[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]
GRADUALLY RAISING THE MINIMUM
WAGE TO $15: GOOD FOR WORKERS,
GOOD FOR BUSINESSES, AND GOOD
FOR THE ECONOMY
=======================================================================
HEARING
BEFORE THE
COMMITTEE ON EDUCATION
AND LABOR
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTEENTH CONGRESS
FIRST SESSION
----------
HEARING HELD IN WASHINGTON, DC, FEBRUARY 7, 2019
----------
Serial No. 116-2
----------
Printed for the use of the Committee on Education and Labor
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available via the World Wide Web: www.govinfo.gov
or
Committee address: https://edlabor.house.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
36-268 PDF WASHINGTON : 2019
--------------------------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Publishing Office,
http://bookstore.gpo.gov. For more information, contact the GPO Customer Contact Center,
U.S. Government Publishing Office. Phone 202-512-1800, or 866-512-1800 (toll-free).
E-mail, [email protected].
COMMITTEE ON EDUCATION AND LABOR
ROBERT C. ``BOBBY'' SCOTT, Virginia, Chairman
Susan A. Davis, California Virginia Foxx, North Carolina,
Raul M. Grijalva, Arizona Ranking Member
Joe Courtney, Connecticut David P. Roe, Tennessee
Marcia L. Fudge, Ohio Glenn Thompson, Pennsylvania
Gregorio Kilili Camacho Sablan, Tim Walberg, Michigan
Northern Mariana Islands Brett Guthrie, Kentucky
Frederica S. Wilson, Florida Bradley Byrne, Alabama
Suzanne Bonamici, Oregon Glenn Grothman, Wisconsin
Mark Takano, California Elise M. Stefanik, New York
Alma S. Adams, North Carolina Rick W. Allen, Georgia
Mark DeSaulnier, California Francis Rooney, Florida
Donald Norcross, New Jersey Lloyd Smucker, Pennsylvania
Pramila Jayapal, Washington Jim Banks, Indiana
Joseph D. Morelle, New York Mark Walker, North Carolina
Susan Wild, Pennsylvania James Comer, Kentucky
Josh Harder, California Ben Cline, Virginia
Lucy McBath, Georgia Russ Fulcher, Idaho
Kim Schrier, Washington Van Taylor, Texas
Lauren Underwood, Illinois Steve Watkins, Kansas
Jahana Hayes, Connecticut Ron Wright, Texas
Donna E. Shalala, Florida Daniel Meuser, Pennsylvania
Andy Levin, Michigan* William R. Timmons, IV, South
Ilhan Omar, Minnesota Carolina
David J. Trone, Maryland Dusty Johnson, South Dakota
Haley M. Stevens, Michigan
Susie Lee, Nevada
Lori Trahan, Massachusetts
Joaquin Castro, Texas
* Vice-Chair
Veronique Pluviose, Staff Director
Brandon Renz, Minority Staff Director
------
C O N T E N T S
----------
Page
Hearing held on February 7, 2019................................. 1
Statement of Members:
Scott, Hon. Robert C. ``Bobby'', Chairman, Committee on
Education and Labor........................................ 1
Prepared statement of.................................... 4
Foxx, Hon. Virginia, Ranking Member, Committee on Education
and Labor.................................................. 6
Prepared statement of.................................... 8
Statement of Witnesses:
Barron, Ms. Simone, Seattle, WA.............................. 148
Prepared statement of.................................... 150
Brodeur, Dr. Paul A., ESQ., State Representative, 32nd
Middlesex District, Commonwealth of Massachusetts House of
Representatives............................................ 202
Prepared statement of.................................... 204
Gupta, Ms. Vanita, President and CEO, The Leadership
Conference on Civil and Human Rights....................... 135
Prepared statement of.................................... 138
Eckhouse, Ms. Kathy, Owner, La Quercia, Norwalk, IA.......... 153
Prepared statement of.................................... 155
Holtz-Eakin, Dr. Douglas, President, American Action Forum,
Washington, DC............................................. 36
Prepared statement of.................................... 38
Reich, Dr. Michael, PH.D., Professor, University of
California, Berkley, CA.................................... 169
Prepared statement of.................................... 172
Spriggs, Dr. William E., Professor, Department of Economics,
and Chief Economist, Howard University and AFL-CIO,
Washington, DC............................................. 9
Prepared statement of.................................... 12
Strain, Dr. Michael R., PH.D. Director of Economic Policy
Studies,, and Resident John G. Searle Scholar, American
Enterprise Institute, Washington, DC....................... 158
Prepared statement of.................................... 160
Wise, Mr. Terrence, Shift Manager, McDonald's, Independence,
MO......................................................... 31
Prepared statement of.................................... 33
Zipperer, Dr. Ben, Economist Policy Institute, Washington, DC 48
Prepared statement of.................................... 50
Additional Submissions:
Adams, Hon. Alma S., a Representative in Congress from the
State of North Carolina:
Letter dated February 5, 2019 from the Economic Policy
Institute.............................................. 210
Letter dated February 6, 2019 from the Economic Policy
Institute.............................................. 211
Article: House Health Bill Would Lead to Less Coverage,
Higher Patient Costs................................... 263
Statement from Rowe-Finkbeiner, Kristin, Executive
Director and CEO of MomsRising.org..................... 265
Statement from the National Disability Rights Network
Opposes American Health Care Act....................... 267
Bonamici, Hon. Suzanne, a Representative in Congress from the
State of Oregon:
Letter dated February 5, 2019 from the Women's Coalition. 81
Courtney, Hon. Joe, a Representative in Congress from the
State of Connecticut:
Letter dated February 1, 2019 from OXFAM................. 72
Article: Hartford HealthCare to Raise Minimum Wage to $15
Across Health Network.................................. 269
Davis, Hon. Susan A., a Representative in Congress from the
State of California:
Letter dated February 6, 2019 from AAUW.................. 273
Mrs. Foxx:
Article: Seattle Small Businesswoman..................... 276
Letter dated February 5, 2019 from the National
Restaurant Association................................. 278
Letter dated February 5, 2019 from NFIB.................. 280
Replacing Employer-Sponsored Health Insurance with
Government-Financed Coverage........................... 282
Grijalva, Hon. Raul M., a Representative in Congress from the
State of Arizona:
Report: Minimum Wages and the Distribution of Family
Incomes in the United States........................... 60
Jayapal, Hon. Pramila, a Representative in Congress from the
State of Washington:
Prepared statement from Asian and Pacific Islander
American Health Forum (APIAHF)......................... 318
Lee, Hon. Susie, a Representative in Congress from the State
of Nevada:
Letter date January 28, 2019 from First Focus Campaign
for Children........................................... 114
Levin, Hon. Andy, a Representative in Congress from the State
of Michigan:
Letter date January 31, 2019 from AFL-CIO................ 102
Letter date January 15, 2019 from Disability Groups...... 223
Morelle, Hon. Joseph D., a Representative in Congress from
the State of New York:
Link: National Council on Disability..................... 229
Norcross, Hon. Donald, a Representative in Congress from the
State of New Jersey:
Letter dated February 6, 2019 for Communications Workers
of America............................................. 323
Chairman Scott:
Fact Sheet: National Employment Law Project.............. 132
Business For A Fair Minimum Wage......................... 250
Link: (Economic Policy Institute)........................ 249
Letter from The Episcopal Church......................... 324
Undersigned Organizations................................ 325
Tipped Wage Effects on Earnings and Employment in Full-
Service Restaurants.................................... 339
Faith-based Organizations Support The Raise the Wage Act
of 2019................................................ 365
Letter dated January 15, 2019, from the National
Disability Rights Network.............................. 367
Letter dated February 4, 2019 from the National Urban
League................................................. 369
Article: Leaked Documents Show Strong Business Support
for Raising the Minimum Wage........................... 371
Link: Center on Wage and Employment Dynamics (CWED)...... 373
Link: NBER Working Paper Series.......................... 373
Takano, Hon. Mark, a Representative in Congress from the
State of California:
Statement from the Center for American Progress.......... 88
Underwood, Hon. Lauren, a Representative in Congress from the
State of Illinois:
Letter dated February 7, 2019 from Advocate Aurora Health 245
Questions submitted for the record by:
Davis, Hon. Susan A., a Representative in Congress from
the State of California................................ 379
Fudge, Hon. Marcia L., a Representative in Congress from
the State of Ohio
Hayes, Hon. Jahana, a Representative in Congress from the
State of Connecticut................................... 379
Lee, Hon. Susie, a Representative in Congress from the
State of Nevada........................................ 383
Chairman Scott
Trahan, Hon. Lori, a Representative in Congress from the
State of Massachusetts................................. 375
Responses to questions submitted for the record:
.........................................................
Mr. Brodeur.............................................. 384
Ms. Eckhouse............................................. 386
Dr. Reich................................................ 387
Mr. Spriggs.............................................. 393
Dr. Zipperer............................................. 396
GRADUALLY RAISING THE MINIMUM WAGE
TO $15: GOOD FOR WORKERS, GOOD FOR
BUSINESSES, AND GOOD FOR THE ECONOMY
----------
Thursday, February 7, 2019
House of Representatives,
Committee on Education and Labor,
Washington, DC.
----------
The committee met, pursuant to notice, at 10:17 a.m., in
room 2175, Rayburn House Office Building, Hon. Robert C.
``Bobby'' Scott (chairman of the committee) presiding.
Present: Representatives Scott, Davis, Grijalva, Courtney,
Fudge, Sablan, Bonamici, Takano, Adams, DeSaulnier, Norcross,
Jayapal, Morelle, Wild, Harder, McBath, Schrier, Underwood,
Hayes, Shalala, Levin, Omar, Trone, Stevens, Lee, Trahan,
Castro, Foxx, Roe, Thompson, Walberg, Guthrie, Grothman,
Stefanik, Allen, Smucker, Banks, Walker, Comer, Cline, Fulcher,
Taylor, Watkins, Wright, Meuser, Timmons, and Johnson.
Staff present: Tylease Alli, Chief Clerk; Nekea Brown,
Deputy Clerk; Ilana Brunner, General Counsel; David Dailey,
Senior Counsel; Emma Eatman, Press Aide; Mishawn Freeman, Staff
Assistant; Carrie Hughes, Director of Health and Human
Services; Eli Hovland, Staff Assistant; Eunice Ikene, Labor
Policy Advisor; Ariel Jona, Staff Assistant; Kimberly
Knackstedt, Disability and Education Policy Advisor; Stephanie
Lalle, Deputy Communications Director; Bertram Lee, Policy
Counsel; Andre Lindsay, Staff Assistant; Richard Miller,
Director of Labor Policy; Max Moore, Office Aide; Udochi
Onwubiko, Labor Policy Counsel; Veronique Pluviose, Staff
Director; Carolyn Ronis, Civil Rights Counsel; Dianna
Ruskowsky, Finance and Personnel Advisor; Banyon Vassar, Deputy
Director of Information Technology; Cyrus Artz, Minority
Parliamentarian; Marty Boughton, Minority Press Secretary;
Courtney Butcher, Minority Coalitions and Members Services
Coordinator; Akash Chougule, Minority Professional Staff
Member; Rob Green, Minority Director of Workforce Policy; John
Martin, Minority Workforce Policy Counsel; Sarah Martin,
Minority Professional Staff Member; Hannah Matesic, Minority
Legislative Operations Manager; Kelley McNabb, Minority
Communications Director; Alexis Murray, Minority Professional
Staff Member; Brandon Renz, Minority Staff Director; Ben
Ridder, Minority Legislative Assistant; Meredith Schellin,
Minority Deputy Press Secretary and Digital Advisor; Heather
Wadyka, Minority Staff Assistant; and Lauren Williams, Minority
Professional Staff Member.
Chairman Scott. The Committee on Education and Labor will
come to order. I want to welcome everyone today and note that a
quorum is present. The committee meeting today is a legislative
hearing on testimony on ``Gradually Raising the Minimum Wage to
$15: Good for Workers, Good for Businesses, and Good for the
Economy.''
Pursuant to committee rule 7(c), opening statements are
limited to the chair and ranking member. This allows us more
time to hear from our witnesses and provides members more time
to ask questions. I recognize myself now for the purpose of
making an opening statement.
Today we are here for a legislative hearing on the Raise
the Wage Act, H.R. 582, a proposal to gradually raise the
minimum wage to $15 an hour. I want to welcome and thank our
distinguished witnesses for being with us today and for
agreeing to testify.
Raising the minimum wage is one of the most hotly contested
and intensely studied of all labor practices. All the time and
research dedicated to this topic has produced a clear
consensus: Gradually raising the minimum wage is good for
workers, who experience a better standard of living; good for
businesses, which benefit from having more customers and less
turnover; and good for the economy, which is strongest when we
lift working people out of poverty and build a thriving middle
class.
Before we discuss where we are going, it is important to
reflect on where we are today. After 10 years of no increase in
the Federal minimum wage, minimum wage workers have suffered a
17 percent pay cut due to inflation. Today's minimum wage
workers making $7.25 an hour have less buying power than the
minimum wage worker had in the 1960's.
The result is that the Federal minimum wage is no longer
serving its purpose. According to a recent study, there is no
place in America where a full-time worker who is paid the
current Federal minimum wage can afford a modest two-bedroom
apartment. One in nine American workers are paid wages that
leave them in poverty even if they worked full time year-round.
An individual earning the current minimum wage working full
time earns only about $15,080 a year, less than the Federal
poverty level for a family of two.
Do we have a chart?
This shows the poverty level and it shows the median wage
and where the minimum wage has been.
My Republican colleagues are eager to warn the so-called
consequences of raising the minimum wage to $15, but they
ignore the consequences of inaction over the last 10 years.
If Congress fails to raise the minimum wage by mid-June it
will be longest period of time without an increase since the
Federal minimum wage was created 80 years ago. During that
time, millions of workers working full time have been forced to
live in poverty. The only radical thing about the bill is it is
so long overdue.
By several standards, the proposal is a reasonable approach
in restoring the value of the minimum wage. First, the erosion
of the minimum wage after adjustments for inflation has meant
that over the last five decades workers at the low end of the
scale have drifted further away from the middle class.
As the chart on the screen indicates, in 1968--back to the
same chart--the inflation-adjusted minimum wage used to be a
little over 50 percent of the median hourly worker's wages for
an individual working full time. Now, at $7.25 an hour, it is
just a third of the median wage.
Had the 1968 minimum wage simply grown with the rate of
increases in average wages, it would be $12 and 6 million fewer
people would be living in poverty.
Second, the minimum wage has not kept up with increases in
productivity. Between 1973 and 2017, workers' productivity grew
by 77 percent while their wages grew by 12 percent. The
widening gap in how much workers produce and how much they are
paid is one major factor contributing to the historic income
inequality we experience today.
If the minimum wage had kept up with worker productivity,
it would be about $20 an hour today. Workers do not just
deserve higher pay, they have earned that higher pay.
Finally, by the time the minimum wage reaches $15 an hour
in 2024, an individual working full time with a family,
including two children, will finally be able to earn enough to
exceed the poverty threshold for a family of four.
We now have an opportunity--and a responsibility--to
restore the value of the minimum wage, lifting millions of
hardworking people out of poverty, and grow the economy in Main
Street America.
The Raise the Wage Act does three things. First, it
gradually increases the minimum wage in six steps to $15 by
2024. Second, it ensures every worker covered by the law is
paid at least the full minimum wage by creating one fair wage
for all workers. Third, by tying future increases to median
wages, the bill ensures that future increases in the Federal
minimum wage are determined by economics and not politics.
A report published this week by the Economic Policy
Institute details the sweeping benefits this bill will have for
workers across the country. For example, if we pass the Raise
the Wage Act, close to 40 million workers will receive a raise,
including two-thirds of America's working poor and parents of
over 14 million children.
This bill will stimulate the local economy across the
country. Whereas the Republican tax bill gave the largest
benefits to those who needed it the least, this puts money
directly in the hands of those who are most likely to spend it
in their communities. Over the 6-year phase-in period, the
increase in the minimum wage should generate about $120 billion
in additional wages, which will flow back into local
businesses.
Every time we propose raising the minimum wage,
unfortunately, opponents repeat a similar set of talking points
that have been repeated and contradicted by evidence and
research.
Today, I am confident that we will hear dire predictions
about job losses that will result from gradually raising the
minimum wage, but the overwhelming majority of research from
both left-and right-leaning labor economists find few, if any,
job loss when we gradually raise the minimum wage.
For example, a widely acclaimed study published by the
National Bureau of Economic Research and coauthored by one of
our witnesses examined 138 minimum wage increases between 1979
and 2016. This study found that the overall number of low wage
jobs remained essentially unchanged over 5 years following the
increase, and there was no evidence of disemployment when
considering higher levels of minimum wage.
The evidence clearly demonstrates that the Raise the Wage
Act is a reasonable proposal and will lift millions of workers
out of poverty.
We now hear calls for a regional minimum wage, but,
unfortunately, the reality is, by 2024, $15 an hour is the
least a person would need to afford the basic essentials
anyplace in America. According to the MIT Living Wage
Calculator, single working parents today, even in the poorest
counties in the country, need at least $20 an hour to cover
basic costs.
Workers should not be forced to work at poverty level wages
regardless of where they live. A low-cost region should not be
forced to continue to lag behind the rest of our economy.
H.R. 582 will begin to restore the original intent of the
Fair Labor Standards Act, to ensure that all workers have a
minimum living standard. And as President Roosevelt stated:
``Our Nation, so richly endowed with natural resources and with
a capable and industrious population, should be able to devise
ways and means of ensuring to all of our working men and women
a fair day's pay for a fair day's work.''
Today's hearing is an opportunity to examine facts and
evidence. Raising the minimum wage to $15 an hour by 2024 in
all regions is good for workers, good for businesses, and good
for the economy. This hearing is a first step toward passing a
bill that reflects our shared belief that no one working full
time should be living in poverty.
And I thank you.
And does the Ranking Member want to speak now or in a
minute? I can introduce the witnesses.
[The statement of Chairman Scott follows:]
Prepared Statement of Hon. Robert C. ``Bobby'' Scott, Chairman,
Committee on Education and Labor
Today, we are here for a legislative hearing on the Raise the Wage
Act, H.R. 582, a proposal to gradually raise the minimum wage to $15. I
want to welcome and thank our distinguished witnesses for agreeing to
testify here today.
Raising the minimum wage is one of the most hotly debated and
intensely studied labor policies. All the time and research dedicated
to this topic has produced a clear consensus: Gradually raising the
minimum wage is good for workers who experience a better standard of
living; good for businesses which benefit from having more customers
and less turnover, and good for the economy which is strongest when we
lift working people out of poverty and build a thriving middle class.
But before we discuss where we are going, it's important to reflect
on where we are today. After 10 years with no increase in the Federal
minimum wage, minimum wage workers have suffered a 17 percent pay cut
due to inflation. Today's minimum wage worker making $7.25 an hour has
less buying power than a minimum wage worker had in the 1960's.
The result is that the Federal minimum wage is no longer serving
its purpose. There is no place in America where a full-time worker who
is paid the current Federal minimum wage can afford the basic
essentials. One in nine American workers are paid wages that leave them
in poverty, even if they worked full-time and year-round. An individual
earning the current Federal minimum wage of $7.25 an hour and working
full-time earns only $15,080 annually, less than the Federal poverty
level for a family of two.
My Republican colleagues are eager to warn of the so-called
consequences of gradually raising the minimum wage to $15, but they
ignore the consequences of inaction over the last 10 years. If Congress
fails to raise the Federal minimum wage by mid-June, it will be the
longest period of time without an increase since the Federal minimum
wage was created 80 years ago.
During that time, millions of people working full-time have been
forced to live in poverty. The only thing radical about this bill is
that it is so long overdue.
By several standards, this proposal is a reasonable approach to
restoring the value of the minimum wage.
First, the erosion of the value of the minimum wage after
adjustments for inflation has meant that, over the last five decades,
workers at the low-end of the wage scale have drifted farther away from
the middle class.
As the chart on the screen illustrates, in 1968, the inflation-
adjusted minimum wage was a little over 50 percent of the median hourly
workers' wages for an individual working full time. Today, at $7.25 per
hour it is just a third of the median hourly wage of $22.36. Had the
1968 minimum wage simply grown with the rate of increases in average
wages, it would be nearly $12 today and 6 million fewer Americans would
be living in poverty.
Second, the minimum wage has not kept up with increases in
productivity. Between 1973 to 2017, workers' productivity grew by 77
percent, while their hourly wages grew by just 12 percent. The widening
gap between how much workers produce and how much they are paid is one
major factor contributing to the historic income inequality we
experience today. If the minimum wage had kept up with worker
productivity, it would be about $20 an hour today. Workers do not just
deserve higher pay, they have earned higher pay.
Finally, by the time the minimum wage reaches $15 in 2024, an
individual working full time with a family and two children will
finally be able to earn enough to exceed the poverty threshold for a
family of four.
We now have an opportunity and a responsibility to restore the
value of the minimum wage, lift millions of hardworking people out of
poverty and grow the economy in Main Street America.
The Raise the Wage Act achieve three key goals:
First, it gradually increases the minimum wage in six steps to $15
by 2024.
Second, it ensures that every worker covered under the law is paid
at least the full Federal minimum wage by creating one fair wage for
all workers.
And third, by tying future increases to median wages, this bill
ensures that future increases to the Federal minimum wage are
determined by economics, and not politics.
A report published this week by the Economic Policy Institute
details the sweeping benefits this bill would have for workers across
the country.
If we pass the Raise the Age Act, close to 40 million workers would
receive a raise. This includes:
* Twenty-three million women,
* Thirty-eight percent of Black workers and 33 percent of Hispanic
workers,
* Two-thirds of America's working poor, and
* The parents of over 14 million children.
This bill will also stimulate local economies across the country.
Whereas the Republican tax bill gave the largest benefits to those who
needed it the least, this bill puts money directly into the hands of
those who are most likely to spend it in their communities. Over the 6-
year phase in period, the increase in the minimum wage would generate
$120 billion in additional wages, which will flow back into local
businesses.
Every time we propose raising the minimum wage, opponents repeat a
familiar set of taking points that have been repeatedly contradicted by
evidence and research.
Today, I am confident we will hear dire projections about job
losses that would result from gradually raising the minimum. But the
overwhelming majority of research from both left-and right-leaning
labor economists find few, if any jobs are lost when gradually raising
the minimum wage. For example, a widely acclaimed study published by
the National Bureau of Economic Research, and co-authored by one of our
witnesses, examined 138 minimum wage increases since 1979 and 2016.
This study found that the overall number of low-wage jobs remained
essentially unchanged over 5 years following the increase, and there
was no evidence of disemployment when considering higher levels of
minimum wages.
The evidence clearly demonstrates the Raise the Wage Act is a
reasonable proposal that would lift millions of workers out of poverty.
We will also hear calls today for a regional minimum wage.
But unfortunately, the reality is that by 2024 $15 an hour is the
least a person would need to afford the basic essentials in anyplace in
the country. According to the MIT living wage calculator, single
working parents today, even in the poorest counties in the country,
need at least $20 an hour to cover basic costs. Workers should not be
forced to work for poverty-level wages, regardless of where they live.
And lower-cost regions should not be forced to continue to lag behind
the rest of our economy.''
H.R. 582 will begin to restore the original intent of the Fair
Labor Standards Act: to ensure all workers have a minimum living
standard. As President Roosevelt Stated, ``Our nation so richly endowed
with natural resources and with a capable and industrious population
should be able to devise ways and means of insuring to all our working
men and women a fair day's pay for a fair day's work''
Today's hearing is an opportunity to examine the facts and
evidence. Raising the minimum wage to $15 by 2024 in all regions is
good for workers, good for businesses, and good for the economy. This
hearing is the first step toward passing a bill that reflects our
shared belief that no one working full-time should be living in
poverty.
Thank you and I now yield to the Ranking Member, Dr. Foxx.
______
Ms. Foxx. That would be wonderful, Mr. Chairman. Thank you.
Chairman Scott. Thank you.
I will recognize the Ranking Member in just a second, but
first I will introduce our witnesses for the first panel.
The Honorable Dr. William Spriggs serves as chief economist
for the AFL-CIO and is a professor in and formerly chair of the
Department of Economics at Howard University. Formerly, he
served as Assistant Secretary for the Office of Policy at the
U.S. Department of Labor.
Mr. Terrence Wise is a father of three who works for
McDonald's. He has been fighting for $15 and a union for over 3
years and has become a voice for the movement, an inspiration
for other low-wage workers. Mr. Wise has worked in the fast
food industry since he was 16 years old and he hails from
Kansas City, Missouri.
Mr. Douglas Holtz-Eakin is the president of American Action
Forum. From 2003 to 2005, he was the sixth Director of the
Congressional Budget Office. He has conducted extensive
research in areas of applied economic policy, econometric
methods, and entrepreneurship.
Dr. Ben Zipperer is an economist with the nonpartisan
Economic Policy Institute. His areas of expertise include the
minimum wage, inequality, and low-wage labor markets. He has
published research in widely respected publications, including
the Industrial and Labor Relations Review and the National
Bureau of Economic Research.
I appreciate all of the witnesses for being here and look
forward to your testimony. Let me remind the witnesses that we
have read your testimony and they will appear in full in the
record.
Pursuant to committee rule 7(d) and the committee practice,
each of you is asked to limit your oral presentation to 5
minutes. Let me remind the witnesses that pursuant to Title 18
of U.S. Code Section 1001, it is illegal to knowingly and
willfully falsify any Statement, representation, writing,
document, or material fact presented to Congress or otherwise
conceal or cover up a material fact.
Before you begin your testimony, please remember to press
the button on your microphone in front of you so that the light
will turn on and the members can hear you. As you speak, the
light in front of you will turn green. After 4 minutes, it will
turn yellow, indicating that you have 1 minute remaining. When
it turns red, I would ask you to please wrap up your testimony.
We will let the entire panel make presentations before we
move to member questions. When answering a question, please
remember, once again, to turn your microphone on.
And before the witnesses, do you want to speak now?
Ms. Foxx. Yes.
Chairman Scott. Before the witnesses speak, I will
recognize the distinguished Ranking Member, Dr. Foxx.
Ms. Foxx. Thank you, Mr. Chairman. And I apologize for
being a little late. Many of us went to the National Prayer
Breakfast this morning, and it went a little longer than usual.
So we were a little slow in getting back. And I apologize. I
promise you, I would not be late for a less worthy cause.
Over the last several years, the far left has begun to call
for extreme social policies that were until recently considered
too radical for the mainstream. But as the far left has become
more frenetic, they have begun to demand headline-grabbing but
unworkable policies, like free college, universal health care,
and a more than doubling of the Federal minimum wage from $7.25
an hour to $15 an hour.
