Topping the bill for Democratic Gov. Tom Wolf in budget negotiations this year is a raise in the state’s minimum wage, currently set at $7.25 per hour.
Wolf and Democrats in the state House and Senate have offered plans to increase the state minimum to $12 an hour beginning July 1, with gradual $0.50 increases that would eventually top off at $15 an hour by 2025.
Proponents of increasing the state minimum argue it would pull many Pennsylvanians above the poverty line, freeing up assistance money and making Pennsylvania more competitive with surrounding states, though some worry that the move could have unforeseen consequences, particularly for nonprofits.
Pennsylvania last hiked the state minimum in 2008, by 10 cents. It had previously been increased from $5.15 an hour to $6.25 on Jan. 1, 2007, and again to $7.15 an hour on July 1, 2007.
State Rep. Leanne Krueger, D-161 of Swarthmore, the minority secretary for the House Labor and Industry Committee and a member of the Appropriations Committee, said it is “way past time” to increase that figure again.
“Someone in Pennsylvania who’s working full-time and just earning the minimum wage, their wage is $15,080 a year, which is below the federal poverty threshold,” she said. “That’s a full-time job, 40 hours per week. You simply can’t support a family on these wages, even if you’re working as hard as you can, so there’s folks who are working second and even third jobs just to make ends meet.”
Krueger said raising the minimum under the current proposal would pull approximately 17,000 people off Medicaid in 2020, saving an estimated $36 million for taxpayers, and almost $120 million the year after – without raising taxes. She noted state employees and contractors were already increased to $12 per hour under an executive order last year.
“I’ve always been supportive of increasing the minimum wage,” said state Sen. Tom Killion, R-9 of Middletown. “Overall, I think $7.25 – especially if you’re someone trying to raise a family on it – it’s not even close to a livable wage.”
But Killion, a former member of the Rocky Run YMCA board of directors, said lawmakers need to be cognizant of the needs of nonprofits and human services organizations when setting a new minimum as well.
“We have heard from some of our membership, especially the non-profit and human services communities, about concerns regarding an increase to the minimum wage,” said Trish McFarland, president at the Delaware County Chamber of Commerce. “Thus, we’re continuing to monitor closely to ensure that it does not have a negative impact. With that said, we think all workers and residents of Delaware County deserve a livable wage and hope the Legislature strikes a fair balance as it considers this important tissue.”
“I think there needs to be some discussion around ‘living wage’ jobs and ‘minimum wage’ jobs, and somehow defining that,” said Michael Ranck, president & CEO of the Community YMCA of Eastern Delaware County and vice chair of the Delaware County Chamber of Commerce he added. “I believe here at the Y we do have some positions, such as lifeguards, who may not need to earn a living wage job because they’re still a 16-year-old in high school.”
Ranck said the he believes the increase is necessary and overdue, though the YMCA is concerned about keeping services affordable for the communities it serves. About six of every 10 children who come to the child-care program receive some type of state or YMCA financial support, he said, and the organization runs a very tight margin trying to keep fees as low as possible.
While a lifeguard might make $8 to $10 per hour, Ranck said, the current minimum wage for child-care workers is already a self-imposed $10.25 per hour. He believes a jump to $15 would be untenable and agrees it should be gradually increased.
Ranck was emphatic that the YMCA will not cut staff or services and will focus more on trying to find efficiencies in house, but there is no guarantee that will be true for every nonprofit and human services agency in the state. While he has not heard concerns of outright bankruptcy from fellow nonprofits, Ranck said he has heard boards are sitting down and trying to come to grips with what a higher minimum wage will mean for them on the ground.
The Keystone Research Center, a left-leaning nonprofit public policy organization, recently issued a countywide analysis that shows a $15 per hour rate would impact 75,000 workers in Delaware County, or 27.6% of the workforce.
On average, those workers earn 39 percent of their family's income, according to KRC, and 57 percent are full time workers. More than half are women, 89 percent are adults and 39 percent are people of color. The analysis indicates 32 percent are also parents and 36 percent are aged 40 or over.
