Minimum Wage," which read: • Tom Douglas, operator of 15 high-end restaurants in Seattle, predicted that the proposed minimum wage would cause the city to "lose maybe a quarter of the restaurants in town." • North American Association of Subway Franchises said, This ordinance means that franchises cannot compete in the Seattle marketplace and many franchise small businesses will cease to exist." • Andrew Friedman, proprietor of Liberty Bar, said, "Local independent businesses will close, many of your neighbors will be out of work." MR. BEANE described the reality of what actually occurred as shown on slide 5, entitled "Seattle's Booming Economy," which read: • Forbes ranked Seattle #1 "Best Place for Business" in 2018 • Unemployment in Seattle going down • In 2019, Seattle unemployment 3.3%, compared to 3.8% nationally • Economy in Seattle growing • From 2014-2019, average annual job growth of 2.7% and income growth of 4.7% • In 2019, Seattle 3rd in the nation for small business growth CO-CHAIR FIELDS asked whether an income growth of almost twice that of job growth is higher than the national performance. MR. BEANE replied that he didn't know. REPRESENTATIVE WOOL asked whether Mr. Beane is implying that Seattle raising the minimum wage and having a good economy is a "cause and effect" relationship. MR. BEANE stated that he is not implying that but is saying that a city can raise the minimum wage and have a booming economy. 4:24:04 PM MR. BEANE commented on Seattle's restaurant industry by reviewing slide 6, entitled "Restaurant Industry Growing; Prices Stable," which read: • Seattle Times study of restaurants in 2017-2018 • 652 restaurants opened, 156 closed • Net gain of 496 restaurants • University of Washington longitudinal study of food prices in local supermarkets • No significant evidence of price increases associated with the minimum wage ordinance MR. BEANE provided information from slide 7, entitled "Job Growth in Food Service," which read: • Food prep and service make up 66% of low-wage work in Seattle • Steady increase in Seattle food service employment: 27,300 new food service jobs created in 2018 MR. BEANE added that since the minimum wage was enacted, there has been competition for food service workers in Seattle, and some of the other cities have raised their wages to compete with Seattle. He reiterated that he is not saying that these things occurred because of the minimum wage but that the worst predictions did not occur. MR. BEANE reviewed the results of a University of Washington study, displayed on slide 9, entitled "Study 1: Workers Earn More and Keep their Jobs," which read in part as follows: • University of Washington study of low-wage workers in Seattle • Workers take home more money • Earnings increases were higher among more experienced workers MR. BEANE added that an initial study was done which showed a decline in workers' hours resulting in them losing money; these results were reported in the media; a subsequent study showed the results to be erroneous and that workers were actually taking home more money overall. Earnings were higher for more experienced workers who worked the same hours but made more money; hours may have decreased for some part-time workers, but they made more money for fewer hours. CO-CHAIR FIELDS asked about the high-profile study that Mr. Beane cited. Representative Fields said that he recalled that it was released prior to peer review. He asked what the methodological flaws were with the study. MR. BEANE responded that part of the problem was that the researchers could only consider a small subset of the workforce - about 40 percent - because they could only look at a certain size business over time. When they repeated the study, they had a completely different finding. REPRESENTATIVE HOPKINS asked what the people who opposed the minimum wage are now saying about the impact on the economy [of Seattle]. MR. BEANE replied that the restaurant owners have adjusted restaurant management to accommodate the minimum wage. He continued with slide 9, which read: • Workers are not losing their jobs • Workers experienced no significant decline in their likelihood of being employed • Workers are less likely to job hop • Minimum wage increase was associated with an 8% reduction in turnover rates 4:29:12 PM MR. BEANE described a second study shown on slide 10, entitled "Study 2 Food Service Workers Paid More," which read: Berkeley study of Seattle food service and restaurant workers • Wages increased, especially in businesses without tips • Biggest wage gains were in limited-service/ fast food restaurants • Workers are not losing their jobs • Employment remained stable, even in fast food franchises that predicted disemployment MR. BEANE relayed additional statistics from slide 11, entitled "Higher Minimum Wages Improve Race and Gender Equity," which read: • Before the minimum wage ordinance in Seattle: • 40% of Black, API and Latino workers made < $15, compared to 25% of white workers • 34% of women made < $15, compared to 27% of men • In states with low minimum wages, the gender pay gap is 25% wider MR. BEANE gave examples of the gender pay gap in two states: Wyoming has a minimum wage of $7.25 and a woman makes $.64 for every $1 a man makes; New York has a minimum wage of $15 and a woman