Liberal activists are trying to sell a radical minimum wage
hike as a benefit to working-class Americans. They claim it
will redistribute wealth and provide poor Americans with a,
quote, ``living wage,'' end quote. This is an empty promise,
the likes of which we have not heard since the famous health
care sales job of 2009: If you like the plan you have, you can
keep it.
Raising the Federal minimum wage to $15 will not help
anyone make ends meet. It will redistribute poverty, eliminate
jobs, and deeply harm American workers, businesses, and the
U.S. economy at large.
When the comparatively less extreme proposal of a Federal
minimum wage hike to $10.10 was on the table in 2014, the
nonpartisan Congressional Budget Office estimated that the
difference, $2.85, would cost 500,000 jobs and could have
destroyed up to a million jobs.
The CBO has yet to determine what the $7.75 hike under
discussion today would do, but logic follows that the
consequences for workers and small businesses would be even
more severe.
Economists, including those who have graciously given us so
much of their time today, can provide the numbers and
projections and graphs we all need to see to have an informed
discussion.
But we must keep in mind that we are talking about people.
We are talking about the very people that Members of Congress
on both sides of the aisle claim they want to serve. Workers in
entry level jobs, workers without a GED or skill certificate,
and tipped employees would bear the brunt of job losses caused
by this mandate.
A recent study by the National Federation of Independent
Business found that raising the minimum wage to $15 would
destroy 1.6 million jobs and 615,000 able-bodied individuals
would be pushed out of the work force by the year 2029. This is
not the future Americans want, and they deserve to know the
truth behind the talking point.
More than half of the private sector work force goes to
work each day at a small business, and these are the workplaces
that would struggle the most under this mandate. Many job
creators would be forced to reduce workers' hours, let
employees go, or close their doors for good. It would also lead
to accelerated workplace automation, something many Democrats
oppose.
The NFIB study also found that raising the minimum wage to
$15 an hour would result in a $2 trillion reduction in real
economic output, a $980 billion reduction in real GDP, and a
$103 billion reduction in personal disposable income.
The title of this hearing aims to focus this discussion on
the impact this mandate would have on workers, businesses, and
the economy. It conveniently leaves out students--and with good
reason. Eighty-three percent of economists agree that raising
the minimum wage to $15 an hour would have a negative impact on
youth employment.
According to the Bureau of Labor Statistics, 2.3 percent of
hourly workers are paid at or below minimum wage--2.3 percent
of hourly workers are paid at or below minimum wage. Almost
half of those workers are under the age of 25. These are
individuals at the start of their careers or filling part-time
or summer jobs.
With the Democrats' proposal, we run the risk of seeing
these types of jobs eliminated altogether. That means even
fewer young Americans will leave educational institutions or
join the work force with minimal work experience.
Not every kid is lucky enough to have a parent who pays for
his or her cell phone and other expenses. We need to give them
a chance to build their skills, build a life, and hope that
someday very soon they run for Congress.
Since January 2017, the number of job opportunities
available across the country has swelled from 5.6 million to
more than 7 million. And thanks to the Republican Tax Cuts and
Jobs Act, wages are up and experiencing sustainable, organic
growth.
We want that strong economic growth to continue. Mandating
a $15 minimum wage would have serious negative consequences for
students, workers, and small businesses.
I yield back, Mr. Chairman, and thank you again for your
patience.
[The statement of Mrs. Foxx follows:]
Prepared Statement of Hon. Virginia Foxx, Ranking Member, Committee on
Education and Labor
Over the last several years, the far-left has begun to call for
extreme social policies that were, until recently, considered too
radical for the mainstream. But as the far-left has become more
frenetic, they have begun to demand headline-grabbing but unworkable
policies like free college, universal health care, and a more than
doubling of the Federal minimum wage from $7.25 an hour to $15 an hour.
Liberal activists are trying to sell a radical minimum wage hike as
a benefit to working class Americans. They claim that it will
redistribute wealth and provide poor Americans with a ``living wage.''
This is an empty promise the likes of which we have not heard since the
famous healthcare sales job of 2009: ``if you like the plan you have,
you can keep it.'' Raising the Federal minimum wage to $15 will not
help anyone make ends meet. It will redistribute poverty, eliminate
jobs, and deeply harm American workers, businesses, and the U.S.
economy at large.
When the comparatively less-extreme proposal of a Federal minimum
wage hike to $10.10 was on the table in 2014, the nonpartisan
Congressional Budget Office estimated that the difference--$2.85--would
cost 500,000 jobs and could have destroyed up to 1 million jobs. The
CBO has yet to determine what the $7.75 hike under discussion today
would do, but logic follows that the consequences for workers and small
businesses would be even more severe.
Economists, including those who have graciously given us so much of
their time today, can provide the numbers and projections and graphs we
all need to see to have an informed discussion. But we must keep in
mind that we're talking about people. We're talking about the very
people that Members of Congress on both sides of the aisle claim they
want to serve. Workers in entry-level jobs, workers without a GED or
skills certificate, and tipped employees would bear the brunt of job
losses caused by this mandate.
A recent study by the National Federation of Independent Business
found that raising the minimum wage to $15 would destroy 1.6 million
jobs, and 615,000 able-bodied individuals would be pushed out of the
work force by the year 2029. This is not the future Americans want, and
they deserve to know the truth behind the talking point.
More than half of the private sector work force goes to work each
day at a small business, and these are the workplaces that would
struggle the most under this mandate. Many job creators would be forced
to reduce workers' hours, let employees go, or close their doors for
good. It would also lead to accelerated workplace automation, something
that many Democrats oppose.
The NFIB study also found that raising the minimum wage to $15 an
hour would result in a $2 trillion reduction in real economic output, a
$980 billion reduction in real GDP, and a $103 billion reduction in
personal disposable income.
The title of this hearing aims to focus this discussion on the
impact this mandate would have on workers, businesses, and the economy.
It conveniently leaves out students, and with good reason. Eighty-three
percent of economists agree that raising the minimum wage to $15 an
hour would have a negative impact on youth employment.
According to the Bureau of Labor Statistics, 2.3 percent of hourly
workers are paid at or below minimum wage. Almost half of those workers
are under the age of 25. These are individuals at the start of their
careers or filling part-time or summer jobs. With the Democrats'
proposal, we run the risk of seeing these types of jobs eliminated
altogether. That means even fewer young Americans will leave
educational institutions or join the work force with minimal work
experience.
Not every kid is lucky enough to have a parent who pays for his or
her cell phone and other expenses. We need to give them the chance to
build their skills, build a life, and hope that someday very soon, they
run for Congress.
Since January 2017, the number of job opportunities available
across the country has swelled from 5.6 million to more than 7 million.
And thanks to the Republican Tax Cuts and Jobs Act, wages are up and
experiencing sustainable, organic growth.
We want that strong economic growth to continue. Mandating a $15
minimum wage would have serious negative consequences for students,
workers, and small businesses.
______
Chairman Scott. Thank you very much.
We will now hear from Dr. Spriggs.
STATEMENT OF THE HONORABLE WILLIAM E. SPRIGGS, PROFESSOR,
DEPARTMENT OF ECONOMICS, AND CHIEF ECONOMIST, HOWARD UNIVERSITY
AND AFL-CIO, WASHINGTON, DC
Dr. Spriggs. Thank you, Chair and Ranking Member Foxx and
members of the committee, for the opportunity to testify before
the committee today on gradually raising the Federal minimum
wage.
I am pleased to offer this testimony on behalf of the AFL-
CIO, America's house of labor, representing the working people
of the United States, and based on my expertise as a professor
in Howard University's Department of Economics and as a former
Assistant Secretary for Policy in the Department of Labor.
I want to start by stating clearly that the AFL-CIO
endorses this legislation.
The response of American policymakers from the Great
Depression was more than stopping the economic slide. The
policy concern was that the Great Depression launched a
downward spiral in wages and prices, a deflation that stunted
economic recovery.
Many of the policies that were put in place back then
assured the Great Recession would not repeat the Great
Depression. Unemployment insurance and Social Security proved
essential stopgaps to the slide in household incomes in 2008
and 2009.
Today, despite record job growth over a record period, the
response of wages has been stingy. Productivity continues to
grow, but wages have struggled to stay ahead of very modest
inflation. The result is labor's share of income continues to
slide. America needs a raise.
What Congress and President Roosevelt did in the face of
the Great Depression was to reforge and perfect our Union, just
as Abraham Lincoln and the Republican Party perfected the
American Union by ending slavery. A New Deal was struck to
ensure that a government of the people could be for the people.
Going forward, a new American value would be enshrined: Work
would have dignity and working hard would pay.
It is a little over 9 years since Congress has raised the
minimum wage, as the chair mentioned. It is time for a raise.
Since 1938, Congress expanded coverage and improved
standards of the original bill. It created a healthy and
expanding economy. Those original components in the 1938 bill
had exemptions that, however, were not benign. They have had
long-lasting effects in creating substantial racial and gender
inequalities.
The reason for those initial exclusions of agricultural
workers and domestics was so specific to the South in the
1930's and 1940's because 57 percent of America's farm
population lived in the South and 51 percent of its
agricultural workers were African American.
The reason the exclusion was so devastating to African
Americans is that from 1930 to 1940, 40 percent of Southern
Blacks were in agriculture. Because many Latino workers at the
time in the Southwest were agricultural workers, this also hurt
Latino workers.
This same Southern exceptionalism argument was raised in
the fight for the Fair Labor Standards Act, except in the guise
of a regional wage variation.
The Fair Labor Standards Act passed in 1938 under President
Roosevelt established a minimum wage of $0.25 an hour effective
October 24, 1938. The act called for minimum wage to increase
to $0.40 an hour October 1945. Raises since then have required
amendments to the act.
Early votes on raising the minimum wage showed the national
consensus on raising the wage and the importance of maintaining
a decent floor of wages. That first increase, the biggest
increase in the raise of the minimum wage of 87 percent, was
approved by 90 percent--90 percent--of House Republicans.
To fix the gap that was caused by excluding agricultural
workers and domestic workers, in 1966 House Republicans voted
60 percent to close that gap and raise the wage. That was the
biggest raise when you look at the workers who have been
excluded, agricultural workers who predominantly lived in the
rural South.
Congress' purpose was to prevent competition based on
lowering wage cost. It was to ensure that we would do this
based on competition, on rising productivity.
You have a chance here to live up to the legacy of
Congresswoman Mary Norton, the first Democrat woman in Congress
who chaired this committee, the first woman to chair this
committee, who forged ahead on this legislation, to make sure
that all workers would rise, there would not be a regional
differentiation.
You have the chance to live up to the legacy of Adam
Clayton Powell, the first African American to chair this
committee, to extend the coverage to agricultural and domestic
workers.
You have the opportunity to live up to the legacy of
Congresswoman Shirley Chisholm, the first African American
woman to serve in Congress, who made sure that domestic workers
would see coverage.
You have a chance to return the minimum wage to a decent
wage that enshrines American values that work will pay, that
all workers will have dignity. This act gives you that
opportunity to fulfill that legacy.
[The statement of Dr. Spriggs follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman Scott. Thank you.
Mr. Wise.
STATEMENT OF MR. TERRENCE WISE, SHIFT MANAGER, MCDONALD'S,
INDEPENDENCE, MO
Mr. Wise. Thank you, Chairman Scott and Ranking Member Foxx
and members of the committee. Thank you for the opportunity to
testify today.
My name is Terrence Wise, and I am a 39-year-old second-
generation fast food worker from Kansas City, Missouri, and I
am honored to speak with you today about the Raise the Wage
Act.
I began fighting for $15 an hour and a union 6 years ago,
because I knew just asking my boss for a raise and benefits
wouldn't do. I felt the struggle of raising a family on low
wages my whole life.
It began in South Carolina. I grew up in government housing
with my two brothers and sister. My mother worked full time at
Hardee's for 30 years, and my dad served as a cook in the
military. My mom would wake me up at 4 a.m. early before she
left for Hardee's, and it was my job to get my siblings up and
ready to go to school. It was also my job to be home when the
mailman arrived to sign for the food stamps.
Even with two full-time incomes and food stamps, my family
still had to skip meals. One winter, I didn't even have a coat
until my guidance counselor at school gave me one from the lost
and found. Hardworking people with two full-time incomes
shouldn't live like this in the richest Nation on earth.
I was a great student, and by the eighth grade I was in all
advanced placement classes. My teachers were saying things
like, ``Terrence, you are going to be great. You are going to
do good things.'' I wanted to be a Gamecock at the University
of South Carolina. I was going to be a writer. But I went to
work at the age of 16 to try to help my family survive.
One day I came home from school, there were no lights, no
food in the fridge. So I got my first job at Taco Bell, making
$4.25 an hour, but I knew my family needed the money
desperately. My first paycheck was 150 bucks, and it all went
on the light bill. One job wasn't enough, so I got a second job
at Wendy's.
I tried to balance both work and school. I had all A's in
my classes. But I started falling asleep in classes. And now
teachers were asking me, ``Terrence, what is wrong?'' I told
them I was working two jobs, had to survive. I didn't need AP
Calculus to run the numbers at home. It wasn't enough to
survive. It wasn't even enough for basic necessities.
I had left school and my dream of college, and at 17 I
dropped out and became a full-time worker, and I have been
working in fast food ever since.
Now I have a family of my own. I have three daughters, ages
17, 15, and 13, and my fiancee is a home healthcare provider.
Neither one of us make enough money to make ends meet, and I
have worked two jobs most of my life. I would leave for Burger
King at 2 o'clock, then leave from there and arrive at
McDonald's and work the overnight shift, 10 p.m. to 6 a.m. I
couldn't get my jobs to line up with my off days, so sometimes
I would work weeks without a day off.
My family has been homeless, despite my two incomes and my
fiancee's. We have endured cold winters in Kansas City,
homeless in our purple minivan. I would see my daughters in the
back tossing and turning.
Try waking up in the morning and getting ready for school
and work in the parking lot. That is a memory I can never take
away from my children and something a parent should never have
to go through. You should not have multiple jobs in the United
States and nowhere to sleep.
I work for McDonald's, the second largest employer in
America, and I still rely on food stamps and Medicaid. Like
other working people in America fighting for $15 and a union, I
want to stand on my own. I want to provide my girls with three
meals a day and give them the opportunities I didn't have.
This movement has changed our entire country. Many people
didn't believe $15 an hour was possible, but it has become a
reality for 22 million workers across the country.
Seventy-five percent of voters in Kansas City voted for a
$15 minimum wage in 2017. Workers won that victory by taking
big, bold action, like going on strike. We even slept on the
steps of city hall for a week in our Fast for $15.
It was a huge victory for us until the State legislature
preempted the minimum wage, returning it to $7.65. Missouri
voters increased the minimum wage in 2018, but we are still not
achieving $15 an hour, the minimum we need to support our
families. That is why we need Congress to take action to raise
the Federal minimum wage.
I often imagine what $15 an hour would mean for me and my
family. It would mean I could keep food on the table, we
wouldn't have to worry about doing homework in the dark, and I
could get the girls school supplies whenever they needed them.
But what would $15 an hour really mean? It means that my
daughters could meet their grandmother for the first time. She
lives in South Carolina and we just have never been able to
afford to travel to meet her.
Low-wage workers like me will continue to organize and
fight for economic justice. My coworkers and I have lifted our
voices from the steps of city hall in Kansas City, at the White
House, and now here today on Capitol Hill.
Everyone who works in this country deserves access to the
promise that America made to each and every one of us--life,
liberty, and the pursuit of happiness--and $15 an hour brings
us closer to living out our values as a Nation. The Raise the
Wage Act will do just that, and I urge members of this
committee to raise the wage, you know. Act quickly to pass this
bill.
Thank you, and I look forward to answering any questions.
[The statement of Mr. Wise follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman Scott. Thank you.
Dr. Holtz-Eakin, good to see you.
STATEMENT OF DR. DOUGLAS HOLTZ-EAKIN, PRESIDENT, AMERICAN
ACTION FORUM, WASHINGTON, DC
Mr. Holtz-Eakin. Good to see you, Chairman Scott, Ranking
Member Foxx, members of the Committee. It is a privilege to be
here today. I am going to make three very simple points and
then I look forward to your questions.
The first point is that the labor market is working very
well right now, with increased work, especially for those with
low skills and marginal attachment to the labor force, and
rising real wages.
The second is that increasing the minimum wage to $15 would
damage these employment prospects, and the preponderance of the
research evidence comes down on that side.
Then the third point is that, for those who deservedly
would like to help those in poverty while working, the minimum
wage is very poorly targeted to solve that problem.
Let me go through those.
The U.S. labor market is working very well right now. There
were 304,000 jobs created in January. There have been over 13
million jobs created in the past 5 years. The unemployment rate
is down to 4 percent and has been even lower recently. At the
moment, there are more job openings, 6.9 million, than there
are unemployed people, 6 million, and that has been true since
March 2018.
The U.S. labor market has been able to create that many
jobs by the miracle of pulling into the labor market and into
productive work people who had not been participating. The
overall labor force participation rate has jumped from its low
of 62.4 percent to 63.2. For prime age workers, it has
rebounded by two full percentage points and is up to 82.6
percent.
I think most importantly, the number of discouraged
workers, those who have just given up looking, has dropped in
half over the past 5 years, from nearly 900,000 to 420,000.
At the same time, we are seeing real wages grow. There is a
flood of people into the labor market. Real wages are now
growing at 3 percent a year. That is a very successful story
and one that I think that members of the committee should be
proud of.
Going forward, if we are to raise the minimum wage to $15,
the preponderance of the research evidence that I go through in
my written testimony, and I will be happy to elaborate in the
Q&A, it would indicate that it would hurt the employment
prospects, especially of those people you care about the most,
those with little skills, little experience, least attachment
to the labor market. This is often not taking the form of the
caricature of throwing someone out of their job, but simply
denying the employment growth that would give people an
opportunity in the future.
I think it is important to note that the nonpartisan
Congressional Budget Office reaches the conclusion that raising
the minimum wage hurts employment prospects. It is their job to
present to you, as the Members of Congress, the consensus of
the research literature, and that is exactly the consensus that
they find.
I think it is important as well to note that more than
doubling the minimum wage is an enormous change, and previous
research will probably give us little guidance as to the
magnitude of the impact. That is outside of the range of
historical experience. Its damage is likely to be much, much
greater than previous studies have shown.
And the combination of the large increase and then indexing
the minimum wage to the median wage sends a strong signal to
employers that these jobs, the ones for those with low skills,
marginal attachment to the labor force, little education, are
jobs that they are going to be unable to have going forward.
They are going to replace them with automation and other means.
So, the employment prospects are probably even more damaging
than previous indications.
The last point is that, if you care about those in poverty
who are working, as you should, the minimum wage is a poor
instrument to address that problem. Eighty percent of minimum
wage workers are not in poverty, and one-third of the young who
earn the minimum wage are living with their parents and are in
households that make more than $100,000.
Knowing the wage a person makes does not tell you about the
characteristics of their household, and as a result, only 6.7
percent of the benefits of a $15 minimum wage would go to those
who are in poverty. This is not a good instrument for solving
that problem.
And the key economic fact that it is important for the
Committee to remember when they discuss this is that passing a
law to make the minimum wage $15 doesn't mean there is any more
money. You have to go get that money from somebody else.
So, to get the money for someone who has a job, you are
going to have to deny someone else a job and effectively take
money from people who are looking for work and give it to
people who have work. That seems like an incredibly perverse
redistribution, one I would encourage the Committee not to
take.
Thank you.
[The statement of Mr. Holtz-Eakin follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman Scott. Thank you.
Dr. Zipperer.
STATEMENT OF DR. BEN ZIPPERER, ECONOMIST, ECONOMIC POLICY
INSTITUTE, WASHINGTON, DC
Mr. Zipperer. Chairman Scott, Ranking Member Foxx, and
members of the committee, thank you for the opportunity to
testify on the importance and necessity of increasing the
minimum wage to $15 per hour.
Raising the national minimum wage is well overdue. Workers
paid today's Federal minimum wage are, after adjusting for
inflation, paid 29 percent less than their counterparts 50
years ago. This is despite the fact that, as the figure on the
monitor shows, the Nation's productivity has doubled over that
time period. Had the minimum wage kept pace with labor
productivity over that time period, the minimum wage today
would be worth more than $20 per hour instead of the $7.25 it
is today.
Gradually increasing the national minimum wage to $15 by
2024, as proposed by the Raise the Wage Act of 2019, is an
important corrective to our failure to raise the minimum wage.
The proposal automatically indexes future minimum wage
increases to median wage growth, so that low-wage workers will
share a common trajectory of wage growth with a broader labor
market.
Finally, gradually phasing out the separate lower wage for
tipped workers will help to eliminate disparities in labor
protections between tipped workers and the rest of the labor
force.
My colleague David Cooper at the Economic Policy Institute
has estimated that raising the minimum wage to $15 by 2024
would lift the pay of about 40 million workers. Affected
workers who work year-round would receive a raise on the order
of about $3,000 per year. This is enough to make a tremendous
difference in the life of a preschool teacher, a bank teller, a
fast food worker, more than half of whom earn less than $15 per
hour today.
Minimum wages are one of the most well-studied topics in
economics. Although there sometimes appears to be much
controversy over the size of the employment effects of the
minimum wage, the weight of recent evidence shows that minimum
wages have worked exactly as intended, by raising wages without
substantial negative consequences on employment.
In a review of all research published in the 15 years since
2001, the economists Paul Wolfson and Dale Belman found that
the average estimated employment effect was very small.
In addition, in research I coauthored with Sylvia
Allegretto, Arindrajit Dube, and Michael Reich, we found that
studies using the most high-quality, credible research designs
also found small to no employment effects.
These findings, taken together, suggest that both the
average study, as well as the best research, show that there
has been little downside to raising minimum wages.
Current research also suggests that even the highest
minimum wages our country has experienced have helped raise
wages without reductions in employment. In new research on 138
State-level minimum wage increases I coauthored with Doruk
Cengiz, Arindrajit Dube, and Attila Lindner, we found that the
highest minimum wages we studied did not adversely affect
employment.
Important new scholarship by Ellora Derenoncourt and Claire
Montialoux also demonstrates that the highest national minimum
wages the United States has experienced significantly raised
wages without reducing the employment of low-wage workers.
Because the evidence shows that there has been little
downside to both minimum wages in general and also even to
minimum wages at their highest points in U.S. history, larger
increases in the minimum wage are economically justified.
Larger increases are also necessary because workers in
every region of the country will soon need at least $15 per
hour in wage income in order to pay for basic necessities. My
colleagues at the EPI have developed a concept of family
budgets to delineate how much a family will need to earn every
year in order to pay for basic necessities.
By 2024, in all areas across the United States, even a
single adult with no children will need to be earning more than
$15 per hour in order to achieve a modest but adequate standard
of living, according to their family budget.
As a result, anything less than a $15 minimum wage by 2024
will not adequately carry out this key purpose of the Fair
Labor Standards Act, which is to, and I quote, ``to protect the
Nation from the evils and dangers resulting from wages too low
to buy the bare necessities of life.''
Minimum wages have long been an effective tool for
maintaining adequate pay, but the failure to adequately raise
the Federal minimum wage has denied American workers
significant improvements in their standard of living.
By raising the Federal minimum wage to $15 by 2024, we will
finally deliver a much-needed boost in wage income and increase
the value of the minimum wage to a level that ensures the
lowest wages we pay workers are not poverty wages.
[The statement of Mr. Zipperer follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman Scott. Thank you.
We will now recognize members for questions, and they are
subject to the 5-minute rule, beginning with the gentleman from
Arizona, Mr. Grijalva.
Mr. Grijalva. Thank you very much, Mr. Chairman.
And if there is no objection, Mr. Chairman, I would like to
enter this report into the committee record. And that is from
the Washington Center for Equitable Growth, entitled ``Minimum
Wages and the Distribution of Family Incomes in the United
States.'' In essence, this report States that if the minimum
wage had been $12 in 2016, over 6 million fewer people would be
living in poverty today.
If there is no objection, Mr. Chairman?
Chairman Scott. Without objection.
[The information follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Grijalva. Thank you, sir.
In strong support of the $15 minimum wage. And I do want to
thank Mr. Wise and Dr. Spriggs for your testimony. It was
excellent and kind of left me without too many questions, to be
honest with you.
And with the chair's indulgence, I think that it is way
past time that we move forward to raise the minimum wage. And
as we do that, Mr. Chairman, I think it is important that the
members understand that it is important to tackle other
inequities that are in our basic minimum wage protections.
It is long past time for Congress to end discrimination
against agricultural workers in the Fair Labor Standards Act,
period. So today, I introduced the Fairness for Farm Workers
Act; and in doing so, simultaneously, Senator Harris has
introduced the identical piece of legislation in the Senate.
And this act, basically, the Fairness for Farm Workers Act
would extend overtime protections to farm workers and eliminate
some remaining exclusions for farm workers from minimum wage
protections.
These protections were first enacted, as Dr. Spriggs so
eloquently gave us the history of it, and surmised at the end,
I believe very accurately, that those exceptions were made out
of political expediency and racism, and that needs to be
addressed.
That inequity that exists, Mr. Chairman, as you well know,
it is a discrimination issue. We have to end this
discrimination against farm workers. The treatment of farm
workers in this country has been and continues to be unjust,
unreasonable, and unsustainable.
My legislation, the Fairness for Farm Workers, would
eliminate the minimum wage and overtime discrimination farm
workers face in the act.
So I know I will be working with you on that. Your
leadership on this is not only welcome but, as you have offered
your support, thank you very much, Mr. Chairman. I look forward
to working this out. And I think it is important that we deal
with raising the minimum wage, but also have an opportunity to
reform the whole package as we move along.
With that, Mr. Chairman, like I said to the two witnesses,
you left me with no questions, and I yield back.
Chairman Scott. Thank you.
The gentlelady from New York, Ms. Stefanik.
Ms. Stefanik. Thank you, Mr. Chairman.
And thank you to our witnesses for being here today.
We agree on this committee of the importance of economic
opportunity for American workers and American families. We
agree that we need to focus on real wage growth. We agree on
the pathway out of poverty. What we don't agree with is how to
get there. We have different solutions about how to achieve
those goals.
We are living in a dynamic, growing economy today, and we
must start talking about the future of work. What do I mean by
that? As we have seen over the last decade, the composition of
our work force is rapidly changing, as is the type of work
Americans, especially young Americans, are engaging in. We are
increasingly seeing a rejection of traditional employee-
employer relationships for nontraditional, dynamic career
paths, like the gig economy or side hustles or self-employment.
In my district, I represent 40 percent of the geography of
New York State. It is a very rural region, and we are very
familiar with this discussion. Our economy in UpState New York
is very distinct from the economy in Manhattan and DownState
New York.
My question to Mr. Holtz-Eakin is, on the future of work,
how does this proposal not embrace opportunities in the gig
economy in the 21st century? And how does this proposal also
not take into account the differences between rural parts of
this country and urban parts of this country, in terms of cost
of living, other issues, challenges small businesses are
facing?
