WRRB-Minimum-Wage-Ja

Minimizing Risk The Implications of a $15 Minimum Wage for Worcester Report 18-01 January 2018 Research in the Public Interest Research Worcester Regional Research Bureau, Inc. 500 Salisbury Street, Worcester, MA 01609 • 508-799-7169 • www.wrrb.org Minimizing Risk Introduction Current Wage Laws Employers and workers have been in a tug-of-war The minimum wage in Worcester is $11 per hour, over working conditions and benefits for as long as required by Massachusetts law. Unlike as formalized employment has existed. But the communities in some other states, municipalities government’s involvement in creating labor laws in Massachusetts do not have the power to and regulating how companies treat their establish local wage minimums on their own. employees is relatively new. The U.S. Department of Labor was created in 1913, and it would take until 1938 for such innovations as paid overtime, The first U.S. minimum wage established in 1938 child labor restrictions, and a federal minimum was $0.25 per hour, equivalent to $4.32 in 2017 wage to become national law. after adjusting for inflation. The minimum wage sets the base hourly compensation that can legally be offered to employees. In a speech While most “Fair Labor Standards,” as the 1938 introducing the Fair Labor Standards Act, Act termed them, are accepted without complaint President Franklin Roosevelt said that “all but by all involved, the minimum wage has been a the hopelessly reactionary will agree that to regular topic of debate over the years. Labor conserve our primary resources of man power, advocates argue the current rates are too low, government must have some control over positing that a higher minimum would ensure a maximum hours, minimum wages, the evil of better quality of life for struggling workers and child labor and the exploitation of unorganized likely benefit the economy, increasing purchasing labor.” power for millions of Americans and keeping people off taxpayer-funded welfare programs. Opponents argue that if wages rise by too much, While the federal minimum wage applies businesses will lay off workers, reduce hours, or nationwide, 29 states have enacted minimum close entirely, putting more people out of jobs, and wages above the current federal level of $7.25 per prices for goods and services would rise as hour. No state can enforce a minimum wage companies try to fund their rising payrolls. below the level set by the federal government. The federal minimum wage is currently $7.25 per Current changes to the federal minimum wage hour, but Massachusetts has set a higher bar— are decided on by Congress. While some states $11 per hour, the second-highest statewide rate in have recently begun automatic annual increases the country. Still, advocates are pushing for based on cost of living calculations, increased rates as part of the “Fight for $15” Massachusetts’ minimum wage is only required to movement and are seeing early interest from be 10 cents higher than the federal minimum, elected leaders. A proposed bill in the with any other changes left to the discretion of Massachusetts Legislature would increase the the state legislature. minimum wage by $1 each year until it reached $15 per hour in 2021, and a ballot question has Chart 1: Massachusetts and Federal been certified for the 2018 ballot that would Minimum Wage accomplish the same goal by 2022. While there is evidence both for and against an increased minimum wage from states and cities across the country, this report examines the potential local impact of a change on Worcester and offers thoughts on how the minimum wage can best serve the local economy and populace. 2 The Research Bureau Table 1: Current Minimum Wage Law Proposals Current Law House Bill 2365 Initiative Petition Hourly Rate, 2017 $11 $11 $11 Next Scheduled None $12 in 2018 $12 in 2019 Change $15/hour Target Date None 2021 2022 Tipped Minimum $3.75 $15.75 by 2025, then equal to or $9 by 2022 Wage greater than general minimum Basis for Future Discretion of the Legislature Consumer Price Index for Urban Consumer Price Index for all Changes Wage Earners and Clerical Urban Consumers, U.S. City Workers Average There are limited exemptions to the Workers published by the U.S. Department of Massachusetts minimum wage law. Employers Labor. The tipped minimum wage would rise to can apply for waivers to adjust the wages of $5.25 in January 2018, and would increase by workers with disabilities affecting their earning $1.50 each year until it reached $15.75 in capacity, seasonal camp counselors, and student January 2025. Starting in January 2026, the employees working at their school or in certain tipped minimum wage would be required to be facilities. equal to or greater than the general minimum wage. Proposals The Massachusetts Attorney