makes $.89 for every $1 a man makes. MR. BEANE continued by discussing the relationship between minimum wage and the economy. He mentioned the "middle-out" theory of economics, which maintains that if low-wage workers have more money, they will spend it in local businesses which, in turn, spurs the economy. He reviewed the information on slide 12, entitled "Higher Minimum Wages Improve Economic Equality and Prosperity," which read: Higher minimum wages: • Increase consumer spending and spur investment in the economy • Low-wage workers are more likely than others to spend extra earnings immediately on previously unaffordable goods and services • A $2.55 increase in federal minimum wage would: • Increase earnings of low-wage workers by $40 billion • Increase economic activity by $25 billion • Generate 100,000 new jobs • Reduce income inequality • For each $1 increase in minimum wages, 0.3% of income redistributed from top to bottom quartiles MR. BEANE referred to slide 13, entitled "Cities and States Adopting $15 Minimum Wage," to point out the cities and states that have passed a $15 minimum wage since Seattle passed the minimum wage. He added that there is now proposed federal legislation to enact a $15 minimum wage. It is believed that there are about 21 million workers on a path to having a $15 minimum wage. The cities are: Flagstaff, Arizona; Belmont, Cupertino, El Cerrito, Los Angeles, Mountain View, Palo Alto, Redwood, Richmond, San Francisco, San Jose, San Mateo, Santa Clara, and Sunnyvale - in California; Minneapolis and St. Paul in Minnesota; Greensboro, New York City, and Syracuse in New York; Greensboro, North Carolina; Portland, Oregon; Pittsburgh, Pennsylvania; and SeaTac, Washington. The states are California, Massachusetts, New Jersey, New York, and Washington, D.C. MR. BEANE pointed out the companies that have seen the minimum wage as a positive development, as shown on slide 14, entitled "Companies Adopting $15/Hour Minimum Wage," which read: • Ben & Jerry's: $16.92 • J.P. Morgan Chase & Co: $16.40 • Aetna: $16 • Amazon: $15 for 350,000 full-time, part-time, temporary and seasonal employees • Charter Communications: $15 • Costco: $15 for 245,000 employees in U.S. and Canada • Facebook: $15 for contractors • Nationwide Mutual Insurance: $15 • University of California: $15 • Walt Disney theme parks: $15 CO-CHAIR KREISS-TOMKINS asked which of the listed states currently have an effective $15 minimum wage. MR. BEANE expressed his belief that every state [listed] is phasing it in gradually. REPRESENTATIVE WOOL stated that he supports a higher minimum wage in theory. He suggested that many of the states and cities that have adopted the minimum wage are places in which the economies are booming. The companies listed [on slide 14] can well afford it. He mentioned that small businesses or regions with depressed economies - "middle America" - may not be able to absorb the payroll increase. 4:35:09 PM MR. BEANE responded that in Seattle, the small businesses were given more time to adjust. He mentioned a study in South Dakota, which is a struggling rural economy, and there was no net decrease in employment after raising the minimum wage. REPRESENTATIVE HOPKINS suggested that the impacts to roadside restaurants could be looked at in northern New York, because that region can be quite rural. CO-CHAIR FIELDS added that there are rural regions of California that are demographically like Alaska in terms of high unemployment and low wages. MR. BEANE offered three stories depicting people whose lives were impacted by the minimum wage law, shown on slide 15, which read: Erin, barista for Compass Group: Erin lives 30 minutes outside Seattle to afford rent and struggled to pay bills. Since the minimum wage increase, she can pay bills and afford occasional date nights. Anthony, print shop attendant at Starbucks HQ: Before the minimum wage ordinance, he moved in with a friend to avoid homelessness. Now he can afford his own place. Darryl, home care worker: "Now I have more food at the end of the month, and I'm not trying to stretch those groceries for a week and a half. I'm feeding myself better." REPRESENTATIVE STORY referred to the chart on slide 2, entitled "Seattle's Minimum Wage," and pointed out that the small employers are in a phase-in period; and the study Mr. Beane cited included the large employers, which have had the $15 minimum wage since 2018. She asked for citations for the studies that Mr. Beane referenced and the sample sizes. MR. BEANE said that he could provide the citations. The University of Washington study was performed in October 2018 and the Berkeley study was performed in June 2017. At that time the minimum wages were approaching $15 or slightly less. REPRESENTATIVE STORY asked for confirmation that the study of large employers runs from January to October 2018 when the $15 minimum wage was in effect. The rest of the chart [2015-2017] shows the phase-in of the wage increase. MR. BEANE concurred. REPRESENTATIVE WOOL asked Mr. Beane if he has seen restaurants moving away from tipping in response to the minimum wage increase - in other words - informing the public that they don't except tips, but there is a percentage increase in the cost of the meal due to paying higher wages. He said that there has already