Mr. Holtz-Eakin. Congresswoman, you have heard a lot of
discussion about the history, but the only real question facing
the committee is, do you want to raise the minimum wage going
forward, and to do it nationally and for all workers, tipped
and nontipped?
That is a very different proposal than even some of the
things we have evidence from in the research. This would hit
all labor markets, rural labor markets and urban identically.
It would hit tight labor markets and loose labor markets.
One of the striking characteristics of the recovery has
been a very unevenness across the geography of the United
States, and it would not recognize that. It would not recognize
the need for businesses in those areas to have a cost structure
they can afford. It would hurt the entrepreneurship in places
that are struggling. It is a very blunt instrument, and, as I
said, that blunt instrument does not land on those who need it
the most, working poor.
And so I think that is one of the things that jumps out of
the literature. And I worry a lot about a proposal that is not
tailored to the circumstances of the labor market and doesn't
target those who need the help the most, especially at a time
when the labor market is actually, on the whole, doing
remarkably well.
And I think the thing I would emphasize is we are seeing
people entering work who we just did not think would come back.
No one thought we could continue to create 200,000 jobs a year
in 2018, and the economy has. That is a remarkable
accomplishment. Those families will forever be better from
having that opportunity.
Ms. Stefanik. My next question is, one problematic aspect
of this legislation, one of the many problematic aspects is the
elimination of the tip wage and tip credit.
I have a local assemblyman who is a Democrat who represents
Plattsburgh, which is in my district, and he recently
highlighted why this is problematic. He included a local
restaurant employee on his website who would have been greatly
harmed by the elimination of the wage tip credit.
I quote: ``Generally has relied on tips to supplement her
wages. She makes $7.50 an hour, but often with tips this salary
is doubled or even tripled because of tipping. This not only
provides her with money in her pocket each day, but it helps to
stabilize and even augment her income to provide food, formula,
and diapers for her children. Each of her fellow servers has
different life situations, but what they all seem to agree on
is that they definitely make more money as a server than if
they had taken a more restrictive set wage position.''
Can you talk about why the elimination of the wage tip
credit is problematic and does not allow this dynamism that we
are seeing in the current economy?
Mr. Holtz-Eakin. Certainly. As you know, those who are
tipped workers are guaranteed to get the minimum wage. If they
don't receive tips that are sufficient to do that, the owner of
their establishment will pay them the minimum wage.
So forcing them to do that anyway raises the cost in the
business, there is no way around it, and once again you have
the problem, where does that money come from? As I said in my
opening statement, they have to go take it from someone else,
and that might be someone they choose not to hire.
And that is the definition of lack of dynamism. I am not
going to take advantage of opportunities to expand my
employment base, offer new services, grow as a business. This
has exactly that characteristic.
And I would point out that in D.C., which we watched
carefully, there was a ballot referendum that said we are going
to raise this minimum wage for tipped workers. It was
overturned by the D.C. Council because the tipped workers
themselves said, no, this is bad for us.
Ms. Stefanik. And that was a similar experience in New
York. Tipped workers were vehemently opposed to this policy and
organized very effectively.
Thank you. I yield back.
Chairman Scott. Thank you.
The gentleman from Connecticut, Mr. Courtney.
Mr. Courtney. Thank you, Mr. Chairman.
And, again, I applaud the fact that week No. 1 of this
committee we are taking up an issue which, again, I think
restores the legacy of this committee in the past, as Dr.
Spriggs so powerfully described.
You and I and a couple of us were around in 2007, the last
time the Federal minimum wage was increased, from $5.15 to
$7.25. Again, it was done gradually over a period of about 3 or
4 years. I remember the Republican votes that reported that
bill out of the committee, and I remember it was in May 2007,
after the new Congress or the 110th Congress, that President
Bush signed that into law.
And, again, Dr. Spriggs, thank you again for sort of
reminding us of the forensics of the minimum wage, that it
really historically has been really a very strong bipartisan
issue, and it is far too long that Congress has not revisited
that standard.
And, again, Mr. Wise, I want to thank you for your
incredibly powerful testimony here today, bringing this down to
real life and also talking about sort of the grassroots organic
support that is out there, and we have seen that in
referendums. And the $15 benchmark has really started to
happen, again, without Congress necessarily doing it yet, but
certainly showing that it is not going to wreck the U.S.
economy for employers to do the right thing.
I would like, Mr. Chairman, to just enter a statement that
Hartford HealthCare, which is one of the largest employers in
the State of Connecticut, just announced about a few weeks ago,
that they are going to raise the minimum wage for their work
force, which is about 2,500 strong, to $15 an hour this spring.
They are not waiting until 2024. And, again, they have entry
level staff folks that are there. That is a really important
decision that the employer made to do that.
And, again, I think it is because of the work that folks
like Mr. Wise and some of the others out in the audience here
with red shirts, tee shirts here today, have really raised this
issue, so that it is making its way into the corporate
boardrooms that this is something important to do.
So, again, I would like to ask Dr. Zipperer just a question
about what has been happening to wage rates since the Great
Recession and the fact that, again, we finally are starting to
see an uptick in terms of wage, but this is 10 years after the
Great Recession. As you point out, this job market has been in
a trajectory that certainly precedes this administration,
although it is continuing to move forward, and I think we all,
as Americans, support that.
But, I mean, how would you explain, again, the fact that we
have not seen the wage growth concurrent with the economic
growth? And the recent uptick in wages, I mean, this is
happening at the State level in terms of minimum wage
increases. Is that a part of the story about why we are finally
starting to see some wage growth?
Mr. Zipperer. Thank you for the question.
We are starting to see wage growth, as you noted and as Dr.
Holtz-Eakin noted in his testimony, which, thankfully, is a
good thing. At the same time, I think we are seeing that wage
growth because the labor market is becoming tighter and
employers are competing more for workers.
At the same time, that wage growth is not actually
sufficient or adequate enough for many workers, in the sense
that the lowest wage workers in particular, what we are
discussing at this hearing, need a much more substantial boost
in wage income than they are going to see from tight labor
markets alone.
Mr. Courtney. Well, thank you.
And to drive that point home, Mr. Chairman, I have
correspondence from Oxfam America, which, again, shows an
economic analysis that, again, we need that sort of push from
the bottom, which a minimum wage increase has been bipartisanly
supported in the past, and I would ask that be admitted into
the record.
Chairman Scott. Without objection.
[The information follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Courtney. And I also just would like one last comment.
You know some of us who serve on committees like Armed
Services, as my friend from New York, you know we get a chance
to interact with other countries, with codels and overseas. I
am co-chairman of the Friends of Australia Caucus, which is a
developed economy somewhat on par with the U.S. They have
actually a minimum wage commission which raises the minimum
wage outside of politics, on a yearly basis. It is $17.70,
Australian dollars. If you convert that into U.S. dollars
today, it is about $14.
That is the one economy in the sort of developed world that
actually did not take a hit during the Great Recession. Again,
their banking system, frankly, was more regulated and I think
withstood what was going on internationally there.
But nonetheless, I mean, they are a growing economy. Their
minimum wage, which has been automatically increased because of
a nonpartisan commission, has shown that, in fact, it doesn't
hurt economic growth. It actually stabilizes a family's income
and increases their purchasing power.
I yield back.
Chairman Scott. Thank you very much.
The gentleman from Kentucky, Mr. Comer.
Mr. Comer. Thank you, Mr. Chairman.
And I appreciate everyone being here.
I think it is interesting that the panel will admit that we
are finally having wage growth, which is something that I think
both parties agree is needed in America. One reason, and the
main reason we are having wage growth, is because there is a
shortage of workers in America. It is basic supply and demand.
In my district in Kentucky, I have Paducah, which is a
headquarters for the regional office for U.S. Bank. They just
recently raised their minimum wage to $15 per hour for all of
their employees. They did that without legislation, without
government intervention. Basically, it is the supply and demand
as a result of having a strong economy.
So my question is--and I want to make this Statement. While
proponents of a $15 minimum wage foresee consumers absorbing
the effects of this proposal through increased end cost, many
smaller businesses in my district in Kentucky wouldn't be able
to sustain charging such radically increased prices.
Dr. Holtz-Eakin, do you agree that raising prices is not
always an option for many businesses in rural or low-income
areas? And can you elaborate on the effects of such a bloated
minimum wage would have on these entrepreneurs who are the
backbone of our economy?
Mr. Holtz-Eakin. As I said, if you pass a legislated
increase in the minimum wage, not a voluntary one as U.S. Bank
had, there is no more money at the moment that becomes law. So
you have to go figure out where you are going to find it.
One possibility is charge your customers more to get the
money. If you are unable to do that, and a lot of people are
not going to be able to do that, another possibility is you
take the thinner nonexistent profit margins of an
entrepreneurial business, a startup, and squeeze it down even
further. They will likely fail, and thus those jobs would go
away. Or you can take it out of your labor cost somehow by not
hiring additional workers when you otherwise might.
And this is just like ``Casablanca'': You round up the
usual suspects and figure out where you can do it, if at all.
Mr. Comer. Dr. Holtz-Eakin, you make it clear that a
minimum wage increase would not affect all areas the same. A
recent study by the University of Kentucky suggests that for
many families below the poverty line in Kentucky a lack of
hours worked rather than a low wage or minimum wage is the
primary challenge.
Right now, the average worker in poor families in Kentucky
are out of the work force more than 4 months out of the year.
Won't a higher minimum wage set up additional barriers to
employment and risk more workers being out of the work force
for longer periods of time?
Mr. Holtz-Eakin. It is certainly a concern that I have
tried to emphasize in my testimony.
We do have some, for example, recent evidence out of the
Seattle increase in the minimum wage which shows 10,000 jobs
lost, but also diminished hours worked by those affected by the
increase. That is another channel by which you squeeze down
your costs, but that means less income for those individuals.
And, again, my concern is that is something Seattle did.
That is very different than doing it to the entire United
States, including your district in Kentucky.
Mr. Comer. Absolutely.
Let me ask one last question. You also stated that 5.1
million jobs have been added over the past 2 years. How would
this dramatic increase affect the progress created by recently
enacted legislation, such as our tax reform bill of the last
Congress? How would this impact that if we passed this proposed
minimum wage increase?
Mr. Holtz-Eakin. So, as I noted in my testimony, my
colleague Ben Gitis and I used a published estimate of the
impact of increases in the minimum wage on the growth in
employment going forward, and it would more than offset those
5.2 million jobs. So, we would set back the progress we have
made, the dramatic progress in getting Americans back to work,
including those who previously didn't work. I think that is a
concern.
Mr. Comer. I think we have seen last month, with record job
growth, over 300,000 new jobs added to the economy, I believe
as a direct result of, first of, the new administration and the
last Congress focusing on reducing regulations; second, on
reducing taxes. We have got the economy growing for the first
time in a long time. We are starting to see wage growth.
So I believe that we finally have America on the right
track economically, and I think we need to think long and hard
before we go back to a Congress of passing lots and lots of
legislation, increasing regulations, more government, bigger
government, because what we see now from an economic
standpoint, in my opinion, is working.
Thank you, Mr. Chairman. I yield back.
Chairman Scott. Thank you.
The gentleman from the Northern Mariana Islands, Mr.
Sablan.
Mr. Sablan. Thank you very much, Mr. Chairman, for having
this hearing.
Thank you, everyone, for coming and testifying.
I wasn't going to speak, but, Mr. Wise, please keep telling
your story. You are sharing your life story. And I am sure you
have heard it before, but if you haven't, let me tell you, sir,
that you are a good father.
My only regret is that one of you sitting there as a
witness probably couldn't hear what you were saying. And you
are telling a real life story, and someone is saying, no,
according to the literature on economics and all of these
things.
We are not creating big government here. We are trying to
create increased wages for those like you, and I am very proud
to do so.
Mr. Chairman, I would like to yield my time to the
gentleman from Virginia, Mr. Bobby Scott.
Chairman Scott. Thank you, and I appreciate the time.
Dr. Spriggs and Dr. Holtz-Eakin, I talked about the
reasonableness of the tipped minimum wage because a tipped
worker would be made whole if the tips don't amount to the
minimum wage. That sounds reasonable, but how often is the
deficiency actually in practice made up?
Dr. Spriggs. My experience at the Department of Labor was
this is one of the more troubling areas for us to figure out
the proper regulation of what to do with tips, and for those
who think that it is clear cut, that is because they haven't
tried to solve this problem.
We know this is the major portion of wage theft that takes
place. It puts the women, and there are disproportionately
women who rely on tip wages, at a huge disadvantage because
they are, by necessity, having to deal with ugly customers, and
they need the tip, and it opens up a huge window for misconduct
and sexual harassment that is hard to close.
If you set the minimum wage higher and you don't move the
tip, then you create a bigger regulatory issue of how do we
collect the information to know whether the workers got the tip
money? Many restaurants want to pool the tips and then dole it
out so that the workers sometimes don't even get the tips. It
is all well and good if you are in a high, fancy restaurant,
and it is mostly men who work there do well, but for the
overwhelming majority of women who have this job, it is not the
historical record. This is the biggest area of wage theft to
try and get the owners of the restaurant to actually pay the
tipped workers the gap. And as that gap gets bigger, the
vulnerability of those workers is going to increase.
Chairman Scott. Dr. Zipperer, do you know how often the
tipped workers are actually made whole? Have you done studies
on that?
Mr. Zipperer. There is research about the preponderance of
wage theft, and that especially falls on tipped workers
because, like the other witness pointed out, regulation and
oversight of this issue is really difficult. In addition, the
Department of Labor, under a recent set of investigations,
found that of the restaurants they investigated, about 84
percent of investigations resulted in wage and hour violations,
and a substantial fraction of those were due to failures in
enforcing the tips standard that we are talking about. Workers
in the food, and drink, and restaurant industry are much more
likely to experience wage violations than in other industries.
Chairman Scott. So although it may be reasonable in theory,
the workers never get the deficiency made up. Is that right?
Mr. Zipperer. I think it is very difficult to enforce in
practice which is one reason why you see those kind of
disparities. You also see that in states that have adopted a
single minimum wage for tipped workers and non-tipped workers
alike that wages inclusive of tips are about 14 percent higher
in those states, and poverty rates for tipped workers are
significantly lower in those States with a single minimum wage.
Chairman Scott. Does the gentleman yield back? Do you yield
back?
Thank you. The gentleman from Kansas, Mr. Watkins.
Mr. Watkins. Thank you, Mr. Chairman. Thank you all very
much for being here. I especially want to say thank you to Mr.
Wise. Your testimony was very moving. It is not easy putting
yourself and your struggles out there, and doing so is very
impactful, and it touches on why we do what we do to try and
make the country a better place.
Now, that being said, I am right down the road on I-70. I
live in Topeka, and so if you need to join a support group for
the Chiefs AFC championship loss, then hit me up.
But sir, we disagree. I think this is a classic example of
legislation that feels good but doesn't do good. It feels good
when you pit up employer versus employee. But I have helped
create hundreds of jobs, respectfully, before this, and I would
move heaven and earth to find and keep good employees. And that
comes at a cost, a cost I am more than willing to pay when I
find good employees.
So listen. The CBO published in a 2014 study that a 10
percent or a $10 minimum wage would cost a half a million jobs.
Harvard Business School said every dollar increase would result
in a 4 to 10 percent increased likelihood of a restaurant
closure. So my question is to you, Dr. Holtz-Eakin. So I
represent a lot of poor communities throughout southeast
Kansas. I am going to share with you some thoughts they shared
with me. I just want you to reflect on them, and some of them
will be things that were written up in your testimony, but bear
with me.
A $15 minimum wage will attract more qualified applicants,
and I won't hire entry level people. Another entrepreneur said
I would have to pay everybody more. If I have to pay the
dishwasher $15 an hour, then I have got to pay the cooks more
than that. I will just replace H.R. with automation. Prices for
everything go up.
So my question is simply to reflect on that so I know what
to tell my constituents.
Mr. Holtz-Eakin. I want to just echo your observation that
the issue here is not about the depth of compassion for people
who are working and poor. The issue is what are the outcomes of
the proposed legislation. And my concern is that the outcomes
include worsened conditions for exactly those people and the
possibility of reduced employment for them, reduced hours if
they are working, the loss of the establishments that have
traditionally employed them, and all of those things you are
seeing when you say well, I am going to have to pay other
people, you are going to get wage compression. And that is
going to say well, we will cutoff a certain category, whether
they are teens or folks who never finished community college.
We are just not going to look at those guys. We can get the
other ones. We will do that because we are paying everybody
more.
And those are just people who are running the numbers and
by necessity trying to keep their business going. It is not an
act of anything other than necessity, and I worry about those
acts being played out across the country.
Mr. Watkins. Thank you, Doctor. Thank you all, and Mr.
Chairman, I yield my time.
Chairman Scott. Thank you. The gentlelady from Oregon, Ms.
Bonamici.
Ms. Bonamici. Thank you very much, Chairman Scott, and
thank you for introducing the Raise the Wage Act which I am
proudly cosponsoring because this is a long overdue
conversation about gradually increasing the Federal minimum
wage to $15 an hour. And as you pointed out, Mr. Chairman, in
your opening remarks today, an individual working 40 hours a
week and earning the Federal minimum wage earns $15,080
annually. Annually. Putting a family of two below the Federal
poverty level, and that is unacceptable that someone working
full time is living below the Federal poverty level.
And as Mr. Wise's testimony so poignantly showed, when
workers are paid wages that leave them in poverty, they
struggle. They struggle to pay for rent, essentials like food,
transportation, skyrocketing child care costs. So the Federal
minimum wage has been stagnant for too long. It has contributed
to income inequality, and I am glad we are having this
conversation today.
So I am from Oregon, and I have to tell you that years ago,
I was kind of surprised to learn that there was actually such a
thing as the subminimum wage for tipped workers because we
don't have that in Oregon. We have a thriving restaurant
industry. People come to Oregon for restaurants. So I was
really actually shocked to learn that people could be paid less
than minimum wage. It was really surprising.
In Oregon, more than 100 years ago, even before the Fair
Labor Standards Act was enacted, Oregon became one of the first
States to enact a minimum wage. It was intended to address
gender disparities for workers, yet still today the majority of
workers earning minimum wage are women and people of color,
according to data from the Bureau of Labor Statistics.
So Dr. Spriggs, in your testimony you talked about the
history of the Fair Labor Standards Act and some of the
compromises that were made to pass the bill, and I know
Representative Grijalva mentioned this, but those compromises
later exacerbated racial and gender wage gaps. So how have
women and people of color been disproportionately affected by a
low Federal minimum wage, and how will the Raise the Wage Act
address these persistent wage gaps?
Dr. Spriggs. Thank you very much, Congresswoman, for the
question and thank you for your comments.
Yes. I think we need to look back at 1966 when 60 percent
of Republicans agreed to expand coverage and get rid of the
exemption for agriculture and many service sector workers which
included restaurant workers. Unfortunately, the restaurant
workers were subject to this creation of a subminimum for tip.
The tip wage itself has a very racist origin. It was originally
because the servants happened to be black, and it was the habit
not to think about you have to pay them, and the tip was meant
in lieu of wages.
When we closed the gap in 1966 in terms of coverage, we
have to remember that many of those workers, because they were
agriculture workers, lived in the south, in the rural south,
and they lived in States that did not have State minimum wages.
There was nothing below them. So the studies that have been
cited by Ellora Derenoncourt and by Claire Montialoux highlight
that when that was closed, first, these workers didn't get paid
a dollar an hour, so the initial expansion of coverage to
include these rural workers was to get them to $1 which was a
34 percent raise. In other words, they were getting close to
$0.80 an hour, and then because they were included, they went
to $1.60. We doubled their wages.
Ms. Bonamici. Thank you. And I want to get another question
in.
Dr. Spriggs. Yes. I want to tell you really quickly the
punch line. The punch line is that black child poverty in this
country went from nearly 70 percent to 40 percent in that 3
years simply by covering 30 percent of African Americans who
had been denied that coverage--
Ms. Bonamici. Right.
Dr. Spriggs [continuing]. and raising their wages. So that
was the biggest effect we have ever had in lowering poverty
from any program. It took us until 1990 to break that record,
to get black child poverty back below 39 percent.
Ms. Bonamici. Long past time to complete the work. I also
wanted to talk about or also point out that when low wage
workers--they spend their earnings. They go right back into the
economy.
In Washington County, Oregon, which is just west of
Portland, the Portland metro region, the minimum wage there is
$10.75 an hour currently. Someone making minimum wage would
have to work 73 hours a week to afford a one-bedroom apartment,
and that is what we are seeing in other areas as well. A full-
time worker should be able to afford basic needs like housing.
And Dr. Zipperer, you mentioned a family budget calculator, and
I liked your quote about protecting the Nation from the evils
and dangers resulting from wages too low to buy the bare
necessities of life. So who benefits from this gradual increase
to $15 by 2024, and why is it important to establish that as a
Federal floor rather than leaving the issue up to States?
Mr. Zipperer. Thank you for your question. It is important
to establish a Federal floor because many States don't actually
increase their minimum wage or increase it adequately, and
Federal action is the only way that we are going to actually
achieve a national minimum wage that would provide a wage
standard high enough so that all people in all areas of the
country will be able to afford the basic necessities for their
families.
At the Economic Policy Institute, we have developed what we
call family budgets to delineate how much a given family type
in a given area of the country needs every year to pay for
housing, food, transportation, child care, and other
necessities. These are extremely conservative amounts. They
don't allow for any saving whatsoever, no saving for
retirement, no saving for buying a home, no saving for
emergencies. And even with these conservative amounts, we find
that in every city and in every county of the country, by 2024,
workers will need $15 per hour working full time in order to
meet their family budget. Two adults working 40 hours a week,
52 hours--52 weeks a year at $15 per hour each, will earn less
than their family budget in every area of the country.
Ms. Bonamici. Thank you very much. And Mr. Chairman, I
request unanimous consent to enter into the record a letter
from the Women's Coalition outlining the importance of passing
the Raise the Wage Act to help address wage gaps for women.
Chairman Scott. Thank you without objection.
[The information follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Ms. Bonamici. And I yield back.
Chairman Scott. Thank you.
The gentleman from Texas, Mr. Taylor.
Mr. Taylor. Thank you, Mr. Chairman. I appreciate the
opportunity to be here. Dr. Holtz-Eakin, just a question for
you. I was going over your testimony last night, and something
that really struck me was the study that you did in 2015, and
in that study you determined--and I will just read your
testimony back to you, but using the most recent academic
literature, the study found that a $15 per hour Federal minimum
wage resulted in the loss of 3.3 million to 16.8 million jobs
with a middle estimate of 6.6 million jobs lost, and I just
wanted to understand. So that is a range, and clearly it is all
bad. I don't think anybody here wants to lose a job, right? We
want to create jobs. I think everybody here agrees on that
basic premise. But can you explain why there is a range in
estimates and sort of--if you don't mind?
Mr. Holtz-Eakin. So there is a range from analyzing the
data, and the imprecision with which statistics delivers the
truth, right, it doesn't say literally this is exactly what
will happen.
Mr. Taylor. Sure.
Mr. Holtz-Eakin. It says, you know, given the variation in
the data, it can go from here to here, and we want to
acknowledge that you can't know with great certainty.
Mr. Taylor. Ok.
Mr. Holtz-Eakin. And I just want to emphasize that says if
we look historically at changes in the minimum wage, we have
limited ability to say precisely what will happen. That gives
you a range. We have even less ability to say what will happen
if we go forward in a fashion that is much more dramatic, more
than doubling and then indexing permanently the minimum wage.
This is an unprecedented experiment, and I think we know very
little about what will actually happen.
Mr. Taylor. And then just as a policymaker, where are these
losses? I mean, are these happening in high-income areas? Are
they happening in--you know, high cost of living areas like New
York City? Are they happening in low-cost areas like, say,
Kansas? Are they happening in suburban areas like where I
represent in Plano, Texas? Are they happening in urban areas,
rural areas? Where are we losing jobs? So you are estimating
millions of jobs being lost. Where are they lost?
Mr. Holtz-Eakin. So you can split the economy in a variety
of ways. I would say the most important way to split it is to
look in the labor force and say let's look at the whole labor
force. It is hard to discern an impact. Let's look more closely
at those people who have little education, little skill, little
experience, say, a teenager. They are going to be priced out of
the labor market. You are not going to find--I will speak from
experience. I never found $30,000 worth of productivity in my
kids. So they are just not going to get hired. And so, you
know, that will show up right away.
If you look further at the places they are most likely to
be employed, that is going to be retail. That is going to be
restaurants and bars, and that is where you are going to find
the employment losses. And then across geography, you can just
see places where you have concentration of low-wage workers as
the labor force base, and that is where you are going to see
the losses.
Mr. Taylor. Ok. And then just shifting over to another
piece of your testimony I was reading last night, and I will
just read this sentence to you. Seattle's minimum wage law, so
we are going to Seattle now, has caused low wage work hours to
decline by 9.4 percent. Consequently, even among low-wage
workers who were still employed and earned slightly higher
wages, their average monthly earnings on net declined $125 per
month.
So in addition to Seattle losing 10,000 jobs which is what
your testimony was, what your written testimony is, you watched
the people that still managed to keep their jobs, their hours
declined, and so their incomes also declined, right?
Mr. Holtz-Eakin. Yes.
Mr. Taylor. So you have lost jobs.
Mr. Holtz-Eakin. Yes.
Mr. Taylor. You have lost income. My question is what has
happened to those workers? Are those workers leaving the labor
force? Are they moving somewhere else where they can get a job?
Are they going into the welfare system? What happens to these
people that lose their jobs? What happens to the families that
lose income as a result of the policy, the $15 policy that was
implemented in Seattle?
Mr. Holtz-Eakin. So Seattle is of interest because No. 1,
it is the top line number, $15, that has focused a lot of
attention. No. 2, it came along with the city deciding to have
a policy violation built in and had the University of
Washington study this closely using a research design that is
the gold standard for those who think that minimum wage doesn't
hurt workers. And so these findings are troubling for that
reason.
The thing it doesn't include is a followup for where
everyone goes, but the logical conclusion is we have seen a
little bit of them moving outside the city to get work. That is
actual in the study. You can see people trying to work outside
the municipal limits, but also you would expect people to
simply leave Seattle. If there is not going to be a work
opportunity, they are going to try elsewhere.
Mr. Taylor. Ok. Thank you. Mr. Chairman. I yield back.
Chairman Scott. Thank you.
The gentleman from California, Mr. Takano.
Mr. Takano. Mr. Chairman, thank you. I would like to begin
my questioning by asking unanimous consent to submit a
Statement into the record from the Center for American Progress
dated January 16th, 2019 which praises the Raise the Wage Act.
