How raising the minimum wage could help (or hurt) Pennsylvanians
The debate to raise the minimum wage in the United States has escalated, and it’s taking center stage again in the Commonwealth.
People from different backgrounds say the current federal minimum wage of $7.25 an hour is too low for a person or family to support themselves on. This is particularly true when it comes to people living in larger cities with rising standards of living like New York City, Washington, D.C., or even Pittsburgh.
Advocates point out the federal minimum wage has not risen to keep up with modern inflation, and because of this it should be at least $11 an hour. Fast-food workers in New York started the push for a $15 minimum wage back in 2012, and some cities and states have already taken action to go in that direction.
In Pennsylvania, Governor Tom Wolf wanted to raise the state’s minimum wage to $15. He planned to do this by immediately bringing it up to $12 an hour by this summer and then gradually increasing the hourly rate by 50 cents an hour every year until 2025. However, State Republicans were quick to point out that doing so would be damaging to small business owners, and would actually harm more workers because companies would have to scale back their hours or fire them altogether in order to pay them the required hourly minimum.
During a Hearing in the Pennsylvania House of Representatives back in February, Duquesne University associate economics professor, Anthony Davies, told house lawmakers the issue is a struggle between employers and employees, “it says to the worker: ‘if you can’t find someone willing to pay you $12 an hour, you may not work at all'” he said. “What this does is it has the effect of knocking out of the labor market disproportionately the least-skilled workers, the least-educated workers, the least-experienced workers… precisely the workers we care most about.”
During the same hearing, the Dean of Susquehanna University’s Business School used Seattle an example of how raising the minimum wage causes job loss.
Like Governor Wolf’s proposal, the city approved a gradual rate hike back in 2014 with a goal of getting the wage to $15 by 2021.
In April of 2015, Seattle’s minimum wage went from $9.47 to $10 or $11 an hour, based on the size of the business, benefits and tips. A study from the University of Washington looked at the effects of the first and second increase. It found the second jump had a bigger impact than the first, by boosting pay in low-wage jobs by roughly 3 percent since the last year but the number of hours worked in those jobs dropped by 9 percent. The result was a 6 percent drop in what employers were able to dish out to their workers. In Seattle, that’s about $125 lost every month.
Recently, Senate Democrats lowered the hike proposal for the minimum wage with an ultimate goal of $9.50 an hour by 2022. Senate Bill 79 was unanimously approved in a committee and heads to the full senate for a vote.
Under the terms of the bill, the minimum wage would automatically increase to $8.00 by July 1, then it would go up 50 cents an hour every six months until 2022. This proposal is a compromise between Wolf’s senior staffers and Pennsylvania Senate Leaders, according to the Philadelphia Inquirer.
In exchange for the bill’s approval, the Governor agreed to scrap an overtime expansion plan for workers who make more than a minimum federal threshold when they work more than 40 hours. It would have helped some 82,000 salaried workers in the state.
If it passes, it will be the first time the minimum wage is raised in Pennsylvania in 10 years. Congress voted to raise the wage in 2009 to the current federal level of $7.25 an hour. The last time the state legislature voted to raise it was back in 2006, bringing it up to $6.25 an hour. That was the first hike since 1998, when state lawmakers approved a raise to $5.15 an hour. The original minimum wage in Pennsylvania, set in 1968, was $1.15 an hour.
Breaking down the inflation argument, $1.15 in 1968 is equal to $8.50 by today’s standards. The 1998 rate of $5.15 is equal to $8.13. $6.25 set in 2006 is worth $7.98, and the $7.25 originally set in 2009 would be $8.70 in 2019 money.
Sen. Camera Bartolotta, R-Washington County and the chair of the Senate Labor and Industry Committee, says bringing the minimum wage to $9.50 exceeds inflation growth since 2009. She agrees raising the minimum wage is necessary, but bumping it to $15 an hour would hurt small businesses in Pennsylvania, she says.
As far as that proposal goes, multiple studies have drawn different conclusions.
Economists at the University of California Berkely released a White Paper on July 2nd studying the effects of a $15 federal minimum wage by 2024. They say it would boost incomes for the poorest households in rural counties, and claim to have found no evidence it would cause significant job losses.
But a study by the non-partisan Congressional Budget Office shows a more mixed effect. It says many low-wage workers would earn more and could even lift some families out of poverty. But, the report states, others would lose their jobs and their family income would drop below the poverty line.
And according to Forbes Senior Contributor Jack Kelly, local stores and businesses struggling to make ends meet would be “forced to raise prices to make up for the addition of labor costs.”
Meanwhile, large corporations would have to consider the increased labor costs and could end up spending more money on technology to replace workers.
In York County, raising the minimum wage is a prevalent issue.
J.R.’s Fresh Cut French Fries on West Philadelphia Street pays its workers a $10 hourly rate. Owner Ron Jacobs says there are more to make it work, “If it means putting your prices up a little bit, then you have to do that. If it means trying to cut expenses by putting one less napkin in the bag.”
In a county of 10,000 small businesses, many owners are worried. They’re not entirely sure how their company would be affected.
“Many of the businesses that will be impacted can transfer that (cost) onto the consumer and our non-profits, obviously, may not have that option” said Kevin Scherbier, the CEO of the York County Economic Alliance.
But, he told Fox43, a lot of businesses in York County are already paying more than the state’s minimum wage.
The governor urged Senate Democrats to support Senate Bill 79, and it’s expected to pass. If it does, the bill heads to the state House, where it’s not as likely to get approval.