been a trend in that direction. MR. BEANE mentioned that many of the restaurants that moved in that direction are going back to tipping due to competition for service industry employees; the employees wanted tipping because they made more money. He maintained that the job market in Seattle is very tight. REPRESENTATIVE WOOL offered that eliminating tipping only works if all the restaurants participate. CO-CHAIR FIELDS stated that in Alaska, tipped employees are not exempt from the minimum wage; Alaska has a $10 minimum wage and employees earn tips in addition. He asked whether there are other states who have adopted a $15 minimum wage that do not exempt tipped employees from the minimum wage. MR. BEANE answered yes, California and Washington. In Seattle, an employer must pay the state minimum wage of $13.50 and "can tip above it to [$15]." He confirmed for Representative Wool that of the states and cities [with the $15 minimum wage] some have tipped employee exemptions. He added that generally the states on the West Coast do not have the exemptions, and states on the East Coast do. 4:41:13 PM ANNA GODOEY, Research Economist, Center on Wage and Employment (CWED), University of California, Berkeley, presented key findings from two recent studies with the use of a PowerPoint presentation, entitled "Downstream effects of higher minimum wages." She referred to slide 2 and relayed that in the U.S., there is substantial variation in state and local minimum wage policies, especially in the past 20 years; there has been an uptick in the number of states that have implemented minimum wages well above the federal level of $7.25 per hour. Researchers have examined the effect of minimum wage policies on labor demand and whether employers respond to the higher wages by hiring fewer workers or cutting back hours. She stated that the studies she will present move beyond the narrow economic outcomes to look at the downstream effects of minimum wages: 1) the effects of the minimum wage on suicides; and 2) the effects of the minimum wage on parental labor supply and child poverty. MS. GODOEY turned to slide 3 to cite the first study, entitled "Can Economic Policies Reduce Deaths of Despair." She stated that the first study was prompted by troubling trends in mortality of less educated Americans. For the first time in a hundred years, life expectancy of Americans was declining, and the decline was driven primarily by the increased deaths rates from alcohol, drugs, and suicide. The increase was especially large among Americans without a college degree. The study sought to determine whether economic policies aimed at low-wage workers could make a difference; one of the policies considered was minimum wage. MS. GODOEY moved on to slide 4 and relayed that the researchers used data from the Centers for Disease Control and Prevention (CDC) on all deaths from 1999 through 2015. They found that neither policy - earned income tax credit (EITC) nor minimum wage - had any effect on drug-related deaths; however, economic policies significantly affected the number of deaths from non- drug suicides. MS. GODOEY referred to the graphs on slide 5, which summarized the key findings: the number of suicides among Americans with a high school education or less changed about the time of the policy changes. She explained that the graph on the right side of slide 5 shows the effects of a 10 percent increase in the minimum wage; in the year when the minimum wage increased, the number of suicides dropped significantly. She mentioned the concern for spurious correlations: in states with booming economies that implement higher minimum wages, it may be the booming economy that is correlated with improved mental health and not the policy. She pointed out from the graph, that is unlikely, due to the suddenness of the decrease in suicide rates. The trend in the graph indicates that it is the economic policy driving the reduction in suicides. 4:45:54 PM MS. GODOEY referred to slide 6 and stated that on average, a 10 percent increase in minimum wage reduced the number of suicides by 3.6 percent among adults without college degrees; over the study period, that corresponds to a reduction in suicides of about 480 lives per year. MS. GODOEY turned to slide 7 to introduce the second study, entitled "Parental Labor Supply: Evidence From Minimum Wage Changes." This study analyzed the impact of minimum wage on families with young children. She said that the stereotypical minimum wage worker is a teenager who works part-time for spending money; however, the minimum wage workforce is remarkably diverse. Many minimum wage workers have children and are working to support their families. The estimate used for the study is that around 30 percent of minimum wage workers have minor children. Parents with children face very different circumstances and barriers than adult without children, such as the cost of childcare. She added that the researchers used the current population survey, which is the labor force survey. MS. GODOEY moved on to slide 8 to relay the key findings of the study, which are: higher minimum wages increased the employment rates of parents and the hours worked; higher minimum wages reduced the probability that low income families would receive income from public assistance or