Chairman Scott. Without objection.
[The information follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Takano. Mr. Zipperer, Mr. Holtz-Eakin cites, you know,
a Seattle study showing harm being done. I would like to know
what the impacts of the minimum wage increases in places like
Seattle, San Francisco, and New York have been?
Mr. Zipperer. All right. Thank you for the question.
Regarding Seattle and the study that Dr. Holtz-Eakin cited,
that study is based on a completely flawed comparison of
Seattle where wages are rising extremely fast during the study
period with other areas of Washington State that do not look
like Seattle or are not comparable to Seattle and not a good
point of comparison. And so that is why I don't think that
study coming from the University of Washington is informative
in any way about the consequences of the Seattle minimum wage
increase.
At the same time, there are also studies that use a variety
of case studies and not just focus on a single city but that
focus on six cities including Seattle, also Chicago and a
couple of cities in California like San Francisco, and they
studied the effects of the minimum wage increases there on
restaurant employment and workers' earnings in restaurants.
That study conducted by Sylvia Allegreto, Anna Godoy, Carl
Nadler, and Michael Reich and others at the University of
California Berkeley found that those minimum wage increases in
those cities, in all of those cities, raised the wages of
restaurant workers without any negative consequences for
employment.
Mr. Takano. Thank you. I appreciate that.
I appreciate my Republican colleagues inviting, you know,
Mr. Holtz-Eakin to give us, you know, the conservative point of
view. I imagine that my colleagues on the other side of the
aisle respect your hard headed analysis of our economy. And we
Democrats are advocating for the minimum wage at $2.15 or at
$15 an hour. Of course, we are interested in trying to raise
the incomes, and I am curious. I want to know, you know, in
some of your past writings, especially on immigration reform.
Do you still hold to your beliefs that immigration reform and
welcoming immigrants into our economy ultimately will raise the
wages of American workers?
Mr. Holtz-Eakin. Absolutely.
Mr. Takano. Can you expound on that a little bit more?
Mr. Holtz-Eakin. Sure. If you look at the research on the
impact of immigration on native born workers, you find that
immigrants are, on average, complements to those native born
workers meaning in economic terms when they arrive, they raise
the wages of the native born workers. Immigrants are
disproportionately entrepreneurial. They start businesses at a
higher rate. They bring capital at a higher--workers at a rate
above the native born. They work longer. They retire later.
They are a source of enormous vitality to the U.S. economy, and
no one should misunderstand that.
Mr. Takano. So you would counsel, you know, my Republican
colleagues to push for immigration reform and to welcome
immigrants into our economy?
Mr. Holtz-Eakin. I have for my entire career, and you have
seen my success.
Mr. Takano. And you maintain that immigrants do not depress
wages, but they actually have either no effect on wages but
actually ultimately increase those wages because our
productivity goes up as an Nation.
Mr. Holtz-Eakin. I am convinced that the blanket statement
no one's wages ever go down is probably wrong. Blanket
statements are always wrong in economics. But I think the vast
amount of evidence is that they are beneficial to the wages of
native born workers.
Mr. Takano. Of course, I believe that we need a strong, you
know, baseline of a minimum wage. We need immigration reform to
reduce the effect of the shadow economy so that people, you
know, are not being exploited by employers who are taking
advantage of their undocumented status.
I mean, we can argue about where that minimum wage should
be set, but do you also believe that as well, that a shadow
economy is not good for us?
Mr. Holtz-Eakin. I think it is terrible if we have
circumstances that permit people to be exploited by the
workers, and that is a real issue, and it ought to be taken
seriously by everyone in this committee. The place where we
disagree is on the minimum wage, and what I would say to you is
it is not that you don't want to try to do something. This is
the wrong thing to do. We have a lot of evidence in the earned
income tax credit that it promotes work and helps these people.
Try the noncustodial tax credit. There are a variety of
alternatives. This is just the single worst way to try to help
these people.
Mr. Takano. Fair enough. Fair enough. We simply disagree on
the level of the minimum wage, but you know, we do agree on
immigration reform and the value of immigrants in our economy.
Thank you.
Chairman Scott. Thank you.
The gentleman from Georgia, Mr. Allen.
Mr. Allen. Thank you, Mr. Chairman, and thank you for
holding this hearing and talking about, you know, the creation
of jobs and the opportunities available out there.
I am from the State of Georgia. We have a little fast food
company down there. Mr. Wise, your testimony was very
impressive, but I can tell you. If you had gone to work for
Chick-fil-A, you would probably own your own restaurant by now.
It is an amazing story. You need to check them out, you know.
Obviously you have a passion for that business, and you have
remained in it, and in fact, they will actually put you through
college. Amazing company.
And in fact, we have had enormous job creation in Georgia.
The wage situation is--I mean, for example, with truck drivers.
I mean, they are making in excess of $80,000 a year, full
benefits, full medical, and there are also companies working
with the drivers to make sure they are not out of town more
than maybe two nights a week. So we are trying to address this
booming economy. Georgia has created over 800,000 jobs in the
last four or 5 years, and frankly, everywhere I go, everybody
needs workers.
So Dr. Holtz-Eakin, how would increasing the minimum wage
to $15--I guess I have two questions. One, how in the world do
you live off $15 in Washington D.C.? I mean, I spend 36 weeks
up here. This is the most expensive place to live I have ever
lived in my life. I mean, you look at Georgia and the cost of
living in Georgia. I mean, it is maybe a third of Washington,
DC. based on my experience.
So how can you just blanket the country with, say, you
know, like in Washington, DC, maybe the minimum wage should be
$30 an hour. Who knows? I mean, why stop at 15? I mean, if you
are talking about a living wage based on, in my experience, the
cost of living up here. So No. 1, what do you think it will do
to a State like Georgia with an incredible economy, and No. 2,
how do you, like, divide up the country and say Ok, this is the
blanket policy? Can you answer those questions?
Mr. Holtz-Eakin. Well, first of all, I am not an expert on
Georgia, but I will say that your characterization matches the
data for the U.S. as a whole where we do have more openings
than unemployed as I mentioned in my opening Statement. That is
the market's way of raising wages, and wages are rising. Our
best measure of real wage growth is the employment cost index,
kind of a nerdy thing you don't need to know. But if you look
at that, it was growing about 1 and a half percent a couple
years ago. It is now up to three. It is doubled.
And so we are seeing real wage growth, wages above
inflation start to move, and that is a valuable thing. That
happens at different rates across the country because we have
different economic labor markets. There are hundreds of local
labor markets in the United States. Tailoring a policy to
Washington, DC. will destroy the State of Georgia, and we
shouldn't do it that way, and I think that is one of my biggest
concerns about this is it is a dramatic increase, and it is
nationwide.
Mr. Allen. It is like, you want do level the playing field
across the country and penalize a State like Georgia, you know,
like I said. And like I said, there is no way you can live off
$15 an hour, and my only experience is here in Washington. I
don't know what it would be like, say, in other large cities,
but--
Mr. Holtz-Eakin. You do want to level the playing field in
the sense of giving everyone the same opportunity.
Mr. Allen. Right.
Mr. Holtz-Eakin. The trouble is having the same minimum
wage makes sure that is not level, and that is what I am
concerned about.
Mr. Allen. Well, I ran a small business for 35 years, and
of course, right now we are looking for people. We have no one
on our payroll that is making less than $15 an hour. And of
course, we are recruiting the best and the brightest, and we
don't mind paying more for the best and brightest because they
are more productive and tend to be more passionate about their
work and that sort of thing, so--
Well, thank you again. You know, I don't think this one
size government program fits all is the answer. I think we have
got to look at it city by city, but again, we have got to keep
the economy growing. Thank you very much, and I yield back.
Chairman Scott. Thank you. The gentlelady from North
Carolina, Dr. Adams.
Ms. Adams. Thank you, Mr. Chairman, and to the Ranking
Member as well. Let me thank all of the witnesses for your
testimony today, and Mr. Wise, thank you for sharing your
story.
A couple of months ago we were scheduled to have a hearing
on how terrible it would be to have a $15 minimum wage. I sort
of agree with my colleague, Mr. Allen. I would go for the 30.
It was fortunate--it was unfortunate, though, that hearing was
canceled because we had hard-working folks from many of our
service industries in Washington that day, all fighting for $15
because they know that $15 is the bare minimum an individual
must earn to raise a family today.
And I was able to meet with many of them that day, and I
met many of them throughout my legislative career, and these
workers, as Mr. Wise has said, work two and three jobs to feed
their families and still, it is not enough. Working hard is not
enough if you don't make enough, and on 7.25, you can't
survive.
I remember in 2006 when I fought for the minimum wage to be
raised from $5.15 to $6.15 in the North Carolina General
Assembly. I fought 9 years to get that done, and it is pretty
shameful today that 12 years later, the Federal minimum wage
and the State minimum wage in North Carolina has only increased
a mere $1.10.
The question is not does it make sense to increase the
minimum wage to $15. The question is who in their right mind
would disagree? You know, Dr. Spriggs, I have a question for
you. I am interested in why generally wage increases no longer
seem to be tied to worker productivity, and if you can just
briefly describe how the key labor market institutions are
functioning today, I would appreciate that.
Dr. Spriggs. Thank you very much, Congresswoman. We have
tried this experiment over the last 40 years that you don't
need a minimum wage, you don't need unions, you don't need any
of the labor market safeguards and institutions we put in place
at the time of the Great Depression where we learned that real
wages can fall.
The problem today is we are now 10 years into the--almost
10 years into the recovery. It is been 9 years since the labor
market started this string of consecutive job growth, and yet
it is only now, only now that real wages are rising and really
only because inflation was negative at the end of the quarter.
So the lack of a floor affects workers because increasingly
economists have come to understand that competitive firms don't
really face a flat wage curve. The belief that employers can
hire as many workers as they wish at a flat wage is not true.
They face an upward sloping demand curve which means, and from
an economist perspective, they act like a term that you might
be familiar with, the monopsony which means that the market
wage should be higher in order to be closer to what the
clearing wage would be.
And those firms are, in fact, hiring fewer workers than we
would expect in a competitive environment. That is why when we
do experiment after experiment and we analyze this, we simply
don't see the negative wages. And workers who are unionized
simply run into a stonewall because firms know that the respect
is not there for bargaining for higher wages, and so we have
not been able to see wages rise that much even in the
bargaining sector.
Ms. Adams. Can you speak briefly to the importance of
indexing wage increases and elimination of subminimum wages in
addressing weakened labor market institutions?
Dr. Spriggs. In the past, when you look at the increases in
the minimum wage, it was one of the charts that was put up
before. You saw that even though Congress wasn't consciously
doing it, it was raising the minimum wage in line with
productivity and in line with the median wage and in line with
the poverty level. When that consensus broke in 1969, you saw
these things move in all sorts of different directions.
And so the purpose of indexing is because it has become
increasingly difficult now that everyone does not agree that
work pays and all work is dignity. It has become such a
political item that it is necessary to put in the indexing
because before this was not partisan. Republicans overwhelming
agreed with Democrats. The whole country agreed work has to
have dignity, and work must pay. That is an American value.
Ms. Adams. Absolutely. Dr. Zipperer, just quickly. If the
wage had kept pace with how productive workers are on the
whole, how much would it be today?
Mr. Zipperer. If the wage had kept pace with labor
productivity over the last 50 years? If the minimum wage had
kept pace with labor productivity over the last 50 years, the
minimum wage today would be closer to $20 an hour.
Ms. Adams. Thank you, sir.
I yield back, Mr. Chair.
Chairman Scott. Thank you. The gentleman from Michigan, Mr.
Walberg.
Mr. Walberg. Thank you, Mr. Chairman, and thanks to the
panel for being here.
Recently my office received a letter from Daniel, a
constituent in my Michigan district, who has worked in the
restaurant industry as a bartender for over 20 years. He
described how he has the potential to make well above the
minimum wage with the tips and appreciates the freedom that the
restaurant industry provides to move to different restaurants
at significant increases and security that can best meet his
personal needs.
Dr. Holtz-Eakin, this Raise the Wage Act would eliminate
tip credit, as I read it, requiring all employers such as these
restaurants where Daniel works to pay cash wages equal to that
of the full minimum wage. What effect do you believe this
policy will have on the take-home wages of Americans like
Daniel who work in the restaurant industry?
Mr. Holtz-Eakin. So it is a good question. I think there
are two possibilities that jump out. The first would be by
forcing the equalized the minimum wage. You are raising the
cost of labor for that establishment, and the worst-case
scenario is that Daniel no longer gets to tend bar, and if he
can't find another job, that his take home pay is undeniably
diminished. He might have to take another job somewhere else
and hopefully be Ok. But that is one channel.
The second is that the tip--you know, if it becomes known
that he is being paid, people stop tipping, and to the extent
that happens, he may not come out ahead. He may come out
behind, but those are the two channels that would be in play.
Mr. Walberg. It takes away that flexibility and security to
a great degree of being able to know that if I go to another
restaurant that has a larger clientele or whatever else, it
could impact me at the tip credit as well.
Mr. Holtz-Eakin. It is in a small way a little labor market
where, you know, there is a return to his skills, his service,
his productivity, and the better he is, the more tips he will
get, and this breaks that link as well.
Mr. Walberg. In looking at what has happened to restaurants
and other businesses in cities that have eliminated the tip
credit, what has been the outcome?
Mr. Holtz-Eakin. I will have to get back to you on the tip
credit, per se. I don't have that at my fingertips. I will just
note that I think the restaurant industry is the one that jumps
out as a concern in the Raise the Wage Act. You know, in my
testimony I showed some of the historical evidence from 2014
and 2015 where we looked at what happened to restaurant
employment in those municipalities that raised their minimum
wages versus those that did not, and it is right in the data.
The employment growth just slows down, and this is at a
time when we are starting to see the economy finally ramp up.
But I am afraid this act would repeat that in a much bigger way
for the Nation as a whole.
Mr. Walberg. Does any data show that the tip credit really
allows workers to earn less than the minimum wage?
Mr. Holtz-Eakin. The law says they can't earn less than the
minimum wage. I am sympathetic to Dr. Spriggs' observation that
compliance is an issue. I am not a compliance expert, but I
would take those comments seriously and make sure that we have
things that are--effective laws that can be monitored and
enforced.
Mr. Walberg. Ok. Thank you. I yield back.
Chairman Scott. Thank you. The gentleman from New Jersey,
Mr. Norcross.
Mr. Norcross. Thank you, Chairman, Ranking Member, and I am
here proud to cosponsor along with the chairman the Raise the
Wage Act, but I want to start out by thanking the witnesses,
but particularly those behind you who are the real faces of
minimum wage, and certainly that is the reality.
So let's talk about myth versus reality. 1950. Minimum wage
was increased by 88 percent. Unemployment decreased. The stock
market went up. Thirty years ago the CEO made 30 times the
average worker. Today, the CEO makes 347 times. That is the
reality of what is going on.
Mr. Chairman, this is America. You work hard, you play by
the rules, you are supposed to be able to make it. Right now,
that is not the case. It has been 11 years since we voted, 10
years since that raise went to the minimum wage. We do need to
raise the wage, and I reach across the aisle because what
happened last time, 348 votes in the house, that was
Republicans and Democrats.
Eighty votes in the Senate to raise the minimum wage. We
can do this because you know it is the right thing to do. It is
predictability. It is not $15 an hour tomorrow. This is over
years that this comes in. I worked for minimum wage. I was a
single dad trying to raise my kid. I know it was tough. Today,
it is impossible, but I will tell you that if the minimum wage
kept up with inflation and productivity, it would be $18 an
hour. That is the path that we follow that if you work hard,
you play by the rules, that the boss doesn't keep everything,
and that is what we have seen happen. But the real surprise is
not that you can't make it, but you don't even come close, do
you, Mr. Wise? You don't even come close.
But the remarkable thing, to my colleagues, raising the
minimum wage to $12 would reduce government spending on
entitlement programs by $17 billion. People want to work. They
want to be able to provide their family. They want the dignity
of going to work each day, but they need to be able to make it
in this country. I am so proud to say my Governor signed in the
$15 an hour wage predictability over the next 6 years. It is
not happening overnight. Let's think about it. If it has been
10 years and it is going to take us another 6 years, that is 16
years to raise the wage to $15 an hour. It is not this
overnight crisis that they are trying to build.
My friends here in Washington, please. It is time to wake
up. We took care of the CEOs for you who voted for that tax,
1.3 trillion to that top 1 percent. It is time to help these
people, the ones that vote in your districts, the ones who need
it.
Mr. Wise, why are you here today advocating on behalf of
the minimum wage? Why is this important to you?
Mr. Wise. Well, you know, it is like you said, and that is
what my mom told me. She told me work hard, be a good citizen,
and everything will be Ok. That is what Mom told me, and I
thought that would be the case. I worked hard, doubly hard, two
jobs to try to provide for my three girls. When I had to start
skipping meals, you know, substituting sanitary products for my
daughters, making them use tissue, just doing anything to
survive and get by even though I was doing everything right,
everything Mom said, but it was obviously something terribly
wrong.
And I know that my fight doesn't end today here in this
building. I have got to continue to fight in my city and all
across the country until every worker is earning a living wage,
and not only that, until we can work to get legislation to
create an easier environment for us to have a union and be able
to have collective bargaining, a seat at the table. So this
fight is something that I have been waiting on my whole life.
This is a way we have got to change this country. There is no
individual solution to social, economic, and political
problems.
So I have been able to come together with my coworkers from
not only Kansas City but across the country to change the
narrative in this country. Before we organized 6 years ago, no
one talked about wage inequality. Nobody talked about unions. I
wasn't taught this in school, but I have been able to learn
through the movement that this is what it is going to take, me
and my coworkers behind me continuing to stand together and
tell our stories because it is real, and this is how we live
every day.
Mr. Norcross. Thank you, Mr. Wise.
Please. Let's work together. Let's take care of all
Americans. Let's give them a chance to have the dignity of the
American dream, of being able to make it because you are doing
the right thing. I yield back.
Chairman Scott. Thank you. The gentleman from Texas, Mr.
Wright.
Mr. Wright. Thank you, Mr. Chairman, and thank all four of
you gentlemen for being here today. Dr. Holtz-Eakin, you made a
point earlier that is worth repeating, and that is that this is
not about compassion, and, indeed, it is not. In fact, what is
before us today is a very poor measure of compassion because we
have to be concerned about the unintended consequences of this
bill just like we should be with every bill that we discuss and
vote on.
Raising the minimum wage is great for people who get to
keep their jobs, and of course, that is the concern is the
effect it will have on jobs because we are not talking about
merely raising the minimum wage. We are talking about doubling
it. That is a shock to the system of any small business, any
small business owner, and they have to make that calculation.
They have to balance whether they can keep all the jobs they
have or eliminate jobs in order to accommodate a sudden, what,
100 percent spike in their wages they have to pay.
So we have to be concerned what effect this is going to
have, and we have already discussed--I had some questions about
rural versus urban, and you have already discussed that because
I have both in my district. What I am concerned about, though,
and is the studies that show, what impact doubling the minimum
wage would have in terms of business closings, not just
employee reduction. Do you have any information on that?
Mr. Holtz-Eakin. I don't have a specific estimate of that.
I think again, one of the concerns is that this is an
experiment that has never been run. We have never doubled the
Federal minimum wage. We are trying to learn from other things
that were far more modest. They happened in a locality or a
State, smaller at the national level, so but there is no
question that one of things you would expect to happen is for
those firms with thin profit margins, that they in the end may
just not be able to make it, you know, and they will close
their doors. And I don't--I have little question about the
direction. I don't know the magnitude.
I think the other thing to think about with that this is
different and important is that yes, it is over a number of
years, and it is laid out in the act. That means that right
now, those firms know, they can look forward with complete
certainty that these low-skill, low-experience workers are
really expensive, and they will stay expensive forever because
it will be indexed at the end, and they will find ways to stop
having counter service and automate things in ways that we have
seen in other parts of the economy. It will just accelerate
that. And so the jobs won't just be lost for a moment. They
will be gone.
Mr. Wright. Right. Well, I want to repeat what has been
said before, and that is that all of us up here share the same
goal in terms of wanting to increase the livelihood of
Americans, expand economic opportunity and progress for
Americans, but I don't believe doubling the minimum wage is the
right way to go.
Thank you, Mr. Chairman, and thank you, Dr. Holtz-Eakin.
Chairman Scott. Thank you. Thank you. Did you want to
respond to that? Ok. Thank you.
The gentlelady from Pennsylvania, Ms. Wild.
Ms. Wild. Thank you, Mr. Chairman. Thank you all for being
here, and thank you to all of you who are here as witnesses to
this.
It is such an important issue, and it is one that I, as a
freshman legislator, campaigned on, to raise the minimum wage,
and I feel very deeply that we should. I am from Pennsylvania,
one of the 22 States that still has a minimum wage of $7.25 an
hour. So as I understand it, Mr. Wise, you are a little bit
ahead of us in Missouri. I guess you just raised it up to $8.60
an hour, is that correct, from $7.85 an hour last year? So
Missouri was still ahead of Pennsylvania with our $7.25 an hour
minimum wage.
Mr. Wise. That is correct.
Ms. Wild. Well, Mr. Wise, let me just say this, and I am
going to talk kind of quickly because I have a lot of things I
want to say or to ask and only a limited amount of time. I
really appreciate your courage and your willingness to be here
today and to talk so candidly about your own experience and
your family's experience. It is not an easy thing to do, and I
recognize that. I also admire your fortitude and your
commitment to your family. And I admire that you are engaging
your daughters in activism and helping them to understand what
it means to fight for social justice, so thank you for all of
that.
We just talked a minute ago about the minimum wage in
Missouri which I understand is $8.60 an hour now, and if I may,
how much are you now earning at McDonald's?
Mr. Wise. Well, after 20 years in the industry, I do make
$11 an hour at McDonald's.
Ms. Wild. Ok. Twenty years in the industry. And you know,
my colleague, Mr. Allen, made a reference to your passion for
the fast food industry. Would I be correct in assuming that it
is not so much a passion for the fast food industry as it is
the only job that you could get when you had to drop out of
school to help support your family?
Mr. Wise. Well, that was the opportunity I had at the
chance, you know. All labor has dignity. My mom worked for the
company Hardee's for 30 years. She enjoyed her work. I enjoy my
work.
Ms. Wild. Good. I am glad to hear that. Now, there was also
a reference made to tractor-trailer operators making $80,000 a
year and so forth. Have you ever explored other opportunities
such as driving a truck?
Mr. Wise. Well, you know, when I worked--and many Americans
work doubly hard. For example, I worked Monday 4 p.m. to 11
p.m. and had to be right back up Tuesday morning at 4 a.m. to
return to work, so there is no flexibility in scheduling. I
work very hard, and there is really not time, you know, to go
back to school, to search that extra education. And the last I
checked, it is really not free in this country.
Ms. Wild. Well, and that is where I was going with that
line of questioning, and it is as much a Statement as it is a
question. For you to pursue something like a tractor-trailer
position, aside from the fact that it would take you away from
your family, it would require additional training and time that
you don't have, correct?
I ask these questions not in any way intended to embarrass
you. Do you and your family rely on any form of public
assistance?
Mr. Wise. Well, currently, Medicaid. My daughters have and
my fiancee did while she was pregnant with my last child, but
she doesn't any more. And we were receiving stamps up until a
few years ago, but they said that we were making too much, and
those got cut. But we still do rely on Medicaid, food pantries,
any way to get by.
Ms. Wild. And how many hours a week are you working?
Mr. Wise. Me, right now, I work just at McDonald's but I
work over 50 hours a week, you know.
Ms. Wild. And what about your fiancee? How many hours a
week does she work?
Mr. Wise. Well, she is a home healthcare, and she works
four 12s, so 48 a week.
Ms. Wild. Ok. And you told us when was the last time you
got a raise?
Mr. Wise. Oh. Oh. Well, it has been a while.
Ms. Wild. Ok. You have told us you have been in the
business for 20 years. When is the last time you--ballpark it.
When is the last time you got a raise?
Mr. Wise. About 3 years ago.
Ms. Wild. And you are at $11 an hour now. Ok. So I am going
to turn the my attention to Dr. Holtz-Eakin in my last 30
seconds here. Dr. Holtz-Eakin, what would you propose to Mr.
Wise as to what he should do to lift his family out of
generational poverty?
Mr. Holtz-Eakin. I don't have specific career advice for an
individual. The decision in front of the committee is whether
to do the Raise the Wage Act, and I would simply argue that it
is more likely to damage his prospects and people like him than
to help on average, and that seems unwise. This is a compelling
story. It can be played out in even greater numbers if the
wrong policies are put in place. That seems unwise to me.
There are other things that we have done, earned income tax
credit that I mentioned, that have both promoted work and
targeted effectively on those in poverty who are working,
clearly the case with Mr. Wise, and thus allowed people to
work, allowed them to be above the poverty line that were very
successful. Those would be the subject of attention, I would
think, not this.
Ms. Wild. But you would agree that Mr. Wise's story is just
one of hundreds of thousands across the country of people who
are working more than full-time hours and are living in
poverty?
Mr. Holtz-Eakin. Mr. Wise's story is one of millions of
labor market stories, and I guess it comes as a perception that
somehow I don't care about those stories when you look at the
data. The data give voice to all those stories simultaneously.
They tell us on average how things will work out. They will be
worse, not better. I don't want that.
Ms. Wild. I am sure Mr. Wise will advise his children about
that data.
I yield back.
Chairman Scott. The chair recognizes the gentleman from
North Carolina, Mr. Walker.
Mr. Walker. Thank you, Mr. Chairman.
Mr. Wise, I first want to say how much I respect the
willingness to be vulnerable like this in a National forum. I
also admire the fact of how intricately involved you are in
your daughter's life. The line that jumped out at me, I believe
that you said earlier, was all work has dignity, and I
certainly agree with that, and thank you for your courage and
being here today.
Mr. Holtz-Eakin, I have a couple questions for you if I
could get to that. I believe our colleagues have proposed--I
think the number comes down to about a 107 percent increase in
the minimum wage. What percentage was the minimum wage
increased by the last time in 2007? Would you have those
numbers?
Mr. Holtz-Eakin. I don't have them in front of me, but it
is much, much lower. I mean, it was about a $2 increase.
Mr. Walker. Ok. So percentage wise, it is about 40, 45
percent, somewhere in that range. Would you say there were some
disruptions in the labor market immediately following the
minimum wage increase, and could you take just a few seconds or
a minute to describe those for us?
Mr. Holtz-Eakin. So that minimum wage increase was
implemented during the depths of the Great Recession and the
early parts of the recovery. If you look in the data, teen
unemployment is markedly higher there. I think there is little
reason to doubt that is, in part, attributed to the minimum
wage increase, a weak economy, very, very few skills in that
population. They didn't get hired.
