S. HRG. 113–636 KEEPING UP WITH A CHANGING ECONOMY: INDEXING THE MINIMUM WAGE HEARING OF THE COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS UNITED STATES SENATE ONE HUNDRED THIRTEENTH CONGRESS FIRST SESSION ON EXAMINING KEEPING UP WITH A CHANGING ECONOMY, FOCUSING ON INDEXING THE MINIMUM WAGE MARCH 14, 2013 Printed for the use of the Committee on Health, Education, Labor, and Pensions ( Available via the World Wide Web: http://www.gpo.gov/fdsys/ U.S. GOVERNMENT PUBLISHING OFFICE 94–431 PDF WASHINGTON : 2015 For sale by the Superintendent of Documents, U.S. Government Publishing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800 Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001 COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS TOM HARKIN, Iowa, Chairman BARBARA A. MIKULSKI, Maryland LAMAR ALEXANDER, Tennessee PATTY MURRAY, Washington MICHAEL B. ENZI, Wyoming BERNARD SANDERS (I), Vermont RICHARD BURR, North Carolina ROBERT P. CASEY, JR., Pennsylvania JOHNNY ISAKSON, Georgia KAY R. HAGAN, North Carolina RAND PAUL, Kentucky AL FRANKEN, Minnesota ORRIN G. HATCH, Utah MICHAEL F. BENNET, Colorado PAT ROBERTS, Kansas SHELDON WHITEHOUSE, Rhode Island LISA MURKOWSKI, Alaska TAMMY BALDWIN, Wisconsin MARK KIRK, IIllinois CHRISTOPHER S. MURPHY, Connecticut TIM SCOTT, South Carolina ELIZABETH WARREN, Massachusetts PAMELA J. SMITH, Staff Director, Chief Counsel LAUREN MCFERRAN, Deputy Staff Director DAVID P. CLEARY, Republican Staff Director (II) CONTENTS STATEMENTS THURSDAY, MARCH 14, 2013 Page COMMITTEE MEMBERS Harkin, Hon. Tom, Chairman, Committee on Health, Education, Labor, and Pensions, opening statement ............................................................................... 1 Prepared statement .......................................................................................... 3 Alexander, Hon. Lamar, a U.S. Senator from the State of Tennessee, opening statement .............................................................................................................. 6 WITNESSES Avakian, Brad, Commissioner, Oregon Bureau of Labor and Industries, Port- land, OR ................................................................................................................ 9 Prepared statement .......................................................................................... 11 Dube, Arindrajit, Ph.D., Department of Economics, University of Massachu- setts Amherst, Amherst, MA ............................................................................... 13 Prepared statement .......................................................................................... 15 Prince, Lew, Managing Partner, Vintage Vinyl, St. Louis, MO .......................... 30 Prepared statement .......................................................................................... 31 Fleurio, Carolle, Restaurant Worker, Jonesboro, GA ........................................... 33 Sickler, Melvin, Franchisee, Auntie Anne’s Pretzels and Cinnabon, Williamstown, NJ ................................................................................................. 35 Prepared statement .......................................................................................... 37 Rutigliano, David, Owner, Southport Brewing Company, Trumbull, CT ........... 41 Prepared statement .......................................................................................... 43 ADDITIONAL MATERIAL Statements, articles, publications, letters, etc.: Melvin Sickler, letter ........................................................................................ 58 Response by Brad Avakian to questions of Senator Alexander ........................... 59 Response by Arindrajit Dube, Ph.D. to questions of: Senator Harkin ................................................................................................. 62 Senator Alexander ............................................................................................ 63 Response by Lew Prince to questions of Senator Alexander ................................ 64 Response by Melvin Sickler to questions of Senator Harkin and Senator Alexander .............................................................................................................. 66 Response by David Rutigliano to questions of Senator Harkin ........................... 