welfare. She maintained that the findings suggest that higher minimum wages play a role in shifting the poorest families off cash welfare and into the labor force. For single mothers, the greatest effects were among mothers of preschool age children suggesting that higher minimum wages allow these women to overcome the barrier of childcare costs. MS. GODOEY continued by saying that the increases in the employment wages of parents have significant effects on children. For children whose mothers did not have college educations, a 10 percent increase in the minimum wage reduced poverty by just under 6 percent; for children of single mothers, the reduction was 11 percent; for preschool age children, poverty was down 9.7 percent. She maintained that the results are important because they are so well established with literature linking childhood poverty to worse outcomes. For low income families, raising family incomes has been found to raise [children's] test scores, improved health, and even improved economic self-sufficiency among women. She said that additionally there is evidence suggesting that children whose parents are on welfare themselves have a higher risk of receiving public assistance as adults. She offered that findings that higher minimum wages reduce welfare receipt and child poverty point to the potential dynamic effect of higher minimum wages; increasing wages today could have a future payoff of improved educational outcomes and economic health sufficiency. MS. GODOEY concluded that the two studies, as well as other studies ongoing across the country, point to important downstream effects of minimum wages that go well beyond narrow economic outcomes like employment and wages. 4:49:43 PM CO-CHAIR FIELDS asked Ms. Godoey to specify the welfare programs to which she referred. MS. GODOEY answered that the programs were Temporary Assistance for Needy Families (TANF) and Aid to Families with Dependent Children (AFDC). CO-CHAIR FIELDS asked for a scenario that includes a region most demographically analogous to Alaska that has implemented a higher minimum wage. MS. GODOEY replied that she didn't have a good answer; however, she mentioned that she has information on other states and would provide it to the committee. REPRESENTATIVE STORY asked about the sample sizes in the studies. MS. GODOEY responded that for the mortality study, the sample consisted of all U.S. deaths from 1999-2017 minus the four states that do not provide education data on the death records - 46 states plus Washington, D.C. For the "Parental Labor Supply" paper, the study population was from the labor force survey; therefore, the sample size is large - in the hundreds of thousands. The sample of parents with high school education or less since 1980 consisted of 280,000 observations; eliminating anyone earning $15 per hour measured in 2016 dollars, resulted in 125,000 observations. REPRESENTATIVE STORY asked for the standard error of the estimates. MS. GODOEY answered that she could provide that information; however, she offered that all the effects that she discussed were significant at the 5 percent level or better. 4:53:53 PM REPRESENTATIVE GERAN TARR, Alaska State Legislature, as prime sponsor of HB 28, presented the proposed legislation with the use of a PowerPoint presentation, entitled "House Bill 28 - Equal Pay & Minimum Wage." She referred to slide 2 of the presentation, entitled "Top 5 Myths About Minimum Wage," which read: head2right Myth 1 - History of Minimum Wage head2right Myth 2 - Who is the Minimum Wage Worker? head2right Myth 3 - Increasing Wages Harms the Economy head2right Myth 4 Has to be One Size Fits All head2right Myth 5 Leads to Job Loss head2right Moving towards evolution of a system REPRESENTATIVE TARR turned to slide 3, entitled "2019 Minimum Wage in Alaska," which read: head2right 2014 Ballot Initiative raised minimum wage from $7.75 to $8.75 on January 1, 2015, then again to $9.75 per hour on January 1, 2016 head2right Added an annual inflation adjustment to remain $1.00 higher than federal minimum wage head2right Tips do not count toward minimum wage head2right Passed by 69% of the vote REPRESENTATIVE TARR added that the minimum wage in Alaska is annually adjusted with inflation: the 2017 wage was $9.80; the 2018 wage was $9.84; and the 2019 wage was $9.89. She offered that one of the challenges of a down economy is that the wage adjustments may not be at the same rate as increases in the cost of food, housing, and health care. REPRESENTATIVE TARR moved to slide 4, entitled "Myth 1 - History of Minimum Wage," which read: head2right 1938 President Roosevelt signs the Fair Labor Standards Act establishing minimum wage of 25 cents an hour to maintain a "minimum standard of living necessary for health, efficiency, and general well-being." REPRESENTATIVE TARR continued with slide 5, entitled "Minimum Wage Increases Over the Years," to point out that even though wages have increased over the years from 1938-2009, when wages are adjusted to 2014 dollars, buying power has not always increased; in other words, wages have not kept up with inflation, as shown on the graph on slide 6, entitled "Wages and Inflation." REPRESENTATIVE TARR moved on to slide 7, entitled "Myth 2 - Who is the Minimum Wage Worker?" She relayed the information on