Mr. Walker. Back in my home area of Greensboro, I think of
my friend who has a yogurt shop there in Northern Greensboro.
It is not his primary source of income because they just kind
of break even, but he has about six to eight individuals who
make around $8 to $10 an hour. It is basically an after-school
for some younger people to be able to have some time. I think
he even has some of his family members just to cover some
shifts there. I know this , and I have talked with him about
this, if they were to go to $15 an hour, he would be defunct.
The place would no longer be in business. If we were to move
forward on such standards that are suggested, do you think that
there would be a drastic change to specifically the labor
market if this was to be adopted?
Mr. Holtz-Eakin. This is, I think, a recipe for very few
opportunities for the younger, less skilled, less experienced
workers, and that first step on the job market ladder of
success is an incredibly important one, and I think that is
something to be deeply concerned about. As I mentioned in my
opening, I think it has been underappreciated what went on in
2018. The fact that the economy, having already reached low
levels of unemployment, could pull so many people into the
labor market and into employment, over 200,000 jobs a month,
means that we were taking people who had given up, who had no
attachment to work, and now they have one. Anything that does
that has great long-running success. This might do the reverse.
Mr. Walker. Well let's speak, then, on the younger people.
I remember my first job there in my small town in Milton,
Florida. I worked at the Piggly Wiggly grocery store for $3.35
an hour. I did get wise to who might tip me $0.50 for carrying
their bags out back when you could do that. To add or pad that
a little bit.
What kind of benefit is it to some of our younger people to
be able to develop these entry-level skilled positions or even
those skilled positions? Can you speak to the generalization of
that? I know that is not a hard data point, but do you have any
evidence supporting that?
Mr. Holtz-Eakin. We know that work is good for people.
People want to work. They feel better when they work. There is
an enormous amount of on-the-job skills that are learned,
especially early, and those skills are general skills that
transfer from job to job. So getting people in, acquiring those
skills is a very important part of the labor market dynamics.
Mr. Walker. And one potential effect of more than doubling
the Federal minimum wage is that small businesses will simply
close the doors as I have mentioned. This is extremely
concerning to me as we have over 890 small businesses in North
Carolina alone employing about 1.6 million workers.
Any evidence showing that increasing the minimum wage to
$15 could possibly lead to some of these businesses closing
like the one that I mentioned. Do you have other evidence to
support that?
Mr. Holtz-Eakin. I would be happy to get it back to you
with as to estimates. That is an important dynamic. I think it
is especially important right now. One of the characteristics
of the U.S. economy is that we have seen fewer business
startups than historically. Indeed, a couple years back,
business startups fell for the first time below business
closings. That lack of dynamism I think is troubling. We don't
want to get in the way of that.
Mr. Walker. And I think we all should be sensitive to some
of the families and with Mr. Wise's situation, people that
there is a gap that cut through here, and our heart goes to out
to them. The financial crisis, as a former pastor I can tell
you I have witnessed it firsthand. But I worry about this one-
size-fits-all where even some of these proposed minimum wages
are even standard of living in places like New York and Boston
and other places.
And with that, I will yield back to you and I will close
out. Yield back to the chairman.
Mr. Holtz-Eakin. I guess the one thing I would note for
this committee, especially this Committee on Education and
Labor, the troubling data point in my mind is the fact that if
we look at our National Assessment of Education Progress, the
NAPE scores, we have got somewhere between a quarter and a
third of fourth and eighth graders who aren't reading at grade.
They are seriously deficient, and they can't do math at grade.
They are seriously deficient. If you want to have a recipe for
a big problem going future, let that continue. That is a
problem.
Chairman Scott. The gentleman from Michigan, Mr. Levin.
Mr. Levin. Thank you, Mr. Chairman.
Dr. Holtz-Eakin, I am glad to hear you are in favor of a
massive investment in public education. That would be great to
raise those scores.
Mr. Chairman, if it is all right, I would like to submit
for the record a letter from the AFL-CIO legislative director,
Bill Samuel, about our hearing topic today.
Thank you.
Chairman Scott. Without objection.
[The information follows:]
[GRAPHIC] [TIFF OMITTED] T5268.089
Mr. Levin. Thank you.
So I appreciate all four of you coming. I have learned a
lot listening to you.
Dr. Holtz-Eakin, I wanted to ask you, you have been a
professor and worked in government so many distinguished
contributions, have you ever written in favor of raising the
minimum wage at any level, written a paper, published a paper?
Mr. Holtz-Eakin. No.
Mr. Levin. You have never supported raising the minimum
wage?
Mr. Holtz-Eakin. I have never written a paper on that, no.
Mr. Levin. Ok. What do you think the ideal minimum wage is,
or should there be one at all? Perhaps--it is a perfectly
legitimate position--just leave it to market forces, would that
be your position?
Mr. Holtz-Eakin. I would prefer to have subnational minimum
wages which are tailored to the labor market conditions where
people are actually working. So I have lots of reservations
about any number for the Federal minimum wage. It doesn't match
any labor market.
Mr. Levin. Even $5 an hour, say, $2 an hour?
Mr. Holtz-Eakin. We are already at 7, so 5 would be fine.
Mr. Levin. Were you opposed to going to 7?
Mr. Holtz-Eakin. I didn't have an opinion on that debate,
to be honest.
Mr. Levin. You didn't?
Mr. Holtz-Eakin. I was not at this table and was not asked.
Mr. Levin. I know you weren't at this table, but you are an
important thinker on these. I am being, in all seriousness, I
am just trying to understand.
Mr. Holtz-Eakin. I know. I am being serious too. I am not a
fan of minimum wage increases for the reasons I explained at
the outset.
Mr. Levin. Thank you. That is what I thought.
Mr. Holtz-Eakin. And--no, it is this and this very
particular thing: If you do it, the best possible outcome is no
harm. The only debate we have is over how much harm. And the
nature of that harm is to take money from people who don't have
a job and give it to people who do have a job. I don't think
that is right.
Mr. Levin. I don't think the data support that, but I
appreciate your point of view. In fact, in 1949, according to
Dr. Spriggs' figures, we raised the minimum wage by 88 percent
and 91.4 percent of Republicans voted in favor of that. So we
have raised the minimum wage significantly before.
In this case, we are talking about raising it over a 5-year
period. So the notion that my friends, some of my friends on
the other side of the aisle talking about a shock, this
immediate thing of doubling the minimum wage, that is factually
completely inaccurate. That is not what we are proposing.
We are proposing raising it to get it back toward what it
was, not toward what it was as a percentage of productivity,
but at least toward what it was in dollar figures, close to
what it was in earlier times.
Mr. Wise, I really was interested in something you said a
couple of times about you are not just here advocating for a
living wage for your family, but also for the freedom to form a
union. Could you explain that a little further?
Mr. Wise. Well, yes. It is kind of like, you know, you get
more done together than you can alone, and that was evidenced
in my life. Like I said, I have asked the boss for a raise in
the nicest ways for years, tell him I need benefits for years,
and it just falls on deaf ears.
And not only that, but when you look back at American
history, when we join a movement we learn about history. We
know that for women to get voting rights, they had to come
together collectively. Any labor laws that we want or any
advances in the labor movement, we had to do it together. To
end slavery, it took a movement, civil rights movement, to
improve the lives of people in this country.
And that is what it is all about. And that is what I like
to instill in my daughters as well, that we get more done
together than we can alone, and we can go so much farther as
long as we stand together. And a union, you know, going to work
every day now is like going into a dictatorship, you know. I
have no voice, no opinion.
I can remember the first job at Taco Bell, we at least had
a comment box. Now those have all but been eliminated from the
workplace. So to be able to come together and have a seat at
the table with my employer where we can negotiate healthcare
and wages. That is the benefits of a union.
Mr. Levin. Thank you so much for coming today and for
speaking the truth for your leadership on this national stage.
The truth of the matter is that we need to raise our wages for
everybody to a basic level of dignity, but unless workers have
the power and the freedom to form unions in this country, which
they don't today, we are at 6 percent of the private sector
being unionized, we will never raise the standard of living for
the middle class in this country.
And I just want to point out that people have this idea of
a lot of workers in my area, auto workers, it is like, you
know, they represent the sort of middle class of working class
people getting a piece of the middle class. A hundred years
ago, when auto workers were in the same fight you are now, my
friend, they were poor workers in incredibly unsafe jobs, and
it was only by coming together to form a union that they got
their little piece of the middle class. So keep on speaking the
truth, and thank you so much for your testimony.
I yield back, Mr. Chairman.
Chairman Scott. Thank you.
The gentleman from Tennessee, Dr. Roe.
Mr. Roe. Thank you, Mr. Chairman. And thank all the
witnesses for being here, and I appreciate that.
In our State of Tennessee, we recognize that we think the
way out of poverty are skills. In our State, we provide free
community college and free technical school. Anybody there. And
if you have lost your job and you want to get educated, we have
a Tennessee Reconnect, where you can go to community college or
you can go to a technical school. We have 27 of them in the
State for free.
So that is one of the ways we are attacking this low wage.
And what I have seen in my district is I think it is going
away, the minimum wage issue and debate. Right now we have a
lot more job openings than we do people filling those jobs even
where we are. And there is a help wanted sign literally
everywhere.
And I just looked the other day for H2 workers around the
country, H2A workers. The highest is $15.03. That is in
Washington State. The national average is almost $13 an hour.
And in my district, it is $11.74 an hour. That is now. Five
years from now, it is going to be $15 an hour. There are fast
food restaurants in my area that are paying $15 an hour today.
I can get you a manufacturing job in my hometown today if
you are willing to work and you can pass a drug test for $19 an
hour. And the skills gap that Dr. Holtz-Eakin is talking about
is where one of the biggest problems are, low-skill workers who
don't have those skills.
I looked up a couple things. I think the minimum wage $15
an hour may be very appropriate. It could be even more if you
lived in San Francisco. And I just did a few calculations while
we are having this. The median price of a home in San Francisco
is $1.4 million.
Let me run down where I live. I live in the wealthiest
county in my district, and the median price of a home is
$148,000. Seattle, $725. I have got a town I represent where
$90,000 is a median price of a home. Fifteen dollars an hour
there is totally different than $15 an hour in New York City or
San Francisco or in Bend, Oregon, where it is $433,000 for a
home, or Portland where it is $449,000 for a home.
So I just looked those numbers up just a moment ago. In
Kansas City, it is $147,000, a little cheaper place to live
than Washington or these other places.
And if my colleagues on the other side of the aisle are
willing to do this, I am more than willing to look at a minimum
wage if you will look at the Medicare Wage Index, where the
Federal Government says it is Ok to pay me and my hospital
where I live 73 cents on the dollar and pay people in
California $1.50 to do exactly the same thing.
The government is already making a difference in what they
pay, depending on where you live. So it makes sense to let
local communities decide those things, based on the economic
conditions in that community.
I would like to yield to Dr. Holtz-Eakin, if he could
comment on that.
Mr. Holtz-Eakin. I would comment on two things: First, I
commend you for your discussion about the community colleges.
There is an enormous amount of evidence that is a relatively
low-cost, very valuable way to go in getting workers new skills
or skills to begin with. And I think that is something to think
about more broadly for the U.S.
And then I have said this many times today, I won't belabor
it, there are hundreds of local labor markets that are very,
very different, and to just jack up a national average to $15
is going to dramatically impact some of them, because it is
inappropriate.
Mr. Roe. And I agree with that. And I think where we are, a
wage, a minimum wage, there is no question, to hire qualified
people, you have to pay more than $7.25 unless it is a high
school student that is just entering the labor force.
And I think the other thing that I took a little bit of
offense at today is I have been an employer my entire life, and
I didn't keep everything. I provided health benefits and
retirement benefits because why? The most valuable person in my
business were my employees. They were the most valuable person
I had. I value them. Right here in this U.S. Congress where I
hire people, the most valuable people are my employees who work
with me every day.
So I certainly know if you have got a good employee, that
is the most valuable person in there and you are going to pay
them what you can afford to pay them to keep them in your
business. And with a growing labor market, they have more
options, and that is a good thing when a person can go from one
job to another and transport and make more money, and that is
what we are seeing right now and it is about time for middle
class working people--and I grew up in that kind of family, my
dad was a factory worker and my mother was a bank teller--to
see wages going up for middle class people.
I yield back.
The Chairman. Thank you. The gentlelady from Washington,
Ms. Jayapal.
Ms. Jayapal. Thank you, Mr. Chairman. And thank you all for
being here.
I am from Seattle. I proudly represent the district that
passed the highest minimum wage in the country. I was on the
committee that wrote the legislation. I have heard testimony
for years similar to some of the testimony we have heard here.
And I want to start by saying none of that would be possible
without the work of people like Mr. Wise and all of the people
that are in the room that have been on the streets, that have
been in your employer's workplaces demanding a $15 minimum
wage. That is where the energy has come from.
I also want to say, Dr. Spriggs, that we are proud in
Washington State to have one of the highest minimum wages in
the country indexed to inflation, going all the way back to
1998. And from 2001 onwards, we have indexed our minimum wage.
And that was part of--that was really the product of a strong
labor movement.
So you articulated so beautifully why it is important to
have collective bargaining, to have organizing, in order to
really work with employers to make sure that workers who are
driving profits--because let's be clear about where profits
come from, they come from workers who drive those profits--are
rewarded for that.
So, Mr. Wise, I just wanted to give you a little bit more
of a chance to talk also about your colleagues. You have spoken
so beautifully about your own situation. Tell me if that
experience reflects what your colleagues are also feeling at
McDonald's?
Mr. Wise. It has. And I can tell you even before this
moment and before the movement, you know, I would work every
day with my colleagues and we would share the same stories of
how we struggle to pay bills, come to work depressed because
the gas is up, you know, skipping meals, the same thing.
Whether it was Suzy, my Hispanic coworker, Ellen, my white
coworker, me myself, we all were going through the same trials
and dilemmas. And we all did what? Woke up every day and went
to work. It is not like we weren't working hard.
And another thing I looked around, the myth of this being
jobs for teenagers. These are McDonald's workers with me here
today. We are hardworking adults raising families, you know
what I am saying? So it was no way, no individual way to fix
the problem by ourself. We would just soak in it and go to work
and take it. But we figured out quickly that when you can
organize, come together and amplify your voice, you know, act
like a union even before we win our union, we were able to get
things done. We were able to change the narrative in this
country.
Like I said, 6 years ago we started hearing about 15. That
number 15, Amazon and everyone else you hear, it just didn't
come out of thin air. These employers didn't wake up oneS day,
you know what, let's go 15. That is because of what workers in
this room and myself have been doing to change the narrative
around the country.
Ms. Jayapal. Thank you so much, Mr. Wise. And I would just
say that the argument around youth employment has been proven
false over and over again. When we have the debate in
Washington State, the reality is the majority of minimum wage
workers today are not teenagers, and I think it is exactly what
you said.
I wanted to just say to Dr. Holtz-Eakin that you quoted a
study on Seattle and the effects of the minimum wage increase.
Are you aware, Dr. Wise that study--I assume you are quoting
the study from 2017. Are you aware that the exact same
researchers put out a study a year later that countered
everything that they said, almost every everything that they
said in the 2017 study? And just a yes or no or is fine,
because I want to go to Dr. Zipperer.
Mr. Holtz-Eakin. I would disagree they countered
everything. I know there is another study.
Ms. Jayapal. Ok. So there was another study done by the
same researchers that had substantially different results than
that first study. So, Dr. Zipperer, can you speak to what the
research shows around the effects of the Seattle increase in
the minimum wage?
Mr. Zipperer. I think there is a study that you are
referring to or a set of studies by the researchers at the
University of Washington. And, like I mentioned earlier, I find
both sets of those studies to be completely uninformative about
the consequences of the Seattle minimum wage. Those studies
find that there are large negative consequences to employment
of certain groups of workers and--
Ms. Jayapal. You are talking about the 2017 study?
Mr. Zipperer. About the 2017 study.
Ms. Jayapal. But can you speak about the most recent
research that actually counters that and shows that our minimum
wage in Seattle has actually increased wages for people that
were earning the minimum wage?
Mr. Zipperer. The second study that you referred to put out
by those researchers found that workers who had jobs prior to
the minimum wage increase benefited tremendously from the
minimum wage increase, and that they saw higher earnings
overall and did not see increased chances of disemployment.
Ms. Jayapal. Thank you. Let me just mention that we talked
about the tip penalty. That is what I call it, the tip penalty,
because part of what happens is that workers who are under a
tip, as Dr. Spriggs said, are subject to all kinds of issues;
but in addition to that, it is front-of-the-house workers
versus back-of-the-house workers when you talk about tips.
And so I think we are going to talk about this on the next
panel, and I have many more questions and things to say, but I
see that my time has expired, Mr. Chairman, so I will yield
back.
Chairman Scott. Thank you.
Mr. Meuser from Pennsylvania.
Mr. Meuser. Thank you, Mr. Chairman. Thank you, Dr. Foxx.
Thank you all for testifying. We appreciate it.
The former Governor of Indiana, Mitch Daniels, had a
saying, and it was: My job is to grow the disposable income of
Hoosiers. Governor Daniels had that quote put up actually on
the door of each of his Cabinet Secretaries' offices. When I
served as Revenue Secretary for the Commonwealth of
Pennsylvania, I truly shared this vision, and spoke to my
department and other Cabinet members about the importance of
that role.
Government does have a responsibility to help competitive
businesses and their families flourish by creating an
environment for opportunities for all Americans to achieve
economic prosperity and help improve family sustaining wages.
However, history shows and data that I review proves that when
government takes an overreaching posture, there are,
unfortunately, unintended consequences.
So I will start with Mr. Eakin. A $15 minimum wage would
have the largest impact on small businesses and on young people
entering the job market, 2.6 percent of employees at small
businesses earn the minimum wage. Large businesses, it is a
little bit less, 1.5 percent.
I represent a rural, hardworking district in Pennsylvania
with thousands of small family businesses. I fear that these
small businesses in my district would be negatively affected in
the event that a $15 minimum wage was implemented.
As someone who helped myself grow a small business into a
large business that has, well, a minimum wage much higher than
the minimum, I think as most companies do, an implementation of
a $15 minimum wage would put tremendous pressure on small
business owners. I would think that the business would first
attempt to raise prices, which is very difficult to do in
competitive markets, global markets.
Next, the company would be forced to cut staff, letting go
of workers who had done nothing wrong. And when that still
wouldn't be enough, business owners would be forced to take
away raises historically given to employees who had worked with
the business for a longer period of time. And then after that,
just be concerned with survival.
Can you outline, Mr. Eakin, how historically small
businesses have dealt with government-mandated minimum wage
increases?
Mr. Holtz-Eakin. You have walked through the logic. It is
the same logic I discussed earlier. There aren't many places to
go. You raise prices, lay people off, don't hire new people,
don't give raises, squeeze your payrolls wherever you can
because you must. And small businesses have the least
capability to survive that, and so, you know, you worry about
the impact on them.
That is part of the cost of this policy. The emphasis has
been on the benefits, but what I wanted to emphasize was if you
have a job and you get this raise, that is the good news. The
bad news is only under 7% of those benefits go to people in
poverty.
And so the notion that this is an effective way to provide
the benefit of poverty alleviation is vastly overstated. It is
a poor instrument for that, and it has significant costs to
sectors of the economy like the small business and sectors of
the labor force who are young and unskilled or least educated.
And that is the unintended consequence that I think has to be
focused on.
Mr. Meuser. Regarding the Seattle study, and it is
certainly quoted often, but not only were there job losses but
even the workers who kept their jobs had their hours cut,
reduced, which more than offset any pay increase.
As a result, my information says the earnings went down
$125 per month for those workers who kept their jobs. Are these
the kind of tradeoffs Congress should keep in mind when
considering an increase in the minimum wage?
Mr. Holtz-Eakin. Yes, absolutely. I do want to say I admire
Seattle because they decided to check on the success of their
policy. I think they are to be lauded for that. And these are
very carefully done series of studies. There are other studies
which can test results. I mean, that is the way you learn. I
applaud that entire effort.
But there is a big difference between Seattle deciding to
do that, praying that I am wrong, those impacts happen to
Seattle and that is their decision. It is very different to do
it at the national level, and that is what is being proposed.
Mr. Meuser. And as well on a national level, the economies
of scale clearly are different from one area to the cost of
living in a city. So that in itself answers doing such a
mandate nationally.
Mr. Holtz-Eakin. I agree.
Mr. Meuser. Thank you.
I yield back my time, Mr. Chairman.
Chairman Scott. Thank you.
The gentlelady from Minnesota, Ms. Omar.
Ms. Omar. Thank you, Chair, and thank you, Ranking Member,
for this important conversation. Thank you to our expert
panelists for having this really important conversation.
As a union member, I fought to make sure that for dignified
work there was dignified pay. And so I wanted to have a little
conversation with you all about what that looks like here and
the moral imperative that we have to make sure that happens.
So, Mr. Wise, thank you so much for your brave testimony
and thank you for sharing your story. I wanted to get on the
record if you knew what the yearly pay for the CEO of
McDonald's was?
Mr. Wise. Yes. He makes over $30 million a year, the CEO.
Ms. Omar. So the CEO of McDonald's gets paid $21.8 million.
Can you share with us what someone in your position at
McDonald's gets paid annually?
Mr. Wise. Not that much. Not even a fraction of that. But I
make $11 an hour at my job currently.
Ms. Omar. So the median pay for a McDonald's worker was
$7,000 in 2017. And that is the pay gap between the CEO that is
making 21.8 to the 7,000 that a worker who has put in 40 hours
a day gets paid. And to me, that just morally does not sit
well.
Dr. Spriggs, I wanted to see if we can talk a little bit
about the type of work. I know my colleague earlier from New
York said something about different types of work and why it
wasn't valuable for everyone to be paid a minimum wage of $15.
Can you walk us through the different kinds of jobs and if
there have been places like Minnesota or Minneapolis,
Minnesota, that has increased the minimum wage or places like
Seattle, if there have been types of work that have shifted out
of that city or that State because of the increase of that
minimum wage.
Dr. Spriggs. Thank you, Congresswoman. I mean, one of the
interesting things about Seattle is that their wage
distribution totally shifted up. And one of the surprises for
the researchers was they anticipated that the way that the wage
would move that nothing would appear above $20 an hour, and
certainly those types of jobs mushroomed. And I think that is
the point. When we raise wages from the bottom, we really
change the way in which the labor market functions to really
allocate workers more fairly.
A large share of the minimum people who would be affected
by this wage have associate's degrees. It is very hard to
understand the pressures that keep those wages down. So this is
an important change in the labor market.
A lot of people have been saying that, well, you know, the
cost of living is different. They are looking as if you make
$174,000 a year and have health insurance. Yes, it is a
different cost of living and maybe you might want to address
someone like that. But if you are a low-wage worker in Alabama,
you don't have Medicaid. If you are a low-wage worker in rural
parts of Alabama, you have to have a means of transportation to
get to a job. If you are in a city like Washington, DC, you
have Medicaid and you have public transportation.
So you can't really look at the differences in the cost of
living in the way that people want to propose it here, because
of the barriers that face workers in these low-wage
communities. Their communities appear to be, quote/unquote,
``low cost,'' but they are very high cost. They get low wages.
And this was in the debate originally in 1937, where people
from low-wage areas wanted to argue about low cost. They just
haven't lived the life of a low-wage person.
Ms. Omar. Yes. And, Doctor, thank you so much for
mentioning that, because I want to draw attention to testimony
that we have here in written. I don't think the owners of La
Quercia are here from Norwalk, Iowa. They are in a city that
has 8,000 people and they have decided to pay minimum wage and
they are still able to operate.
So when we are talking about paying people a minimum wage,
we are talking about making sure that there is value in the
work that they are doing, and that uplifts workers. It makes
sure that they continue to do the hard work. It uplifts that
community. It uplifts that city. It uplifts that State because,
in return, you also get people who are paying more taxes and it
creates an economy that is thriving. So it is not only morally
just for us to raise the minimum wage; it is economically
feasible and necessary.
Thank you so much. I yield back my time.
Chairman Scott. Thank you.
The gentleman from Wisconsin, Mr. Grothman.
Mr. Grothman. Thank you. Mr. Holtz or Dr. Holtz-Eakin, I am
going to give you some questions. As I understand it, this
bill, if you were going to increase the minimum wage from about
7 and a half to $15 an hour the amount you are paying somebody
for 1 week of full-time wages--and it is beyond just wages,
right, because you have social security, employer's social
security taxes and workers' comp. I get your increase, your
cost goes up from about 325 to 650 bucks a week per employee.
Is that true?
Mr. Holtz-Eakin. That sounds right.
Mr. Grothman. Ok. Over time--we have kind of covered this
area before, but if your cost of anything in life goes up from
325 to 650 bucks per week, do you try to make adjustments if
you are writing that much bigger of a check?
Mr. Holtz-Eakin. Certainly. You will try to use less of
whatever is more expensive.
Mr. Grothman. Anywhere in life?
Mr. Holtz-Eakin. Yes.
Mr. Grothman. Ok. I am looking at something that was found,
a Brookings Institution study, Pathways to Higher Quality Jobs
for Young Adults. It points out even later in life people have
a tendency to make more money if they were working when they
were 16 or 18 years old. Is that true?
Mr. Holtz-Eakin. Yes.
Mr. Grothman. Is it important, therefore, in life that we
have young people get jobs?
Mr. Holtz-Eakin. I believe so, yes.
Mr. Grothman. Ok. And as you mentioned, if we increase the
cost of hiring somebody or if we double the cost, somehow you
are going to scramble to write less of those checks, whether
you put in--I am told from McDonald's, my local McDonald's
owners they can put in a lot of equipment that causes you to
hire less people. Maybe you could cut hours, Ok. Maybe some
marginal restaurants will close. Who is most likely to get laid
off when those things happen?
Mr. Holtz-Eakin. The people with the least skills, the
least education, the least experience, the least ability to
contribute to the enterprise.
Mr. Grothman. I will even ask Dr. Zipperer, is there any
doubt that if you double the check you are writing that you are
going to somehow try to scramble to write all those checks? Do
you believe that?
Mr. Zipperer. I think that we have heard these kinds of
scare stories about almost every--
Mr. Grothman. If you owned a restaurant--I will put it this
way: If you owned a restaurant, because we are talking about a
restaurant worker here, and you were told--and I think right
now the vast majority of people in our society, at least
restaurants in my area, judging from the signs out front, are
paying more than minimum wage.
But let's say you had to jump how much you were paying
somebody from $325 to $650 a week, you know, don't you think
you would try to hire less people or it would affect the way
you run the business? Just like anywhere else in life, if the
cost of something doubles, you maybe want to use less of it,
not use it at all. Do you think that is true?