“There’s a sort of misnomer about minimum wage that it’s sort of teenagers flipping hamburgers, and the reality of it is that it’s not,” said state Sen. Tim Kearney, D-26 of Swarthmore. “It’s people, a majority of whom are women, a very large percentage of which are African American or minority, and these are jobs that they have that they’re trying to raise their families on.”
Kearney, a small business owner and minority member of the Senate Labor and Industry Committee, said raising the minimum wage would put more money into the economy by allowing those impacted to spend more on necessities like food, clothing and transportation.
“It’s across the board, it’s almost every kind of job you can imagine,” he said. “Now, a lot of them are small businesses and we do have concerns about whether or not (wage increases) can adversely affect small businesses. But what we need to do is get past the kind of knee-jerk reaction that ‘I can’t afford to pay them that because I’m not going to make that much money’ sort of thing. The thing is when we put more money in the pockets of these people, then those small businesses actually see more business as well.”
Though raising the state minimum has been a constant call from Democrats in budget negotiations for years, Krueger said one new component this year is the idea of “one fair wage” for all workers – including tipped employees.
Tipped employees in Pennsylvania currently earn $2.83 per hour. Krueger said those employees, particularly in the restaurant industry, face a very high rate of sexual harassment that they feel they need to endure in order to get tips, keep their jobs and put food on the table.
Seven states have either eliminated the difference between tipped and non-tipped employees or never had the two-tier system in place. Voters in the District of Columbia last year decided to phase the tipped wage system out over the next six years, bringing all city workers up to a $15 per hour minimum by 2025.
Pennsylvania is also surrounded on all sides by states with higher minimum wages. New York, Virginia and New Jersey are all scheduled to bring the minimum up to $15 per hour, while Delaware is on track toward a minimum of $9.25. West Virginia is currently pegged at $8.75 and Ohio has a current minimum of $8.55 per hour.
“I’m really not focused on other states, what they’re doing, I’m really just trying to focus on Pennsylvania,” said State Rep. Chris Quinn, R-168 of Middletown. “I’m focused on what we need to do as a state.”
Quinn noted that when the issue came up during last year’s budget negotiations, his caucus settled on a 40-percent increase pegged to the consumer price index. He said he still believes that is a fair number and would be willing to go along with it, but wants to hear from the state’s Independent Fiscal Office on what kind of impact that might have on jobs.
“I’m certainly in favor of an increase in the minimum wage; I think it’s time,” said Quinn. “My question really comes down to, ‘How much of an increase?’”
The IFO did perform an analysis of the proposal for non-tipped workers in March, after Wolf unveiled the proposed FY 2019-20 budget.
Though there would be higher incomes for more than 1 million low-wage earners, reduced state spending, higher tax revenues and some offsets in business expenses due to lower turnover, the IFO concluded there would also be fewer job opportunities overall, with about 34,000 total jobs eliminated, and more difficult labor market entry for inexperienced or younger workers. Rural areas, with a lower cost of living and a greater share of small, regional employers could also be disproportionately affected, the IFO found.
The analysis envisioned a $3.5 billion net income transfer to low-wage workers, who are more likely to spend all of their income and keep that spending in-state, as well as wage spillover effects for workers earning $12 to $15 per hour.
Projected tax revenues from spending showed an increase of $50 million, according to IFO, and $119 million in savings for the Department of Human Services by FY 2020-21.
But the analysis also found that higher prices will reduce spending in other areas of the state economy and businesses could expect a 20-percent reduction in profits, as not all costs could be passed on to the consumer. Businesses could also see reductions in available reinvestment dollars, although they would see some cost offsets from higher retention rates and increased productivity.
The IFO noted increasing the minimum from $7.25 to $12 per hour represents a 65-percent increase, but the average wage for workers earning less than $12 per hour is already $9.73, about 23 percent above the state minimum.
Legislators will no doubt bandy these points back and forth as the June 30 deadline nears, but as Killion noted, budget negotiations can often turn on a dime.
“By the time I stop talking, things have changed,” he said. “It’s very, very fluid, right up until the end. I do anticipate the budget will get done … but everything’s up in the air.”