Could hit teenagers hardest, business and labor at odds
By Darwyyn Deyo | PA Independent
HARRISBURG — Business groups claim a proposal in the state Senate tying the minimum wage to inflation would cost teenagers and new workers jobs, while labor groups deny the claim.
Sponsored by state Rep. Christine M. Tartaglione, D-Philadelphia, S.B. 235 would tie the minimum wage in Pennsylvania to the consumer price index, which tracks inflation.
The CPI is calculated on a monthly basis by the federal Bureau of Labor Statistics and calculates the change in the price for a “basket” of goods.
Pennsylvania has matched the federal minimum wage of $7.25, passed in 2009. Adjusted for inflation, that translates to $7.48 in 2011. The Senate bill uses the lower $7.15 minimum wage passed in 2007, which would be worth $7.63 in 2011 dollar, adjusted for inflation.
Under the legislation, the minimum wage would be adjusted every January, beginning in 2012, using the CPI for urban consumers in the Pennsylvania-Maryland-Delaware-New Jersey region.
Richard Bloomingdale, president of the Pennsylvania AFL-CIO, said Pennsylvania would not be the first state to enact such a measure.
“The voters of Washington State approved, seven years ago, tying the minimum wage to the CPI,” said Bloomingdale. “Of course, in Washington they just added a bunch more jobs because of Boeing’s expansion (so) it hasn’t hurt their job growth at all.”
Washington State’s minimum wage is $8.67 as of 2011. In Pennsylvania, with a minimum wage of $7.25, an individual could make $15,080 working a 40-hour work week. According to CNN Money’s cost of living calculator, a $15,080 salary in Philadelphia is comparable to a $14,459 salary in Seattle.
J.P. Kurish, spokesperson for Tartaglione, said adding the inflation calculator would take politics out of the minimum wage.
“Tying the minimum wage to inflation would prevent it from slipping back to where working families were living in poverty again,” said Kurish. “The minimum wage adjusted for inflation has fallen to an all-time low.”
Tartaglione serves as minority chair of the Senate Labor and Industry Committee, where the bill is waiting for a hearing. It may be a tough fight, but Kurish said previous minimum wage bills were supported by moderate Republicans from the southeastern part of the state.
“It’s just a tough political thing because a lot of businesses line up against it,” he said.
Senate Republicans, who control the chamber, did not respond to a request for comment.
Gene Barr, a lobbyist for the Pennsylvania Chamber of Business and Industry, said the organization is “absolutely opposed” to the proposal, especially given the new federal health care costs small businesses are facing.
“Wages should be tied to productivity,” said Barr. “These kinds of things artificially hamstring businesses and simply give raises for no valid reason other than this. When you put these mandates on businesses, you get this reluctance on employers to add jobs.”
The current economic landscape isn’t pretty. Pennsylvania’s unemployment rate stands at 8.5 percent, compared to the national rate of 8.9 percent. The CPI, which measures consumer costs, increased 0.5 percent in February. The Producer Price Index, which measures the cost of goods for producers and employers, increased 1.6 percent.
“The more expensive you make anything, people are going to buy less of it,” said Barr. “When you raise the cost of entry level jobs you tend to hurt most those that have lower skills and are just coming back in to the work force. When you increase the minimum wage, some people get raises, some people lose their jobs, and some people lose benefits and some never get their foot in the door to develop job skills.”
Michael Saltsman, research fellow at the Employment Policies Institute, a Washington, D.C.-based nonprofit, nonpartisan research group, said several states are trying to increase the minimum wage, a move the organization is arguing would hurt teenagers and part-time workers the most in a “weak summer job market.”
“We have some states where things are really bad for teens,” said Saltsman. “Unemployment rates are over 30 percent. The economic literature has clearly shown each time the minimum wage increases, it makes it more expensive to hire and train teens.”
He said that every 10 percent increase in the minimum wage decreases employment between 2 percent to 4 percent.
“Depending on the demographic group it could be larger or smaller,” he said. “When we look at legislation like this, it’s the last thing states need to be doing when you have teens dropping out of the labor force.”
Bloomingdale said labor groups should not be the first target for cost controls, and denied that small businesses would suffer disproportionately, pointing instead to large-scale competitors driving “moms and pops” out of business. He suggested businesses control costs by buying goods locally or increasing their prices.
“If people are going to (mom and pops) it’s for the quality of the food and the service,” said Bloomingdale. “If they added a quarter to their menu items to pay for a minimum wage increase, I doubt if that would impact their business. Everybody always wants to cut wages first.”