Mr. Zipperer. I think what the research shows on
restaurants and their responses to minimum wage increases is
that restaurants don't employ fewer workers after a minimum
wage increase, but they do change how they operate. In
particular, the two channels by which they adjust to a minimum
wage increase are, one, it makes it easier for them to hire
workers and so worker turnover falls. That is actually a large
cost saving for low-wage businesses like restaurants and helps
them absorb the minimum wage increase.
Mr. Grothman. I will give you one more question, because
they only give us 5 minutes.
I will ask Mr. Wise a question, because I have only got a
minute left. Have you told us here you have been working for
your business or for where you work now for 20 years?
Mr. Wise. I have been in the fast food industry for 20
years and McDonald's for the last six.
Mr. Grothman. For 6 years, Ok, and you are making 11 bucks
an hour right now?
Mr. Wise. Oh, yes.
Mr. Grothman. Have you applied to work anywhere else?
Mr. Wise. Well, when you look across my city and across
many cities in the country, these are the fastest growing jobs,
service-based jobs.
Mr. Grothman. I know. I am just saying like in my area we
got manufacturing. Sometimes people shift from that sort of
thing to manufacturing. Maybe they look for fast food where you
have a chance to move up and become a shift manager, or
whatnot. I am just saying, have you done anything in the last 6
years to try to look for a job that pays more than 11 bucks an
hour?
Mr. Wise. Well, I am a manager. I have been to management
training classes. I have been to Safe Serve. I have been
certified.
Mr. Grothman. Have you looked for any other jobs anywhere
else that pay more than 11 bucks an hour?
Mr. Wise. Less than half of my city makes less than $15 an
hour. There aren't jobs readily available.
Mr. Grothman. Have you applied for any other jobs?
Mr. Wise. Oh, definitely. I have looked for jobs in my
city, you know. They are all low-wage jobs. They are paying
poverty wages.
Mr. Grothman. Somebody else talked about drive trucks. Have
you ever tried to do that sort of thing?
Mr. Wise. No, I never tried driving tractor-trailers or
anything like that.
Mr. Grothman. Not even tractor-trailer, just delivery
truck, that sort of thing.
Mr. Wise. No.
Mr. Grothman. Ok, thanks.
Chairman Scott. Thank you.
The gentlelady from Nevada, Ms. Lee.
Mrs. Lee. Thank you, Mr. Chairman.
For much of my career, I have focused on helping young
children graduate from high school, some of the most at risk
students in Nevada. And poverty is the most significant barrier
to educational success. And I would like to say that a story
like Mr. Wise's is the exception, not the rule.
But when you think about the stress that you as a young man
and your family went under, having to work two and three jobs
to make ends meet, then you having to pitch in and, thus,
dropping out of high school, to me that depicts that not only
are we talking about minimum wage, but we are talking about a
lost opportunity cost.
And the Congressman Grothman who asked you about did you
apply for another job, well, a lot of jobs that are higher
paying require additional training. And if I recall, you
basically said there were weeks on end where you had days where
you did not have a day off. Is that correct?
Mr. Wise. Yes.
Mrs. Lee. So I think we need to take note of the lost
opportunity cost of not increasing a minimum wage here.
So I want to thank you for the courage that you had in
giving that testimony. I think it was incredibly important.
And, again, I wish it were one that isn't as common as it is.
And I now want to ask Dr. Zipperer a question with respect
to that. Looking at these barriers in youth, I am hoping that
you can inform us what the impact of increasing the minimum
wage will have on children in our country.
Mr. Zipperer. Thank you for the question. My colleague
David Cooper at the Economic Policy Institute has recently
conducted an analysis showing the benefits of raising the
minimum wage to $15 by 2024. And in particular, raising the
minimum wage to that level by 2024 would raise the wages of
parents of nearly 14 million children. That is nearly one-fifth
of all U.S. children would have a parent that experienced a
minimum wage increase.
Mrs. Lee. Thank you.
Mr. Chairman, I request unanimous consent to offer this
letter into the record from First Focus Campaign for Children,
explaining the economic impact of increasing the minimum wage
on children in our country.
Chairman Scott. Without objection.
[The information follows:]
[GRAPHIC] [TIFF OMITTED] T5268.090
Mrs. Lee. Mr. Zipperer or Dr. Zipperer, I have another
question. There is this fear-mongering about the notion of
workers losing their jobs because of an increase. Can you tell
us how or why this notion of job loss is misleading, and is it
possible that workers would be able to work fewer hours but
still earn a stronger income, thus having the time to pursue,
perhaps, education that would put them in a position to achieve
a higher-paying job?
Mr. Zipperer. Thank you for the question. Yes, I think
there are three ways in which this phrase ``job loss'' is
misleading when we are talking about the minimum wage. First is
that the vast body of research published in the last 15 years
or at least since 2001 establishes very clearly that the
employment effects of the minimum wage are small to zero. That
is the average study in that literature.
And I would argue, in my judgment, the best studies also
strengthen that conclusion, finding little negative employment
effects of the minimum wage. So that is the first way in which
job loss is misleadingly characterized as the consequences to
the minimum wage.
The second reason is that even studies that either find or
assume that there is going to be job loss, typically the
benefits to workers outweigh the job loss that those workers
experience. So just looking at it from terms of cost and
benefits, raising the minimum wage still has benefits that
outweigh the cost.
The third point and the reason why job loss is a misleading
phrase applied to the minimum wage, is that, just as you
indicated at the end of your question, if there is some
reduction in the number of hours worked by workers, which I
don't necessarily subscribe to, but if that is the case,
workers can still earn more over the course of the year because
they are earning a higher wage and, therefore, would be better
off.
Mrs. Lee. And perhaps spend time with their family as well.
One final thing. Oh, I am sorry, I think I am going to run
out of time, so I will yield the floor. Thanks.
Chairman Scott. The gentleman from Pennsylvania, Mr.
Thompson.
Mr. Thompson. Thank you, Chairman. Thanks for hosting this
hearing. It is a very important topic.
You know, I don't want anyone who is a primary earner in
their home, you know, responsible to provide for their family
to earn just minimum wage. You know, and I don't care what that
minimum wage level is, to tell you the truth. You know, it will
always be the minimum wage.
And some of the consequences that we have seen is that we
will see that raising minimum wage, you know, raises the cost
of many basic necessities. We also see that more times than not
minimum wage increases results in the Federal income threshold
for what qualifies as poverty to go up, sweeping more families
technically into poverty. And if it is done technically, it is
done for good reasons, because the value of that earned dollar
lessens.
But, again, I want to say I don't want to see anyone who is
supporting a family who is the primary earner earn minimum
wage. That is why I work so hard to support restoring ladders,
rungs on a ladder of opportunity. And this committee did great
work in that area with the Career and Technical Education bill
President Trump signed. I believe it was on July 31st we were
at the White House.
We put an additional billion dollars on top of what we
already invest in career and technical education training. And
we know there are 7 million jobs that are out there today, and
that number is climbing. It is compounded and getting larger
because of the retirement of the baby boomers, but it is also
growing because of the growth of the economy and the jobs that
are being created.
So I am not saying those opportunities are equal. I mean,
sometimes communities and cities, places, for whatever, based
on whatever is going on there, perhaps they don't have as many
opportunities; but nationwide, that is the scenario that we are
seeing. And that is why I, when it comes to better wages,
especially for those who are primary providers for their
families, I want them on those ladders of opportunity. And I
think this committee did some really good work to restore that
with resources and reforms to that program.
I also get the point--and, unfortunately, she left. I
appreciated the passion of the gentlelady from Seattle. You
know, it is situational. It is geographical. And just to share
a couple numbers. I am from Pennsylvania. In Pennsylvania, the
average, the median home value in Pennsylvania is $172,000. In
our largest city--I tried to pick a big city that compared to
Seattle, you know--it is $158,500 right now, and that was after
a 12.7 percent increase in value this past year. Washington
State, it is $379,500. And in Seattle, the median home value is
over $725,000. I get it. But that is a geographical issue. That
is not a one-size-fits-all solution of a Federal minimum wage.
And so I appreciate her passion and I appreciate her local
leadership of serving the folks in Seattle who are incurring
such a--I mean, it is just a--what a terrible situation for
folks who are living paycheck to paycheck and struggling.
And so, Dr. Holtz-Eakin, great to see you again. A real
quick question here: Your testimony cites a 2014 study by
Jeffrey Clemens and Michael Wither that shows a hike in the
minimum wage is likely to increase the occurrence of unpaid
internships.
Would a 107 percent increase in the Federal minimum wage
hurt students and young adults who are trying to enter into
that work force and to get that basic experience, you know, to
be able to launch successful careers that hopefully eventually
will be with family sustaining wages?
Mr. Holtz-Eakin. I have an intern program. I don't know if
I would if you doubled the minimum wage. They are paid minimum
wage. And that is an issue. And that is the starting rung, and
everything I have said earlier today applies to the intern
programs across this country as well as the full-time
employees.
Mr. Thompson. Thank you.
I know we have another panel, so in the effort of
efficiency I will yield back, Mr. Chairman.
Chairman Scott. Thank you. Thank you.
The gentlelady from Georgia, Mrs. McBath.
Mrs. McBath. Thank you, Mr. Chairman. And I want to thank
you for holding this hearing today. And I would like to thank
the witnesses who are here to discuss the importance of raising
the Federal minimum wage for Americans.
It is time for us to raise the minimum wage and to have
these very, very important conversations. Too many in our
Nation are working hard, but are definitely not seeing their
wages budge. The Federal minimum wage has been stuck at $7.25
per hour since 2009. And in that time, costs have gone up
significantly.
In my home State of Georgia, the minimum wage workers make
only $7.25, and even for those who work 40 hours per week, it
is nearly impossible for them to make a living. Now, this
translates into lost value and lost purchasing power for the
American worker, not just for those that are earning the
minimum wage, but also for those that make more that have not
seen wage growth in a resurgent economy.
We need to raise the minimum wage to help families make
ends meet, but we also need to do it in a way that protects
jobs and small businesses in our communities. Our country is
made up of many different regional economies, but only one
Federal minimum wage across the board.
This is an old model that truly ignores the basic reality
of cost of living differences. The cost of everything from rent
to a carton of milk to a haircut is different from one part of
the United States to another, and our minimum wage should
account for those differences. $1 in Macon, Georgia, is
different than $1 in Roswell, Georgia. And $1 in Roswell is
different than a dollar in San Francisco and New York City. We
need a Federal minimum wage policy that works for rural,
suburban, as well as urban Americans. A $15 minimum wage might
be right for San Francisco, but what about Birmingham? What
about Cleveland? What about Houston and Raleigh?
Jared Bernstein, who served as a member of President
Obama's Economic team and he also held the post of Deputy Chief
Economist at the U.S. Department of Labor between 1995 and
1996, he discussed this very topic in an article that he wrote
for the New York Times, when the Obama Administration proposed
to raise the national minimum wage to $10.10. He wrote: When we
adjust the national minimum wage of $10.10 for regional
differences, these are the amounts you would need to have the
same buying power: $11.94 in Washington, DC. and $11.40 in
California, but only $8.90 in Alabama and $9.08 in Kansas.
My goal is truly to make sure that folks in rural
communities, communities of color, and distressed communities
are not adversely affected by well-intentioned minimum wage
policies that raise the minimum wage to a higher point or to a
point that is higher than the local economies can handle.
Now, we are all in agreement that the minimum wage needs to
be raised to help Americans, but I would like to learn more
about how this will be received in every part of the country.
So, Mr. Zipperer, my question is for you, would the $15
minimum wage under this bill be applied with any consideration
for differences in local cost of living or is it just one flat
rate across the country?
Mr. Zipperer. The $15 minimum wage bill of the Raise the
Wage Act of 2019 is $15 across the country, but States, cities
if they can, and localities could raise their minimum wage
above that if they desired.
Mrs. McBath. So my followup question is, does the $15
minimum wage have the same purchasing power in Washington, DC,
that it does in rural parts of the country?
Mr. Zipperer. No, it has different purchasing power in
different parts of the country. But in all parts of the
country, including the cities you mentioned, Houston,
Cleveland, Raleigh, and in rural parts of the country, rural
counties in every State of the United States, workers will need
at least $15 an hour in order to purchase basic necessities
that attain them a modest yet adequate standard of living.
Mrs. McBath. And, Dr. Zipperer, have you heard of the term
``regional price parity?''
Mr. Zipperer. Yes, I have.
Mrs. McBath. Can you explain its meaning and why it exists?
Mr. Zipperer. Regional price parities are a tool that we
can use to calculate the differences in the cost of living
across different areas of the country.
Mrs. McBath. Last word: I believe that workers in every
part of the country, they deserve a raise, most definitely. So
I thank you for answering my questions.
And I thank you, Mr. Chairman, for holding this hearing. I
hope this is the beginning of what I believe will be very
thoughtful and inclusive discussions about how we can raise the
minimum wage to a living wage for all communities. And I yield
back my time.
Chairman Scott. Thank you.
The gentlelady from Massachusetts, Mrs. Trahan.
Mrs. Trahan. Thank you, Mr. Chairman, and thank you for
holding these hearings. Thank you for hanging in with us today.
I know it is a long day to sit on this panel.
I grew up in a family that needed two incomes. My mother,
she juggled multiple part-time jobs while I was growing up,
working more than 40 hours a week and managing to raise us
children. So sometimes, you know, when you are removed from
that, it is easy to forget that it doesn't leave a lot of time
to look for another job. So, Mr. Wise, thank you. I appreciate
your testimony.
Dr. Zipperer, I want to talk about women and families and
the impact that the minimum wage has. Women are nearly two-
thirds of workers paid the Federal minimum wage of $7.25 per
hour. Women are also two-thirds of tipped workers for whom the
Federal minimum cash wage is just $2.13 per hour.
Throughout my career, I have seen the pay gap in action
time and again. Women's overrepresentation in low-wage jobs is
one factor driving the persistent wage gap. Women working full
time year-round typically are paid just 80 cents for every
dollar paid to their male counterparts, and this gap is even
wider for women of color.
Congress has raised the minimum wage only four times in the
past 40 years and enacted the last increase a decade ago. A
woman working full time at minimum wage earns just $14,500
annually, nearly $5,000 below the poverty line for a mother
with two children. You know all this.
Dr. Zipperer, what do we know about how the minimum wage
would impact the gender pay gap, and what is the evidence from
States on how the minimum wage could impact the gender pay gap?
Mr. Zipperer. That is a great question. It is true that the
minimum wage disproportionately raises wages for women. It
benefits women more than men, and that is because, as you
outlined in your question, unfortunately, our country's economy
pays women excessively low wages. If we were to raise the
minimum wage to $15 by 2024, the majority of workers that would
benefit from that are women. Close to about 58 percent of the
workers who would benefit from a minimum wage increase of that
kind would be women.
The minimum wage has long been an important tool to reduce
gender wage gaps. In particular, the minimum wage has the
strongest effects on reducing inequality for women, in that it
brings up women at the bottom of the pay scale toward the
middle much more strongly for women than it does for men.
Mrs. Trahan. Terrific. Thank you. I appreciate that.
You know, I know my colleague from Michigan asked about
unions and the impact that the minimum wage will have on
unions, but if I could just ask one followup question on his
terrific inquiry. I do believe that unions have built the
middle class. And what should we consider here in Congress--and
if this is a better question for you, Dr. Spriggs, feel free to
jump in.
What should we consider here in Congress to better support
men and women in labor so that all workers see improved
conditions beyond increasing the minimum wage?
Dr. Spriggs. Just as we are having this discussion to
modernize the minimum wage, we need to have discussions to
modernize our labor laws to restore the ability of American
workers to organize. Today, the penalties for violating labor
law are de minimus. It is far cheaper for a firm to fire
workers, to intimidate them, then it is for them to let them
have a voice. It is unfair to have employers engaged in closed
conversations with employees to intimidate them out of their
democratic right to vote about whether they want to be in a
union.
There are a number of other changes we need to make to make
sure that workers will be at the table so that as productivity
continues to increase, workers get to say, where is my share of
the productivity increase, which hasn't happened in the last 40
years.
Mrs. Trahan. Thank you. Thanks so much for all your
testimony, and I yield back.
Chairman Scott. Thank you. The gentleman from New York, Mr.
Morelle.
Mr. Morelle. Thank you, Mr. Chairman, for holding this
valuable hearing to discuss gradually raising the minimum wage.
And thank you to the panel and the witnesses for being here
today to share their expertise.
I do want to note, in my home State of New York we have one
of the highest minimum wages in the nation. And I was proud to
support gradually increasing the minimum wage to $15, which is
what it is in the city of New York and other parts of New York.
It is going to be $15 in just a few years, as we deal with some
regional differences. And that happened, I had the privilege of
being the majority leader in the assembly when we do that. And
I look forward to hopefully achieving that here in the Nation's
Capitol as well, to ensure that all Americans working full time
can live safely and sustainably above the poverty line.
If I might, Mr. Chair, I would like to ask Dr. Zipperer if
you would just talk about the studies evaluating minimum wage
increases. Is it your view that raising the minimum wage will
result in negative economic consequences for low-wage workers,
as some have suggested?
Mr. Zipperer. No, it is not my view. I think that the best
studies show that minimum wages have been very successful in
raising the wages of low-wage workers without those negative
employment effects, but you also don't have to take my word for
it. You can just look at the studies published over the last 15
years and that the average study and the typical study finds
very small to no employment effects.
Mr. Morelle. If I might just followup with you, Dr.
Zipperer, obviously, people have testified it is important that
the Raise the Wage Act have a gradual increase, the cost
adjustment over time, which obviously benefits so that, from a
public policy point of view, 10 years don't go by, 6 years go
by without an increase and you are essentially having to jump
up a considerable degree in a single year.
Have you calculated what the $15 minimum wage, if it were
enacted today, what it would translate to in 5 or 6 years, in
terms of what the adjustment would bring us to?
Mr. Zipperer. Right. So under the Raise the Wage Act of
2019, a $15 minimum wage would be fully phased in by 2024. And
if you account for projected increases in the cost of living
over that time period, that is equivalent to about a $13
minimum wage today.
Mr. Morelle. Got you. So there obviously would be some
erosion because of the impacts of inflation so $15, as we are
thinking about it in 2024, isn't the same as $15 today. It is
$13. Is that what I understand?
Mr. Zipperer. That is correct.
Mr. Morelle. Thank you. If I could just followup, relative
to that in the purchasing power, I have given some thought to
trying to understand what the historical high point was of the
minimum wage relative to the median wage of the American worker
and, in a sense, what is the $7.25 minimum wage compared now to
that median or typical worker's wages. Do you understand that
question? Could you comment on that?
Mr. Zipperer. Yes. Thanks for the question. So, at the
highest point, the minimum wage in 1968 was close to about 53
percent of the full-time, full-year workers' median wage at
that time period. Now, the national minimum wage of $7.25 is
about a third or about 32, 33 percent of the full-time, full-
year median wage.
Mr. Morelle. Which is obviously a dramatic, dramatic
decline, more than half. In 1960--what year did you quote, the
first--
Mr. Zipperer. 1968 is the high point of the minimum wage.
The minimum wage has fallen since 1968 over the last 50 years.
It has fallen in real terms, terms adjusted for the increase of
cost of living, by about 28, 29 percent.
Mr. Morelle. Obviously, dramatic.
If I might, Mr. Wise, and thank you for your testimony
earlier today and for being a part of this. But could you just
describe the challenges that your family would face in your
situation during a family emergency when you had an unexpected
expenditure of an essential? How do you and your family and
others presumably in the same situation, how do you respond to
that? How do you deal with that?
Mr. Wise. Well, first and foremost, it is frightening,
because we are truly one missed paycheck away from being
homeless. So there is no such thing as being sick or having to
call in or a family emergency. Refrigerator breaking down, car
breaks, any of that going out is catastrophic, basically, for
me and my family. So it is just--it is all pure luck, you know,
hoping everything is Ok every day.
Mr. Morelle. And if I could also, Dr. Spriggs, what are, in
your view, the lasting impacts to wage and wealth levels to
regions of the country from the minimum wage coverage
exclusions in the Fair Labor Standards Act of 1938?
And just as a followup, would a regional minimum wage in
2019 lock in income and wealth disparities that were born of
that racially motivated exclusions to the FLSA?
Dr. Spriggs. Thank you for the question. The only example I
can give you of a proposal to do, quote/unquote, ``parity pay''
is from the Third Way. And when you look at the chart of what
they think are the areas that have these wonderful lives at low
wages because of pay parity, it looks exactly like a
distribution of the Black population.
If you agree to those regional pay ideas, which Congress
debated extensively in 1937 and rejected, extensively in 1966
and rejected, you won't be accepting a new idea, you will be
cementing an old idea that got rejected twice and you will
create a racial pay disparity.
It will be, once again, America understands the problem, we
are going to pass a labor law that improves the lives of
American workers, and Black workers will be told, the bus is
full when it pulls out. If you do that, that is what you will
be doing.
Mr. Morelle. Thank you for the question.
Just in closing, Mr. Chair and colleagues, I just do note
that I represent a district in New York State, but many people
when they hear the words ``New York'' assume it is metro New
York and the city, where now the minimum wage is $15 an hour.
Despite that, and I live in a community of about a million
people in the Rochester, New York, metro area, Upstate New
York, there were concerns about how the increase in the minimum
wage would impact an economy that is the vestiges of a
manufacturing economy and transitioning.
And despite all the concerns that we heard from people
about raising the minimum wage, it has really been something
that has been greeted largely with support, certainly from the
labor community and from people who are working very, very hard
to make ends meet. And from what I can see, it has benefited
our community greatly, and I certainly hope we pass this
legislation in the Congress and make it the law of the land. So
thank you.
Thank you again, Mr. Chairman. I yield back my time.
Chairman Scott. Thank you.
And next is the gentlelady from Washington, Dr. Schrier.
Ms. Schrier. Hi. Good afternoon. Thank you, Mr. Chairman.
And I want to thank all of you. I have really enjoyed your
testimony today.
I really appreciate, first of all, Dr. Spriggs, your
comments in particular about tipping, because I was unaware of
that history, and I think that was very eye-opening.
I also wanted to thank you all, but I also appreciate the
clarification about Washington State. That is where I am from.
We are gradually increasing to a $15 minimum wage, and it has
worked well for the State.
The one study out of the University of Washington got a lot
of eyes when that first came out, but it has become clear that
is an outlier study and that for the most part we have done
very well with this. Businesses are thriving, and people are
thriving.
I would also, for people up here who think that $15 is too
much, I would just note that although my district starts in the
suburbs of Seattle, in Seattle proper you need to have a salary
of at least $70,000 a year to afford a one-bedroom apartment.
And so I want to just remind everybody that we are talking
about a minimum, and that $15, as we have heard many times, is
a minimum for the whole country, and there are parts, like
where I live, where you would need far more.
I did have a question to just drill down a little bit on
tips, because I want to make sure that we are taking care of
everybody.
The way that I am wrapping my head around this is I think
about all of the workers in a restaurant, for example, and that
if we have, for example, a $15 minimum wage for the wait staff,
and they get generous tips on top of that, but the chef in the
kitchen is not getting that added bonus and maybe isn't getting
tipped out enough from the wait staff or the host. And so I
want to think through whether there might be unintended
consequences in the social relationships at work.
I also wanted to talk about the difference between when you
have a subminimum wage, you know, $2 or whatever it is, and
then workers are reliant on tips, which to me seems very
tenuous, versus people who are guaranteed that if they don't
make at least 15 an hour that they will have that as a floor
and the tips would be over and the difference in poverty level
between those two groups.
Dr. Spriggs, maybe I will go to you.
Dr. Spriggs. I would like to speak to that first. And thank
you very much for the question because it gets to people who
think this is easy to regulate.
The way that many restaurants run, they either force
pooling of the tips, so that the host who might get a bigger
tip or the waiter who might get the bigger tip can then share
it with busboys.
Some restaurants violate the law because they consider some
back workers who should get a minimum wage. They think they are
supposed to get tipped. It is a nightmare. And when the wages
are pooled, now, at some high-end restaurants, perhaps they let
the staff control it, but many restaurants want to claim the
pool tips are theirs, and then we dole them out to make sure we
meet the minimum, it gets very complicated.
And, yes, the social relations are complicated because time
and again, unfortunately, there is a difference between the
race and gender of these different jobs, and inevitably that
causes a friction in and of itself in terms of who will get
what.
So it is going to be a more fraught problem if the real
minimum goes up and the tip minimum stays down, because the gap
that has to be made up is going to be bigger and bigger and
bigger. There is no assurance that will happen.
And people need to remember that it is not the fancy
restaurants that people in this room go to. The bulk of these
workers are at low wage restaurants. They don't work where the
tip is going to be $25. They work where the tip is going to be
$3.
So it is far more complicated to regulate than people
understand, and this is the true solution. It closes a gender
inequality bigger than anything else we could do to close the
gender inequality when it comes to wage theft sexual
harassment.
Ms. Schrier. Thank you.
Chairman Scott. Thank you.
The gentlelady from Ohio, Ms. Fudge.
Ms. Fudge. Thank you very much, Mr. Chairman.
And thank you all so much for being here. Forgive me. I
have had three committee hearings today, so I have been in and
out. So if I ask you something that has already been asked,
please forgive me.
Dr. Holtz-Eakin, when I was in earlier I heard you talking
about ``these people.'' Who are ``these people'' that you--you
have used the word ``these people'' at least three times while
I was sitting in this room. Who would you describe as ``these
people''?
Mr. Holtz-Eakin. I am not sure what the context was,
Congresswoman.
Ms. Fudge. You were talking about that $15 wouldn't help
``these people.'' So who are ``these people''?
Mr. Holtz-Eakin. The workers that I am most concerned about
are those with the least skills, education, and experience.
Ms. Fudge. So are they poor? Are they Black? Are they
White? Who are ``these people''? I am just saying that you
shouldn't use it if you don't know what you are talking about.
Mr. Holtz-Eakin. I know who I am worried about in the labor
market, and those are the people.
Ms. Fudge. I think it is very insensitive. But neither here
nor there.
Dr. Spriggs, corporations are making more money today than
they have ever made. They are making even more money this year
as they have benefited from the Republican tax scam giveaway to
the richest people in this country. We have also reduced what
they would pay in estate taxes. So we have basically said to
them: Rich people, we want you to get richer.
It is ridiculous to me, knowing that the wage gap is
getting bigger, the wealth gap is getting bigger, that someone
would say to me that because someone makes $15 an hour, there
is no money to pay them. I just don't understand it.
Dr. Holtz-Eakin, I am assuming you make more than $15. I
don't want to make an assumption, but do you make more than $15
an hour?
Mr. Holtz-Eakin. I assume so. I am not paid by the hour.
Ms. Fudge. If you give me your salary for last year, I will
tell you how much you make an hour. I am sure it is more than
$15. And the sky is not falling. The sky is not falling because
you make more than $15 an hour, and it will not fall if these
people sitting in this room make $15 an hour.