General’s office has certified a ballot question, pushed by the Raise While the state legislature can alter minimum Up Massachusetts advocacy group, to appear on wage laws in any number of ways, and could raise the 2018 statewide ballot. If passed, the petition or lower the minimum wage to virtually anything would raise the minimum wage to $12 per hour in above the federal minimum, the two proposals January 2019, $13 in January 2020, $14 in 2021, most likely to be enacted are a bill before the and $15 per hour in January 2022. Each year state legislature and a ballot question certified for after that, beginning in September 2022, the the 2018 election cycle, both focusing on a $15 per minimum wage would be increased by the cost of hour wage. living increase as indicated by the Consumer Price Index for all Urban Consumers, U.S. City Average published by the U.S. Department of The Massachusetts House of Representatives is Labor. The tipped minimum wage would increase currently weighing a bill proposed by State Rep. to $5.05 in January 2019, and would increase to Dan Donahue of Worcester and the late State $6.35 in 2020, $7.64 in 2021, and $9 in 2022. The Sen. Ken Donnelly of Arlington. The bill would tipped minimum wage would then be tied to cost raise the minimum wage to $12 per hour in of living increases. January 2018, $13 in January 2019, $14 in January 2020, and $15 per hour in January 2021. Every January after that, beginning in 2022, the While the two proposals are similar, to the point minimum wage would be adjusted by the cost of of using nearly identical language in some living increase as indicated by the Consumer sections, there are important differences. The Price Index for Urban Wage Earners and Clerical state House bill sets a more aggressive timeline, 3 Minimizing Risk Chart 2: Massachusetts Workers Affected by Chart 3: Massachusetts Workers Affected by a $15 Minimum Wage, by Industry a $15 Minimum Wage, by Education Level Source: Economic Policy Institute Source: Economic Policy Institute reaching a $15 minimum in 2021, one year ahead group only makes up about 20 percent of hourly of the ballot question’s goal. The state House bill paid workers. Hourly workers make up nearly 60 would also eliminate the gap between the tipped percent of the total wage and salary worker minimum wage and the regular minimum wage population. by 2026, while the ballot question keeps the tipped wage $6 per hour lower than the regular minimum. And while both proposals would Most minimum wage workers nationally are in institute regular, scheduled increases tied to service occupations, a category that makes up annual cost of living increases, they use slightly nearly 66 percent of the minimum wage different U.S. Department of Labor metrics to workforce. Nearly 60 percent are in leisure and calculate those increases. hospitality specifically, “almost entirely” in restaurants or other food services, according to the BLS. The House and Senate versions of the minimum wage bill have attracted more than 90 co- sponsors, and have received endorsements from While Massachusetts has its own, higher an array of sources, including the Worcester City minimum wage, previously highlighted exceptions Council. The organizers of the ballot measure at the state and federal level allow 2.9 percent of campaign have said they support the legislature’s hourly workers in the Commonwealth to make at bill and are pushing their petition as a backup or below the federal minimum. In states without measure. It garnered enough citizen signatures to minimum wage laws or where the state minimum appear on the 2018 statewide ballot, pending an matches the federal law—generally Southern intervention by the legislature. states—the rate can be as high as 6 percent. The states with the lowest percentage of minimum wage workers are in the West, and register at The Minimum Wage Workforce around 1 percent. About 2.2 million hourly American workers—2.7 Much of the public advocacy around minimum percent of the total hourly workforce—earned wage changes has focused on the retail and food exactly the federal minimum wage or below in service industries, a focus that is backed up by 2016, according to the U.S. Bureau of Labor state workforce demographics analyzed by the Statistics (BLS). About 50 percent of minimum Economic Policy Institute, a labor union wage workers are under age 25, though that age supported research group. About 21 percent of 4 The Research Bureau Massachusetts workers directly or indirectly Chart 4: Massachusetts Workers Affected by affected by a $15 minimum wage work in retail, a $15 Minimum Wage, by Share of Group while 15 percent are in food and drink service, 13 percent in health care, and 7 percent in education.

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