the slide: People think that the minimum wage worker is the teenager who lives at home and works part-time after school for extra spending money. The reality is that the minimum wage worker's average age is 35; 88 percent are 20 or older; 36 percent are 40 or older; 56 percent are women; 28 percent have children; and on average, minimum wage workers earn half of their family's total income. REPRESENTATIVE TARR referred to the information in the sponsor statement to relay that the Massachusetts Institute of Technology (MIT) performed a study to establish what a living wage is for Alaska. The study indicated that a living wage for one individual is $12.89 [per hour], which is $3 over Alaska's minimum wage. For one adult and one child, the living wage is $27.49, which she maintained demonstrates the significant disparity between earnings and financial needs. REPRESENTATIVE TARR turned to slide 8, entitled "Myth 3 - Raising Wages Hurts the Economy," which read: head2right 18 other states increased minimum wages in 2019 head2right Eighteen states began the new year with higher minimum wages. head2right Eight states (Alaska, Florida, Minnesota, Montana, New Jersey, Ohio, South Dakota and Vermont) automatically increased their rates based on the cost of living head2right 10 states (Arizona, Arkansas, California, Colorado, Maine, Massachusetts Missouri, New York, Rhode Island and Washington) increased their rates due to previously approved legislation or ballot initiatives. head2right Other states that will see rate increases during the 2019 calendar year include D.C., Delaware, Michigan and Oregon (NCSL) REPRESENTATIVE TARR referred to a National Conference of State Legislatures (NCSL) report, included in the committee packet, which further details the minimum wage laws enacted in the various states. She pointed out that most of the states that raised their minimum wages did it gradually over time. She mentioned that Missouri passed a minimum wage ballot initiative last fall; it currently has a minimum wage of $8.60 and will increase it to $12 effective 1/1/23. She also cited Michigan's minimum wage - currently at $9.25 - to undergo a multi-year increase resulting in $12.05 by 2030. She added that the cost of living in both states is less than Alaska. REPRESENTATIVE TARR stated that there are 13 states with a higher minimum wage than Alaska; some have bigger economies and have a higher cost of living; however, some do not. She mentioned that Arizona and Maine have $11 minimum wages; these two states are like Alaska in cost of living. 4:59:29 PM REPRESENTATIVE TARR referred to slide 10, entitled "Myth 4 - Has to be One Size Fits All," which read: head2right Current Alaska Law has many exemptions head2right Alaska Wage and Hour Act requirements do not apply to any individual employed as follows: head2right In agriculture head2right In domestic service (babysitting) in a private home head2right Youth under age 18 employed part-time for not more than 30 hours a week head2right A person licensed and employed by a guide or master guide REPRESENTATIVE TARR moved on to slide 11, entitled "Myth 5 - Leads to Job Loss," and cited an article, entitled "Argument for and Against the $15 Minimum Wage for Health Care Workers" [by J. Paul Leigh, PhD, American Journal of Public Health, 2019], not included in the committee packet. She offered that the health care industry is the fastest growing industry in Alaska, but workers tend to be lower wage employees. In addressing Myth 5, she relayed the research findings summarized on slide 11, which read: head2right Research does not support this head2right Could be that fewer new jobs, but employees in those jobs are paid more head2right Research on health care workers accounted for this and showed that increasing wages would lead to a reduction in poverty rates of 27%, not 50% head2right Demonstrating the difference between all workers getting $15.00 and a reduced workforce getting $15.00 REPRESENTATIVE TARR turned to slide 12, entitled "Evolution of a System," which read: Current head2right Workers work full-time, but still qualify for benefits head2right Workers depend on government funded programs for healthcare, childcare, and food With Living Wages head2right Workers work full-time and can afford to purchase healthcare, childcare, and food Researchers estimate that if the federal minimum wage were raised from $7.25 to $10.10 per hour would save $4.6 billion in food stamps REPRESENTATIVE TARR mentioned the economic inefficiency of the transfer of money considering the cost of administering such programs. She stated that the average monthly case load for food stamps in Alaska for FY 18 was 41,945; for the Women, Infants, and Children (WIC) program, the case load was 17,092; 11,358 individuals participated in breastfeeding counseling; the WIC Farmers' Market Nutrition Program (FMNP) had 10,000 participants; and there were 203,000 Medicaid recipients. She explained that all these programs are income-based; she advocated for a system that supports "the dignity that comes from people being paid a good wage for their hard work." CO-CHAIR FIELDS posed the questions: Has anyone modeled impacts on state budgets of higher wages and reduced dependence on welfare and is such modeling possible? [HB 28 was held over.]