It is just not believable to me that you could say that if
we pay people $15 an hour, everything is going to collapse. You
know what I mean? You have to stop crying wolf. It is not true.
There is no evidence to prove it is true.
What we are doing today is saying that we have the ability
to pay people a decent wage, but we refuse. We have the
ability, but we have not the will. So it is Ok for rich people
to get richer and poor people to get poorer.
I just think it is ludicrous to say that the richest nation
in the world cannot pay people a decent wage. It is
unconscionable, it is mean, and it is cruel.
And with that, Mr. Chairman, if someone would like to claim
the balance of my time. Does someone need my time?
Chairman Scott. You can yield to the gentlelady from
Connecticut.
Ms. Fudge. I will.
Mrs. Hayes. Good afternoon, everyone. I am sorry. I have
been in and out as well, but I have been following the
testimony on the TV screen. I had a couple committee hearings
as well.
First of all, thank you all for being here. Thank you all
in the galley for coming out to support.
Mr. Wise, I am particularly moved by your testimony. And I
hope I can impress upon you that your work is not in vain, that
your work has value.
And what we hear people talk about is that minimum wage
being attributed to people who have the least skill, the least
education. But how about the least opportunity? One does not
impact the other.
I always excelled in school. I always did a good job. But
then life happened. So if you don't have access to those same
opportunities.
I heard one of my colleagues say that he could not imagine
living on $15 in a city like Washington where the cost of
living is so high. How about the reality of living on $7? And I
think that is the conversation that we should be having.
And people are always quick to pick out someone who has
done it as if this is the rule instead of the exception. And,
again, it is just that life happens, and maybe somebody got,
you know, a good opportunity or caught a break. But that is not
the rule.
And then the other thing. I am just listening to all of
you: Well, what have you done? My colleagues are always asking:
Well, what have you done to lift yourself out of poverty? What
have you done? You can go be a truck driver. What if you don't
want to be a truck driver?
Shouldn't you have the right to live out your best life, to
live the future that you want for yourself and not this by-
default position that you are placed in because you are
attempting to survive?
Has your housing cost increased over the last 10 years?
Chairman Scott. The time of the gentlelady from Ohio has
expired. You will be recognized for your full 5 minutes
shortly.
The gentlelady from North Carolina, the Ranking Member.
Mrs. Hayes. Mr. Wise, I am still talking to you. Has your
housing cost--
Chairman Scott. You will be recognized after Dr. Foxx.
Mrs. Hayes. Oh, I am sorry.
Ms. Foxx. Thank you, Mr. Chairman.
Dr. Holtz-Eakin, I am interested in the workers who would
be affected by a 107 percent increase in the Federal minimum
wage.
Individuals under 25 years old make up only one-fifth of
hourly workers, but they account for about half of hourly
workers making the minimum wage. Only 7 percent of workers
earning wages between $7.25 and $15 live in poor households.
In your view, is increasing the minimum wage to $15 an
anti-poverty policy?
Mr. Holtz-Eakin. I don't think it is an effective anti-
poverty policy. As I mentioned at the outset, it is fairly
poorly targeted on poverty. And in those cases where it
actually does affect the poverty population, the impact may be
negative.
Ms. Foxx. Thank you very much.
Let me follow this train of questioning with you. We had
what many are calling a surge in job creation in January,
304,000 new jobs, nearly doubling expectations. Over the last
year, average hourly earnings rose by 3.2 percent, average
weekly earnings rose by 3.5 percent. And with last month's job
surge, the labor force participation rate ticked up to 63.2
percent.
There are more jobs than job openings, as you have said and
we have said, more jobs at higher wages, and now people who
have been the most discouraged and on the sidelines are
reentering the work force.
Based on your research and experience, are you concerned
that more than doubling the Federal minimum wage would reverse
these positive trends for workers and the economy?
Mr. Holtz-Eakin. I am very concerned about that. The
research would indicate that is exactly the part of the labor
market that would be most deeply affected. And we are finally
making some progress. It would be a shame to go back the wrong
way.
Ms. Foxx. Great.
You know, I have always emphasized making sound policy
decisions based on evidence. But my husband told me a long time
ago that too many people in elective office make decisions
based on emotions and not on evidence. But as I told him, I am
going to start with evidence always. I can get emotional if I
have to, but evidence is the best way to go.
When it comes to the radical proposal before us to increase
the Federal minimum wage by 107 percent, however, it is hard to
find convincing evidence because the proposed policy change is
so extreme.
Would Congress be making a sound policy decision from an
evidence-based perspective if legislation were enacted to more
than double the Federal minimum wage, impacting businesses and
workers around the country?
Mr. Holtz-Eakin. In my judgment, that would be a very
unwise thing for the Congress to do. It is not just the 107
percent nationwide, which is unprecedented, and as a result,
any of the research that we have that shows negative impacts
doesn't even come close to capturing the impact of that kind of
a change. You also do the indexing at the end of that to the
median wage. That is unprecedented and leads to permanent
incentives to restructure businesses away from having jobs for
that particular part of the labor market.
Ms. Foxx. In your testimony, you note the large job losses
in California and New York due to the recent increases in their
State minimum wages. These job losses may surprise some people
because these areas have a relatively high cost of living and
are high average income States.
What do these States' experiments tell us about what would
happen in other regions of the country if a mandate to impose a
$15 minimum wage around the country was enacted?
Mr. Holtz-Eakin. I think the lesson of these State-based
minimum wage increases is that there are people who will be
just fine. We do see that.
But the people who are affected are the ones who are
probably the least well-off in the labor market, for the
reasons that I have outlined before; that not all of these
changes come through the stereotype of someone getting kicked
off their job. It is the raise you don't get, the hours you
don't work, the person who doesn't get hired.
And a lot of this is not, you know, the bear at the door.
It is the termites in the woodwork taking out the vitality of
the economy.
Ms. Foxx. Thank you very much. I yield back.
Mrs. Hayes. Thank you, Mr. Chair.
Mr. Wise, back to you. Back to my previous question. Has
the cost of your housing increased?
Mr. Wise. Yes. Yes, it has.
Mrs. Hayes. I heard you talk about purchasing school
supplies for your daughter. Has the cost of those supplies
increased?
Mr. Wise. Yes, they have, over the years.
Mrs. Hayes. Has the cost of food increased?
Mr. Wise. Definitely.
Mrs. Hayes. Have you had to get a prescription for yourself
or your children?
Mr. Wise. Yes.
Mrs. Hayes. Have those costs increased?
Mr. Wise. Yes, they have.
Mrs. Hayes. Ok.
So to Dr.--I am sorry, I can't read your whole name, I am
so sorry, I don't mean to--when you talk about corporations and
the effect that this will have on the economy, have
corporations stalled their price increases to wait for people
who are living in poverty under minimum wage to catch up? If
everything else is increasing except for their wages, are
corporations held to the same standard where they are stalling
to wait for people's wages to catch up?
Mr. Zipperer. If I understand the question correctly, I
think it is the case that businesses in general in this
country, unfortunately, have not paid low wage workers well
without the help of a minimum wage increase.
Mrs. Hayes. So if only 7 percent of minimum wage workers
live in poverty, how could raising those workers to $15 have
the catastrophic effects that we are hearing about? If it is
such a small number, if it is such a small number in the
overall economy and the overall number of workers, I just heard
only 7 percent of minimum wage workers live in poverty, so how
could that small number disproportionately impact the overall
economy if that group is lifted up?
Mr. Zipperer. I don't think that there will be disastrous
effects of a $15 minimum wage. But you might be interested in
hearing from Dr. Holtz-Eakin.
Mrs. Hayes. Yes. I am interested to hear your response.
Dr. Spriggs. I want to help out here. In 1966, when we
expanded coverage for the minimum wage, suddenly 20 percent, 20
percent of the American work force suddenly had coverage and
protection, which means this is a bigger experiment than what
you are talking about right now and when you think about what
we did. Twenty percent of the entire American work force had
not been protected. We raised their wages from $0.80, because
on average that is what they made, to $1.60.
Mrs. Hayes. I was here for that.
Dr. Spriggs. We doubled it.
Mrs. Hayes. Yep.
Dr. Spriggs. And yet, employment did not fall. And in those
states that had no State minimum wage employment did not fall
because those States would have been the ones most impacted.
So the evidence, the experience, the real experience, not
some theoretical experience, the actual experience of the
American people in the work force was when we doubled the
minimum wage, which 61 percent of Republicans voted for, and
gave 20 percent of these workers access to protection, poverty
went down. Their employment did not go down. It was helpful.
And it got the Black poverty rate for children down to 39
percent, the lowest it was until 1994.
Mrs. Hayes. Thank you. I guess, Dr. Spriggs, you would do
well to answer the next question.
When we talk about the improvement in the economy and the
jobs numbers goes up, every month we hear about all of the
people who have entered the work force, does this include
minimum wage workers around the country?
Dr. Spriggs. Yes, it does.
Mrs. Hayes. So that number, although we are talking about
more people are employed, does not accurately reflect an
increase in living conditions, our communities improving,
because although people are employed, it does not sound like
they are at a livable wage.
Dr. Spriggs. That is correct. And increasingly, it has been
difficult for us to deliver lower poverty levels simply from
higher levels of employment and from economic growth. When we
disconnected the minimum wage from a living wage and you look
at the poverty, this is why it took from 1969 to the 1990's to
get Black child poverty back down below the level it was in
1969.
Mrs. Hayes. Thank you. Thank you so much.
And I guess the last thing I would say is, with all due
respect, the fact that you don't know how much you make or what
that translates to over a specific amount of time is more
telling than anything else you could ever say, because I bet
you every single person in this galley knows exactly how much
they make. They know exactly how much they will lose if they
are late, if they don't show up, if they call out, if it is a
holiday. They know exactly to the penny what that means for
them and their family.
I have been them. I know what that feels like, and that
should be all you need to know.
Mr. Chair, I yield back.
Chairman Scott. Thank you.
The gentleman from Indiana, Mr. Banks.
Mr. Banks. Thank you, Mr. Chairman.
There has been a lot of focus today on how this proposal
will destroy jobs, and rightfully so. You have already heard a
lot about the NFIB study, but another recent study using the
methodology of the Congressional Budget Office found that this
proposal would cost my home state, the State of Indiana, 64,130
jobs in 2020 alone.
This isn't just a number. That is nearly 65,000 Hoosiers
losing the dignity that comes from having a job and being able
to provide for themselves and their families. At a time when we
have nearly 7 million jobs that cannot be filled, it is
incredibly reckless to rob people of their livelihoods in order
to live up to a campaign talking point.
I have heard from local business owners in my district who
believe this legislation would have a disastrous effect on
their ability to grow and hire Hoosiers. One business owner who
runs a number of local franchises conveyed to me that
approximately 25 percent of his staff would need to be cut to
account for this proposal. He would also be forced to raise
prices in his restaurants by 2 to 4 percent just to stay in
business.
Another constituent of mine who owns a number of
restaurants as well and employs nearly 250 people told me that
the tipped wage provisions of this bill would force him to cut
half of his staff just to stay afloat, along with across-the-
board menu prices as well. Think about that. Anywhere from one
in four to one in two workers unemployed who are then forced to
pay higher prices after losing their jobs.
And as if that wasn't bad enough, there is evidence that
this will actually reduce income for low wage workers. By
making labor more expensive, fewer workers will be hired, and
the ones that do keep their jobs will work fewer hours, which
translates into lost income.
And, in fact, that is exactly what we saw in Seattle. The
city of Seattle recently, as you know, increased the minimum
wage to $15 an hour. And a study from the University of
Washington found that this reduced the number of hours worked
in low wage jobs by nearly 7 percent and lower take home pay
for low wage workers by $74 a month. That is right, the minimum
wage increase actually resulted in lower overall wages.
Now, I take personal offense to this conversation as well
because in high school and college, my folks didn't have enough
money to pay for my college degree. So I worked low-wage,
minimum wage jobs to be able to save up for college and make
ends meet. So this conversation reminds me of just how
important jobs like these are to those Americans who are
hopeful to 1 day pursue the same American dream that I have
been able to live in my life.
So, Dr. Holtz-Eakin, can you expand on the insights of
these studies from the University of Washington, the NFIB
study, the Congressional Budget Office statistics, specifically
how minimum wage laws actually can reduce the income of low
wage workers?
Mr. Holtz-Eakin. I am happy to, Congressman.
First, in the interest of clarity, none of these studies
indicate that overall employment in the economy is at a
decline. The economy will continue to grow. There will be fewer
jobs created than otherwise would have been. That is the nature
of the loss. Those jobs are going to be concentrated in a
particular part of the labor market, which is the low wage, low
skill, little experience part of the labor market that you
started out in.
And the adjustments that businesses of all sizes will be
forced to make will be either to charge higher prices or cut
their labor bill somehow, and that means cutting back on
raises, cutting back on hiring, cutting back on hours of work.
And if you are one of those people who is lucky enough to
maintain their job, but is not getting a raise and getting
their hours cut, you could end up with less income.
Mr. Banks. Another study suggests that 2.3 percent of the
American workers actually receive minimum wage or work in
minimum wage jobs. And of those 2.3 percent, most of them are
under the age of 25, which reflects upon the story that I have
lived as well. They work those jobs to pursue something better,
the proverbial American Dream.
I am struck at the outset of this hearing, Dr. Zipperer
admitted--he conceded over and over again, although not on
the--we can debate the scale, but he conceded over and over
again the negative impact that proposals like this would have
on low-wage workers all over the United States of America.
This conversation is concerning to me. It is concerning to
not just business owners in my district but those who work in
jobs like these. It would have a disastrous effect.
And with that I yield back.
Chairman Scott. Thank you.
I yield to myself for 5 minutes.
Dr. Spriggs, do you know if the poverty rate is connected
to the minimum wage at all?
Dr. Spriggs. It no longer is connected to the minimum wage,
though when Congress formulated the minimum wage they clearly
had the intent that workers would not have to say: ``I hope to
1 day get to be poor. I hope that 1 day I will get a raise so I
can get up to the poverty level.'' That is what Congress was
trying to avoid. They wanted work to have dignity. And everyone
agreed, Republican and Democrat, that should be an American
principle. So no longer--
Chairman Scott. So increasing the minimum wage will not
affect the poverty rate?
Dr. Spriggs. It would not affect the poverty rate because
there is little evidence that it would create a sufficient
inflationary force that the poverty level would go up. As the
Congresswoman said, it is not enough workers, and it is not a
big enough part of cost. And as the Congresswoman was
suggesting, if CEO pay goes up and that doesn't affect cost, if
profits go up and that doesn't affect price, as she was saying,
prices went up without wages going up, so why should we think
that if wages go up that would happen?
Chairman Scott. I just wanted to correct that for the
record, because there was a suggestion that if we increase the
minimum wage, we would be affecting the poverty rate. We would
just be affecting how many fewer people would actually be poor.
You say on the uniform Federal minimum wage, why that is
important. If you had a subminimum wage for some States that
didn't apply or a region minimum wage that was lower, would
some States be able to attract businesses by bragging about the
fact that you could underpay your workers?
Dr. Spriggs. There will be an attempt, I am sure, for some
States to brag about it as they do brag that they are not
union, that they do brag about other weak investments. So I am
sure that some States may wish to brag that, yes, we pay our
workers less.
Chairman Scott. You had a chart that showed the support for
increasing the minimum wage amongst Republicans. Are there any
Republican States or States that are considered Republican
States that have recently voted to increase its minimum wage by
referendum?
Dr. Spriggs. Yes. Several of the states are states headed
by Republican Governors who through public referendum have
shown that this is something that the American people agree
with, and they think it is part of their standard.
So whether it is the efforts in Arkansas or the efforts in
some other States, Florida has raised its minimum wage, we have
had a number of victories in red States because of the people
you see with these red shirts and the efforts of organized
labor and the efforts of Americans of all stripes who
understand this is the right thing to do.
Chairman Scott. Thank you.
And, Dr. Zipperer, a lot has been said about job loss, and
we found a couple of studies that have suggested that there
would, in fact, be job loss. Overall, of all the studies done,
what is the conclusion drawn?
Mr. Zipperer. Overall, the recent set of scholarship over
the last 15 years finds that on average the minimum wage does
not have negative effects on employment but, in fact, raises
wages for low wage workers.
Chairman Scott. What is the importance of making the
increase in the minimum wage gradual rather than all at once?
Mr. Zipperer. It is important to allow employers time to
adjust to the new higher wage standard. That is why past
Federal increases and other State and city level increases
include a gradual path to their ultimate minimum wage standard.
So raising the minimum wage gradually to $15 by 2024 as time
passes and the cost of living increases, that is equivalent to
raising the minimum wage to roughly about $13 today.
Chairman Scott. Thank you. And can you say a bit about the
demographics of who minimum wage workers are and their
likelihood of actually spending the increase?
Mr. Zipperer. Yes. So low wage workers are actually an
incredibly diverse population. They are mostly women. They are
more likely to be people of color, more likely to be Black or
Hispanic than White workers. They are likely to be low wage.
If you were to raise the minimum wage to $15 by 2024, the
average age of who would get a wage increase, the average age
would be about 35 years old. Most low wage workers are not very
young at all, primarily because so few teenagers work to begin
with.
Chairman Scott. Thank you.
My time has expired. I would ask unanimous consent that a
letter led by the National Employment Law Project and co-signed
by 500 worker organizations be entered into the record. Without
objection.
[The information follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman Scott. I remind my colleagues that pursuant to
committee practice, materials for submission to the hearing
must be submitted to the committee clerk within 14 days
following the last day of the hearing, preferably in Microsoft
Word format. Materials submitted must address the subject
matter of the hearing. Only a member of the committee or an
invited witness may submit materials for inclusion in the
hearing record.
Documents are limited to 50 pages each. Those longer than
50 pages will be incorporated in the record by way of an
internet link that you must provide to the committee clerk with
the required timeframe, but please recognize that years from
now that link may no longer work.
I want to thank our witnesses for your participation today.
What we have heard is very valuable. Members of the committee
may have additional questions, and we ask the witnesses to
please respond to those questions in writing. The hearing
record will be held open for 14 days to receive those
responses.
I remind our colleagues that pursuant to committee
practice, witness questions for the hearing must be submitted
to the majority staff or the committee clerk within 7 days to
allow ample time for witnesses to respond. Questions must
address the subject matter of the hearing.
Thank you.
And that concludes the first panel. We will have a 15-
minute break before the next panel. We expect votes presently.
And as soon as the votes are over, we will return for the
second panel. Thank you. We are in recess.
[Recess.]
Chairman Scott. The committee will come back to order. We
will now introduce the second panel.
Ms. Vanita Gupta is president and CEO of the Leadership
Conference on Civil and Human Rights, the Nation's oldest and
largest civil rights organization. Ms. Gupta is an experienced
leader and litigator who has devoted her entire career to civil
rights work. Before joining The Leadership Conference, she
served as Acting Assistant Attorney General and the head of the
U.S. Department of Justice's Civil Rights Division.
Ms. Simone Barron has been a full service restaurant
employee for nearly 33 years. She has worked in several cities
across the country, including Indianapolis and Chicago, and has
lived and worked in Seattle for the past 17 years.
Ms. Kathy Eckhouse is founder and co-owner of La Quercia, a
producer of artisan cured meats made with nonconfinement,
antibiotic-free, sustainable raised pork from family farmers in
the Midwest. Based in Norwalk, Iowa, the company produces
products that are sold throughout the U.S. and Canada.
Michael Strain is the Director of Economic Policy studies
at the American Enterprise Institute, AEI. He oversees the
institute's work in economic policy, financial markets, poverty
studies, technology policy, energy, economics, healthcare
policy, and related areas.
Professor Michael Reich is Professor of Economics at the
University of California, Berkeley, where he is also the co-
chair of the Center on Wage and Employment Dynamics. The
professor has published over a dozen books and over 120 papers
and in the past decade has authored numerous policy and
scholarly studies on living wages and minimum wages.
Representative Paul Brodeur is serving his fifth 2-year
term in the Massachusetts State House representing the
residents of the 32d District in Middlesex, just north of
Boston.
He was the House Chairman of the Joint Committee on Labor
and Workforce Development during the 2017-2018 legislative
session. He was successful in convening negotiations between
labor unions, religious organizations, community groups,
business trade groups, and employer advocacy organizations to
reach a landmark agreement which, among other provisions,
raises the state's minimum wage to $15 an hour by 2023.
We appreciate all of the witnesses for being here today and
look forward to your testimony. Let me remind the witnesses
that we have read your testimony and the testimony in full will
appear in the hearing record. Pursuant to committee rule 7(d)
and the committee practice, each of you is asked to limit your
oral testimony to a 5-minute summary of your written Statement.
Let me remind the witnesses that pursuant to Title 18 of
the U.S. Code, Section 1001, it is illegal to knowingly and
willfully falsify any Statement, representation, writing,
document, or material fact presented to Congress, or otherwise
conceal or cover up such a material fact.
Before you begin your testimony, please remember to press
the button on your microphone in front of you so it will turn
on and members can hear you. As you begin to speak, the light
in front of you will turn green. After 4 minutes, the light
will turn yellow to signal that you have 1 minute remaining.
When the light turns red, your 5 minutes have expired, and we
ask you to wrap up.
We will let the entire panel make their presentations
before you move to member questions. When answering a question,
please remember to once again turn on your microphone.
We will start with Ms. Gupta.
STATEMENT OF MS. VANITA GUPTA, PRESIDENT AND CEO, THE
LEADERSHIP CONFERENCE ON CIVIL AND HUMAN RIGHTS
Ms. Gupta. Chairman Scott, Ranking Member Foxx, and members
of the committee, my name is Vanita Gupta, and I am President
and CEO of The Leadership Conference on Civil and Human Rights,
a coalition of more than 200 national organizations working to
build an America as good as its ideals. Thank you for the
opportunity to testify here today about the minimum wage.
The Leadership Conference strongly supports H.R. 582, the
Raise the Wage Act of 2019. Gradually raising the Federal
minimum wage to $15 an hour by 2024, indexing it to median
Federal wages, and ensuring that all tipped workers, working
people with disabilities, and young people get paid at least a
full minimum wage is essential for working people to cover
basic expenses like housing, food, transportation, childcare,
healthcare, and other necessities.
Congress has not raised the Federal minimum wage of $7.25
hour since 2007, and the tipped minimum wage has been stuck at
$2.13 an hour since 1991.
First, the Raise the Wage Act of 2019 is a step in the
right direction toward closing the gender pay gap. In a 2018
report that we prepared with the Georgetown Center on Poverty,
we found that nearly half of working people in our country are
paid less than $15 per hour, 55 percent being women. The
National Women's Law Center and the National Employment Law
Project have noted that women of color are more likely than any
other group to be paid the lowest wages.
Second, on the tipped minimum wage, it is really important
to note its history. Before the Civil War, tipping was largely
frowned upon in the United States, but after the war the
practice of tipping proliferated, and at that time the
restaurant and hospitality industry hired newly freed slaves
without paying them base wages. The effect was to create a
permanent servant class for whom the responsibility of paying a
wage was shifted from employers to customers, and having to
depend on tipping put African-Americans in an economically and
socially subordinate position.
The Fair Labor Standards Act then established a bare
minimum floor for tipped wages only in 1966, and it increased
to $2.13 an hour in 1991, still leaving tipped workers earning
far below their basic needs.
Third, as with the tipped minimum wage, the subminimum wage
under Section 14(c) of the FLSA that allows people with
disabilities working in segregated settings to be paid less
than the minimum wage leaves this already vulnerable community
that much more vulnerable to poverty and exploitation.
I previously served as head of the Justice Department's
Civil Rights Division from 2014 to 2017, where I oversaw the
Disability Rights Section. In 1999, in Olmstead v. L.C., the
Supreme Court held that under the Americans with Disabilities
Act unjustified institutional isolation of persons with
disabilities constitutes discrimination. And, unfortunately, 20
years after Olmstead and almost 30 years after the passage of
the ADA, too many people with disabilities spend their time in
segregated workshops or day programs with some paid just
pennies per hour.
While in theory segregated settings provide job training
and experience to people with disabilities and help them find
regular employment in their community, the reality is that too
many remain stuck in segregated settings for years.
Cases that the Department of Justice investigated to
enforce Olmstead's community integration mandate illustrate the
deep concerns with 14(c) employment, and one of those cases
involved Oregonians with disabilities, people like Gabrielle
who dreamed of saving up money to buy a home, who assembled
nut-and-bolt kits and knee pads in a sheltered workshop for
$100 to $150 per month. And after the settlement, she began
working as a grooming assistant at a dog daycare earning more
than $9 an hour. And as she told a local media outlet, ``I feel
better about my life, and I ended up buying that house.''
Some states and localities have taken action to raise the
minimum wage, and while these States and localities should be
applauded, Federal action is needed to establish a higher
universal floor for wages. The Leadership Conference opposes
prevention laws that allow states to prevent cities and
counties from raising the minimum wage and proposals like a
regional minimum wage that could be misused by employers and
further calcify racial and gender inequities.
At the 1963 March on Washington for Jobs and Freedom, one
of the founders of The Leadership Conference, Black labor
leader A. Philip Randolph, noted, ``Nor is the goal of our
civil rights revolution merely the passage of civil rights
legislation. Yes, we want accommodations open to all citizens,
but those accommodations mean little to those who cannot afford
them.''
Working people should be allowed to live with dignity and
have the dignity of a fair paycheck, and that is what the Raise
the Wage Act of 2019 would do. And I want to thank you for the
opportunity to testify at today's hearing.
[The statement of Ms. Gupta follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman Scott. Thank you.
Ms. Barron.
STATEMENT OF MS. SIMONE BARRON, SEATTLE, WA
Ms. Barron. Good afternoon and thank you, Chairman Scott
and Ranking Member Foxx, for the opportunity to testify today.
My name is Simone Barron. I am the mom of a smarty-pants
teen boy. I am a semi-professional actor, and I have worked in
the full-service restaurant industry for nearly 33 years. I
have worked in several cities across the country, including
Indianapolis and Chicago, but I am coming to you today from
Seattle, Washington, where I have been a tipped worker there
for the past 17 years.
Today the minimum wage in Seattle is $15 an hour, and it is
supposed to be a paradise for employees like myself. Instead, I
am watching my income drop as the mandated wage rises. As I
have learned that Chairman Scott has proposed to raise the
Federal minimum wage to $15, I am here to tell you to, to warn
you, and to share with you my experience as a full-service
restaurant worker living in a city with a $15 an hour minimum
wage.
To understand my predicament, you first must need to
understand my industry a bit. Control over my earnings is one
of the biggest perks of working in the restaurant industry. The
harder I work to show hospitality to my guests, the better my
tip, and that is an average of 20 percent that I can garner on
about every bill.
The standard tipping model also has a cost of living
increase built into it, too. As the cost of goods go up, menu
prices go up, and so do my tips.