69 (III) KEEPING UP WITH A CHANGING ECONOMY: INDEXING THE MINIMUM WAGE THURSDAY, MARCH 14, 2013 U.S. SENATE, COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS, Washington, DC. The committee met, pursuant to notice, at 10:05 a.m. in room SD–430, Dirksen Senate Office Building, Hon. Tom Harkin, chair- man of the committee, presiding. Present: Senators Harkin, Alexander, and Warren. OPENING STATEMENT OF SENATOR HARKIN The CHAIRMAN. Good morning. The Senate Health, Education, Labor, and Pensions Committee will please come to order. For several years now, I have held hearings in this committee fo- cusing on the need to bolster the middle class in this country and to help restore the American Dream. The American Dream is sup- posed to be about building a better life through work. If you work hard and play by the rules, you should be able to support your fam- ily, raise your kids, get them a good education, enjoy some of the accoutrements of life: housing, clothing, a decent vacation once in a while, and retirement. But today, tens of millions of hardworking Americans, who are earning at or near the minimum wage, can’t even aspire to live a middle-class life or achieve the American Dream. They are falling further and further behind. We need to do more to support these workers as they try to build opportunity for their families and their futures. A critical first step is to ensure that they earn a fair day’s pay for a hard day’s work. That is why last week I joined with Con- gressman George Miller to introduce the Fair Minimum Wage Act of 2013, to provide a long-overdue increase in the Federal min- imum wage. The bill would gradually increase the minimum wage to $10.10 an hour in three annual steps, and then link future increases to the cost of living, so that people who are trying to get ahead don’t fall behind as the economy grows. Today’s hearing will focus, I hope the most, on indexing the min- imum wage. This is the first hearing in this committee to look at indexing the minimum wage in more than 20 years. Over the past four decades, Congress has raised the minimum wage five times, but these raises have come sporadically and after long stretches with no raise. The subsequent increases have not (1) 2 brought the wage up to its past level, and so the real value of the minimum wage has declined significantly. The minimum wage right now is, in fact, worth 31 percent less than at its peak in 1968, even as productivity has soared. That is what that chart shows. It shows productivity going up. Interest- ingly enough, real average wages right now are about where they were in 1970; real average wages. But the real minimum wage, as you can see, has gone down about 31 percent; real, when you take inflation into account. If the minimum wage had kept pace with inflation since 1968, today it would be $10.56 an hour, and a full-time worker would earn about $22,000 a year under the minimum wage. Instead, now it is $7.25 and the earnings are about $15,000 a year. Actually, that is a poverty wage. I pointed out the other day, also, that in the 1970s, the minimum wage was about 20 percent higher than the poverty level. Today, it is 20 percent less than the poverty level. This has hurt, seriously hurt, the standard of living for low-wage workers and their families. As a result, more and more low-wage families are forced to rely on safety net programs like food stamps, and housing assistance, and things like that to ensure that they can survive. And when millions are barely surviving because of low wages, they just cannot hope to join the middle class, and everyone gets hurt, especially our economy. The middle class is the backbone of our economy, and we have to grow that middle class to have a growing economy, I believe, in the long run. Businesses need customers to buy things if they want to grow and prosper. But when workers earn a poverty wage, they do not have purchasing power, they cannot help the economy thrive. That is why so many businesses, large and small, from the CEO of Costco to the record store owner that we will hear from here today, they support a higher minimum wage, and support indexing it so that it will no longer lose value in the future. I think we stand at a rare moment of opportunity where we can do what is right for the economy, and at the same time, do what is simply right. A fair minimum wage that is predictable, with modest increases that keep wages steadily growing in pace with in- flation, rather than falling behind, I think, will benefit everyone. Indexing will do all of these things. That is why 10 States have al- ready implemented indexing, and we will hear from one of them today. At the Federal level, this policy is long overdue. I have this chart that shows the 10 States that already do index, and as you can see, it ranges from very progressive liberal States like Vermont, to conservative States like Florida, and Missouri, and Arizona, and Montana. So it does not favor one area of the country over the other, it is kind of spread around, but 10 States that, I think, represent various places on the political spectrum; various parts of the political spectrum have already decided