Contrary to the rhetoric of my industry's critics, I am not
forced to rely on tips. I have been able to thrive on tips.
Historically, in short four-to 6-hour shifts, I can earn $25 to
$50 an hour, and that is enough to make a life for myself and
my son.
In Seattle, the rapidly rising minimum wage has upset this
beneficial arrangement. Without getting into the nitty-gritty
details, you should know that Seattle is one of a handful of
locales in the country that doesn't count my tips toward my
hourly wage. What this means in practice is that the pressure
other businesses are feeling under the 15 is magnified in full
service restaurants.
Things have started to change in Seattle in our industry in
ways that have negatively affected workers like myself. At my
restaurant, it was the loss of tipping. As 15 went into effect,
some restaurants made the decision to change the tipping model
either in favor of a flat stagnant wage or replaced with
service charges to substitute for tipping.
The math on that is pretty simple. If you are forced to
give a raise to tipped employees who are already making
hundreds of dollars a night in tips, where does the money to
pay for it come from without a huge jump in prices. Well, my
employer, who is a leader in our restaurant community, took
away tip lines and went to a service charge model in order to
keep his restaurants sustainable for as long as possible.
Service charges are a mandatory charge to a guest that must
be filtered through the employer and in which the employee
receives a percentage instead of a customer tip. In my case, I
receive only 14 percent of my sales from a 20 percent service
charge on a bill. So from a $100 sale, I receive $14 on my
paycheck as a salary commission instead of the $20 or more in
cash tips that I could have received before. The other $6 is
then retained by the house to be paid out to support other team
employment costs and benefits like insurance and vacation.
The few dollars an hour increase in my minimum wage doesn't
cover the loss of income because of not receiving tips. Under a
service charge model, it is less about how I use my knowledge
and skills to maximize my income. I am no longer bothered to
give excellent service to receive that tip but must instead
sell you the most expensive item on the menu to make the sale.
The minimum wage increase has literally changed my job from the
art of service to a routine sales job.
I used to work four shifts a week and made enough money to
raise my son, pay my rent, go to school, and be part of a
vibrant arts community. With the cost of living skyrocketing
and the impact of the minimum wage increase on my income, I had
to get a second job and work 6 days a week.
I couldn't sustain that pace. Now I worry every month about
paying my rent, and this is a worry that I never had until the
minimum wage increase impacted my job. I have had to give up my
passion for acting, I no longer can take trips with my kid in
the summers, and my smaller income all goes to bills. All my
time goes to picking up just one more shift.
I have many friends who have lost their jobs because of the
rise in the wage. And these are not people of privilege. These
are working folks, people who have invested in their jobs,
moved up ladders through experience and education, worked hard
to grow their jobs, only to lose their jobs because of a policy
forced on their employers.
My friend, JW, is one of those. He worked his way up from a
busser to a sommelier over years of experience but lost his job
because the restaurant he worked closed in Seattle because of
the minimum wage increase.
My friend, Ritu was excited when she opened her pizza
place. As an Indian female business owner, she was proud that
all of her hard work and experience had led her to a place
where she could be an owner. After the increase, she closed
because she could not make the numbers work.
And these are just two of several dozen stories.
Now, I understand the typical arguments for legislating
higher wage rates, and I especially understand that in Seattle,
where the cost of living is incredibly high, but there is no
free lunch here. Under our minimum wage increase, tipped
workers are losing our incomes and moving backward to $15 an
hour. And I would happily trade my gig in Seattle for the
golden days in Indianapolis, a so-called low-wage market, where
I wouldn't be working more for less and watching my financial
stability whittle away as the minimum wage rises.
Unfortunately, if Chairman Scott's one-size-fits-all bill
is passed, I won't even have that option to consider.
Thank you, and I would be happy to answer questions.
[The statement of Ms. Barron follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman Scott. Thank you.
Ms. Eckhouse.
STATEMENT OF MS. KATHY ECKHOUSE, OWNER, LA QUERCIA, NORWALK, IA
Ms. Eckhouse. My name is Kathy Eckhouse. I am the co-owner
with my husband of La Quercia in Norwalk, Iowa. We make award-
winning cured meats, like prosciutto and pancetta. We source
exclusively from family farms in the United States, primarily
in Iowa and Missouri. I strongly support raising the Federal
minimum wage to $15 by 2024 as called for in H.R. 582 because
it will be good for businesses, workers, and our economy.
We founded our business in 2000 and by 2004 we were able to
build our own production facility. We started with just
ourselves and now have 60 employees. Our products are sold
across the United States and Canada in large grocery chains
like Hy-Vee and Whole Foods as well as independent shops.
We have always paid a livable wage, and that is an
important factor in our success. We are a meat processor, a
generally low-paying sector of the economy. We have been
committed from the start to true sustainability and livability
in our work chain from the farmers to our employees.
Our starting hourly wage for production staff is $12 to $14
an hour, depending on experience. The cleanup crew, which works
a later shift, gets a $2 an hour premium. Anyone with us for 2
years or more is currently making at least $16 to $17 per hour
plus a quarterly bonus equivalent to a week's wages. We also
provide paid time off, paid maternity leave, and other
benefits. All our employees work full-time year round.
The Raise the Wage Act does not call for a quick jump to
$15. It calls for gradually raising the minimum wage to $15 by
2024 which will give businesses time to adjust and experience
the benefits of higher wages.
Reduced turnover is one benefit. High employee turnover is
common in low wage industries. Turnover is costly for a
business in terms of both money and time, requiring advertising
open positions, screening applicants, training, and onboarding.
Employees new to our operation or any operation are less
productive. It takes at least 3 months for an employee to learn
our particular processes and be efficient, even those who
worked in meat processing plants before. It takes a year for
true proficiency. We see more waste, more downtime, and more
inefficiency on our production line with newer staff. That is
costly.
In addition, not spending time on a constant cycle of
rehiring and training frees us to look beyond the day to day to
innovate and grow our business. It encourages employees to be
part of that process, too, as they develop new skills and
techniques and familiarity with our work.
A minimum wage that covers the basics like rent, groceries,
and transportation reduces turnover, reduces employee stress,
and allows them to be more focused and productive at work.
It also has a broader societal impact. When businesses pay
wages that are not enough to live on, the costs of necessities
get partly shifted to the community at large, the taxpayer-
funded government assistance programs and food banks, for
example. It also means that our business is subsidizing the
profits of low pay competitors.
This is not a fair or efficient way to run an economy.
Workers in one business are the consumers for another. Minimum
wage increases put money in the hands of people who will spend
it. Increased wages mean increased consumer spending.
My home, State of Iowa uses the Federal minimum wage floor
of $7.25, as do 20 other States. In 2017, Iowa enacted a law
that blocked cities or counties from setting higher minimum
wages, and it is unlikely that Iowa will raise our state
minimum wage ahead of the Federal. We need a Federal increase
to ensure that wherever people live and work in Iowa or around
the country and whoever they work for, they can at least meet
their basic needs.
For 80 years, the Federal minimum wage has set the national
wage floor. I do not support a regional approach to the Federal
minimum wage. Nobody should receive a geographical penalty on
their wages.
Raising the minimum wage is not a threat to business.
Inadequate wages are, weakening the consumer demand that
businesses depend on to survive and grow. The minimum wage is
the floor in working people's lives and should enable a minimum
standard of living that workers and businesses can build on, as
we have.
This is why I have joined with businesses across the
country to call for raising the Federal minimum wage. It is
time to get moving to $15 by 2024 to help businesses, workers,
communities, and the economy to thrive.
Thank you for having me today, and I am happy to answer
questions.
[The statement of Ms. Eckhouse follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman Scott. Thank you. Dr. Strain.
STATEMENT OF DR. MICHAEL R. STRAIN, PH.D, DIRECTOR OF ECONOMIC
POLICY STUDIES, AND RESIDENT JOHN G. SEARLE SCHOLAR, AMERICAN
ENTERPRISE INSTITUTE, WASHINGTON, D.C.
Mr. Strain. Chairman Scott, Ranking Member Foxx, and
members of the Committee, thank you for the opportunity to be
here today to discuss raising the Federal minimum wage to $15
per hour. It is an honor. Congress should not increase the
minimum wage to $15 per hour. The benefits of doubling the
minimum wage would accrue to middle class households while the
cost would be borne by workers with relatively fewer skills and
less experience.
It is already difficult enough for workers without a
college education, workers trying to get their start in the
labor market, and more vulnerable workers, including the
formerly incarcerated, to find jobs. Congress should not erect
a barrier in their paths in order to legislate a raise for the
middle class.
Increasing the minimum wage to $15 per hour would very
likely result in significant reductions in employment. For
context, consider the Congressional Budget Office's analysis of
President Obama's proposed $10.10 minimum wage. CBO found that
would cost half a million jobs. Importantly, CBO also found
that the extra earnings generated by a $10.10 minimum wage
would accrue to households above the poverty line. Three
dollars out of every $10 of extra earnings would go to
households earning more than triple the property line, while
only $2 in every $10 would go to the working poor. Fully $8 in
$10 of extra earnings generated by the $10.10 minimum wage
would go to families in the working and middle classes and not
to the working poor.
CBO's analysis then highlights several important tradeoffs
for minimum wage increases. First, they reduce employment while
raising earnings. Second, most of the benefits of increases go
to families that aren't in poverty, while most of the costs are
borne by the least-skilled and least-experienced workers in the
labor market. These tradeoffs are only more severe for a $15
minimum wage, because $15 is such a high-wage floor.
It is hard to overstate how high this wage floor would be.
Over half of all workers in Mississippi and Arkansas make less
than $15 an hour. In 20 States, half of all workers earn less
than $17 an hour. Nationally, around one-third of workers, one-
third earn less than $15 per hour.
Given how many workers earn at or just above $15 per hour,
a $15 wage floor would be extremely disruptive to the labor
market and would likely cause significant employment reductions
and other unintended consequences. It is hard to forecast with
confidence how severe employment reductions would be, because a
$15 minimum is so far outside our evidence base. But research I
have done studying previous minimum wage increases finds that
larger increases produce disproportionately larger employment
reductions. In other words, if employment fell by X percent
when we last increased the minimum wage, my expectation is that
employment will fall by more than X percent as the minimum wage
goes higher and higher.
The productivity of workers, the additional revenue they
are able to generate for their employer for each hour they
work, is the primary determinant of their wages. Why would a
firm pay a worker $15 per hour when that worker is only
generating, say, $9 in revenue for every hour he or she works?
If a firm paid this high minimum wage to that worker, it would
be losing money every hour he or she worked. Businesses can
absorb and have absorbed minimum wage increases through
channels other than reducing employment, but they can only cut
profit margins so much or raise the prices they charge for
goods and services so much higher.
Doubling the Federal minimum wage will leave many with no
choice other than to cut jobs. This is particularly true if
Congress indexes the minimum wage to median wage growth or to
any other measure of price or wage inflation. Research I have
done shows that preventing the value of the minimum wage from
eroding over time through indexing leads businesses to reduce
employment more than they otherwise would. My research finds
the magnitude of employment reductions is three times more
severe in the presence of indexing.
Raising the minimum wage to $15 an hour sends us into
unchartered waters. It is imprudent. It is a very risky gamble,
with the employment opportunities and livelihoods of the least
skilled, least experienced, and most vulnerable workers in the
United States bearing the risk. There are better ways to help
the working poor than a policy that risks putting so many of
them out of work. Thank you.
[The statement of Mr. Strain follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman Scott. Thank you. Dr. Reich.
STATEMENT OF DR. MICHAEL REICH, PH.D., PROFESSOR, UNIVERSITY OF
CALIFORNIA, BERKLEY, CA
Mr. Reich. Thank you, Chair Scott, Ranking Member Foxx, and
the other members of the committee, for the opportunity to
testify today about the Raise the Wage Act of 2019.
I want to begin--and this is not planned--by talking about
Amazon. Amazon announced last October it was going to raise its
minimum wage for all its workers--temporary, seasonal regular,
250,000 workers in the United States--to $15 an hour. It was a
substantial increase, even in rural areas and in low-wage areas
of the South. These are for the big warehouse centers that they
maintain.
This was a good business decision by Amazon. It has not
disrupted those local labor markets, those rural labor markets.
In fact, Amazon, the only disruption I guess is that Amazon got
850,000 requests for a job at Amazon, quite a large number,
reducing their recruitment and retention costs.
I wanted to make five points or touch on five points. Well,
rather than say what they are I will just go through them,
because I don't have enough time to do the prelims. First of
all, the increase from $7.25 to $15 is over 6 years, is
surprisingly smaller than it might appear. First, $15 in 2024
is about $13 or $13.33 in 2019 dollars, depending on which
price series and forecast you use.
Second, entry-level wages in unskilled jobs in our low-wage
states, not just in high-wage states, in our low-wage states
are already near or above $9. We heard some testimony, some
comments earlier today to that effect in North Carolina. And
those wages are going to go up anyway, 3 percent per year has
been the forecast that was mentioned. That would bring you to
$10.50 anyway by 2024.
So an increase from $10.50 to $13 is about a 30, 35 percent
increase, 5 percent per year. That is well within the range of
previous experience. If you want to calculate it another way,
you could say that the increase from $9, the entry-level pay
today, to $13.33 is a 48 percent increase. That sounds high,
but it is over 6 years, so it is about 8 percent per year. By
comparison, most of the 140 or more State and Federal minimum
wage increases of the past 35 years have averaged between 6 and
9 percent. Some of the citywide minimum wage increases have
been as high as 28 percent in a given year.
Now, 5 years ago, many minimum wage experts, including
myself, told officials in Seattle and Los Angeles that a $15
minimum wage would be a bold experiment into unchartered
territory. In 2019, however, we have the early results from
many recent minimum wage experiments. These include States like
California and Massachusetts that are $12 an hour, New York
City that is at $15, San Francisco is at $15, Seattle is at $15
and so forth. So the increase in real wages from H.R. 582
actually does lie within our historical experience. That means
that the studies that researchers have done does provide a good
roadmap to what the likely effects are going to be.
Now, I want to emphasize that the studies that minimum wage
economists have done have really changed in their findings over
the last 30 years, especially in the last 10 years and even in
the last year. Increasingly, we find very small effects of
minimum wages on employment. It is really important to be up to
date when doing a review of this literature. And these new
studies are of better quality, they have better data than the
old ones, and they have been influential.
In 2015, a panel of prominent economists put together by
the University of Chicago Booth School of Business asked the
panel what would be the likely effects of a $15 minimum wage?
This was in 2015. An overwhelming majority did not think it
would have a substantial negative effect on employment. Since
then, we have had further improvements in our research methods
and the datasets that we can use to study the effects of
minimum wages.
These newer studies really supersede the estimates from the
old ones. It is just not Ok anymore to rely on these very old
studies. We now, for example, have excellent estimates of the
effects on all jobs. Our older studies used to look at teens
and restaurant workers, and we would then try to guess how many
workers would be affected throughout the labor force. CBO just
took a guess at that in 2014.
What do these studies tell us? Well, I review the
literature in detail in my submitted testimony. In one
sentence, I would say the new studies indicate that a $15
minimum wage by 2024 will work as it was intended to, that is
intended to, increase pay, will have minimal to no adverse
effects on employment.
I have to say, of course, that I have been a participant,
an active participant in doing these studies. My most recent
one looked at minimum wages in six cities that are the pioneers
in going above $10 all the way. By 2016, they were $13, which
is the equivalent of--well, it is higher than what $15 would be
in 2024. And those included some low-wage cities or low-cost
cities like Chicago as well as San Francisco and Seattle and so
on. And we found, a very careful study, that it did not have
any effect on restaurants' employment.
Why does the minimum wage have such small effects? We are
also making progress on that front. Labor demand might fall,
that is true, but automation is really overrated. A lot of it
has already happened. It is going to happen anyway, because
technology costs are falling. Don't blame the minimum wage for
the good effects of automation. Labor supply has not been
mentioned very much, but labor supply of low educated workers
is going to increase, especially those who have young children
and high child--
Chairman Scott. Summarize the rest of your testimony. You
are about a minute and a half over.
Mr. Reich. I am not following what you are saying. I still
have a minute and a half, right?
Chairman Scott. No, you are over a minute and a half.
Mr. Reich. Oh, my God. Ok. I will bring it to a close. All
right. I will bring it to a close.
I will just say very briefly that there are price
adjustments that will occur that are pretty small that could be
handled by most industries. Individual businesses can't
understand how much the prices are going to go up, because they
are just an individual business. But these costs are changing
for all businesses, and when you do the math, simple math, you
find very small price increases. The latitude to increase
prices is more limited in manufacturing, but we have already
lost all or most of our low-wage manufacturing.
And then we are going to have an economic stimulus, because
there will be more consumption demand. The effects will be
greater in the low-wage cities--low-wage states, I am sorry.
And the low-wage States will have a more educated, more
healthy, and a bigger work force. So I would say, contrary to
the fears that some people have said that you have to look only
at cost, in fact, the effects are going to be much better in
the low-wage States.
Thank you. And apologize for going over.
[The statement of Mr. Reich follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman Scott. Representative Brodeur.
STATEMENT OF THE HONORABLE PAUL A. BRODEUR, ESQ., STATE
REPRESENTATIVE, 32ND MIDDLESEX DISTRICT, COMMONWEALTH OF
MASSACHUSETTS HOUSE OF REPRESENTATIVES
Mr. Brodeur. Good afternoon, Mr. Chairman, Ranking Member
Foxx, and members of the committee.
My name is Paul Brodeur, and I have the honor of serving
the residents of Melrose, Wakefield, and Malden in the
Massachusetts State Legislature as their State Representative.
I wish to share my perspective on the success we have had
in the Commonwealth of Massachusetts confronting the problem of
wage stagnation while creating a stronger economy by increasing
our minimum wage to $15 an hour by 2023. Two years ago, under
the leadership of our Speaker, Robert DeLeo, I was appointed to
serve as the House chair of the Joint Committee on Labor and
Workforce Development.
The Commonwealth faced significant challenges. Despite
historically low unemployment rates, income inequality was
growing. New jobs were being created at a promising rate, but
overall wage growth remained stagnant. Like you, our committee
held extensive hearings and heard many hours of testimony. The
statistics and expert testimony were compelling, but I was
particularly struck by the stories we heard from Massachusetts
workers and their families. We heard from single moms and dads
that were working multiple jobs, teens who helped their
families make ends meet, and families who have been working
paycheck to paycheck for generations.
We also heard from employers who care deeply about their
workers, but were concerned about the impacts on their
businesses. In particular, middle-skilled jobs went unfilled,
which limited their business growth. And we heard from folks
who want to get ahead, who want the training and skills to move
out of low-wage jobs but cannot, because they do not have the
time, energy, or money to seize those new opportunities.
In response, our committee convened negotiations among a
broad coalition of community organizations, religious groups,
labor unions, and representatives of businesses, both large and
small. Ultimately, we were successful in passing into law a
bipartisan bill, which improved the financial stability of
working families in the Commonwealth within a robust Statewide
economy. Here is what shaped our efforts: We knew from our past
experience that previous increases to our minimum wage had
produced economic gains for workers while unemployment
decreased and business confidence increased.
Looking forward or projecting ahead, the Massachusetts
Budget and Policy Center testified that nearly one-quarter of
Massachusetts workers would benefit from an additional gradual
increase in our minimum wage, and that this would include
nearly one-fifth of all working parents in Massachusetts. We
also knew that these working families will spend their
additional income on our main streets and in our downtowns.
These observations of our past experience, coupled with
projections based on sound economic principle, led us to
raising our minimum wage.
During our deliberations, we considered a regional minimum
wage, but rejected implementing one. We found it is very
difficult to draw those lines, particularly when geography is
not a clear indicator of cost of living. Locking certain
regions of our State into lower wage status by using regional
wage boundaries would detract from our hard work in investing
in and revitalizing those cities, towns, and neighborhoods that
needed help the most.
Similarly, we rejected the creation of a training wage or
teen minimum wage. Now, we all agree on the importance of
getting that first job. It can be an incredible learning
experience and can be a foundation for lifetime success.
However, the testimony we heard and the statistics we reviewed
told a more complicated story about teen employment.
Teen workers are responsible in Massachusetts for nearly a
fifth of household income amongst our poorest families. These
teens are not merely working a summer job for extra spending
money, but they are functioning as breadwinners for their
families or earning money to further their education. Creating
a complicated training wage system that few would use or a teen
wage that would push other low-wage workers, including seniors,
out of the job market was inconsistent with our goal of helping
working families.
So, contrary to what you may think, Massachusetts isn't
populated exclusively with elitist, wealthy, Ivy Leaguers. We
are a diverse state of financiers and family farmers, laborers
and lawyers, researchers and entrepreneurs, blue bloods and
blue-collars. We have a proud history of tackling hard problems
by working together to solve them. Finding a balance between
these diverse and often conflicting interests was at the
forefront of our work in raising up the minimum wage.
I appreciate the opportunity to address you today. I thank
you for the opportunity, and I am available to answer any
questions you might have.
[The statement of Mr. Brodeur follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman Scott. Thank you. Thank you.
We will now recognize members in the order of appearance
this morning, and the first one is Representative Adams of
North Carolina.
Ms. Adams. Thank you, Mr. Chair, and thank you, Ranking
Member. And thank you all for your testimony and for being here
today to our second panel of witnesses.
We have been here a while and we have had I think a lot of
testimony and certainly testimony to the fact that poverty
level wages don't instill dignity. That is the first thing I
want to say. Equality makes dignity, and dignity demands a job
and a paycheck that lasts throughout the week, and I am quoting
Dr. Martin Luther King on that.
I am glad that we split today's hearing into two parts,
because I don't think enough is said about the positive impact
that raising the minimum wage has on our economy as a whole.
Too often we view economic progress as a zero-sum game where if
workers win, employers lose. But our economy is built by
consumers. The more money Americans have in their pockets, the
more they can spend on the goods and services that American
businesses produce. So don't take my word for it, a consensus
of economists say the same thing.
And with that, Mr. Chair, I want to enter into the record
two letters, both from the Economic Policy Institute, one from
Senior Economist and Director of Policy Heidi Shierholz, and
the other signed by a collection of over 100 of our Nation's
leading economists.
Chairman Scott. Without objection.
[The information follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Ms. Adams. All of these individuals are in support of the
notion that a $15 minimum wage is beneficial to our economy and
is long overdue.
Ms. Eckhouse, you state in your testimony that when workers
have more money in their pockets, they spend it. Why is it
that--so why is it that it is so important for a business,
including a business like yours that does not sell directly to
consumers?
Ms. Eckhouse. Thank you for your question, Congresswoman.
One thing that is very important to us is, of course, what
we make is sold to be eaten, and people need to be able to buy
it so that they can enjoy it and we can continue as a business.
So that is the first element. People have to have money in
their pockets to buy food, and we make food. That is one thing
that we do.
The other thing that is important is that if people in our
employ or in other companies' employ have more money, they can
do things like purchase goods and services in their
communities, and that is really important.
Ms. Adams. Ok. Everybody has to eat, and we heard this
morning from laborers, workers who are in the fast food
business and other businesses who have a difficult time trying
to make the ends meet for their family.
Professor Reich, the research and the testimony of Ms.
Eckhouse clearly makes a compelling case that increasing the
minimum wage boosts consumer spending. What about savings?
Mr. Reich. First, I think her argument is borne out by a
number of studies from the Federal Reserve Bank of Boston that
show that the bigger the wage increase, minimum wage increase,
the more consumer spending goes up. I think people who are
making the minimum wage, most of them aren't saving, and
probably most of their income, most of their increased income
goes to items like food, to buying a used car.
The other effect that it has is on improving credit scores.
And if you improve credit scores, you know, you have much lower
interest rates and you can borrow. So ultimately, maybe it will
get you to savings, but I don't think at $15 we are talking
about a lot of savings.
Ms. Adams. Ok. Can you make the argument that raising the
minimum wage allows individuals and families to make
investments that provide long-term sustainable returns?
Mr. Reich. Well, first of all, I think people who are
struggling to make ends meet every month--and that isn't just
people who are below the poverty line, it is many people who
are above the poverty line. The Federal Reserve just did a
survey showing about one-third of Americans couldn't meet a
sudden $400 financial requirement. One-third, that is a very
large number.
Anyway, people who are struggling on a day-to-day level
like that aren't--you know, they are having a hard time being
organized. They are having a hard time getting their kids to
school, getting their cars to work, dealing with all the
disruptions that everyday life has. And so I think if they want
to, you know, be able to invest in training and education, it
requires more income. Often it requires more time, you know,
being able to work.
Ms. Adams. Ok. Thank you very much.
Mr. Chair, I yield back.
Chairman Scott. Thank you. Ranking Member Foxx, do you want
to be recognized?
Ms. Foxx. Would you recognize Mr. Comer?
Chairman Scott. Ok.
The gentleman from Kentucky, Mr. Comer.
Mr. Comer. Thank you, Mr. Chairman.
And, Ms. Barron, I really appreciated your testimony. The
minimum wage is often talked about as a policy to help low-wage
or lesser skilled workers, but you didn't seem to fit in either
of those categories. You are earning a good living--
Ms. Barron. I do, yes.
Mr. Comer [continuing]. in the restaurant business. But
that was because of your skills and your work ethic--
Ms. Barron. Yes.
Mr. Comer [continuing]. and your experience. Seattle's $15
minimum wage did not appear to help you. Would it have been
better for the city of Seattle to just not do that and not try
to help you?
Ms. Barron. I didn't ask for the help. I was doing just
fine. We don't have a tip credit in that city, and that is
another reason why it just is not working out.
Mr. Comer. That is my experience. I was a state legislator
for 11 years in Kentucky, and I look back from a historical
standpoint and there were a lot of bills that passed with good
intentions but had unintended consequences. And I want to say
it sounds like a policy that was supposed to help workers now
appears to be doing the opposite in Seattle.
As we are considering a legislative proposal to radically
increase the Federal minimum wage and eliminate the tip credit,
what would you want us to take into consideration, based on
your experience?
Ms. Barron. I would say take into consideration tip credit
for sure. I mean, that is one of the reasons why tipped workers
in Seattle are having a hard time now. The tip models are
changing, and we are losing money. And, you know, I lose money
on a daily basis under a service charge, which is something
that is going citywide now.
And so I would say you have to look at this whole
situation. It is a one-size-fits-all deal, and it doesn't fit
everything. So please, you know, look at it a little closer.
Mr. Comer. And I couldn't agree more that one size does not
fit all, because the economy in Washington State is
significantly different than the economy in rural Kentucky,
where I represent. So I appreciated that.
Dr. Strain, as you noted in your testimony, there are large
regional differences in cost of living and average income.
Obviously, the cost of living in Seattle is significantly
higher than it is in Monroe County, Kentucky, where I reside.
Can you elaborate on how a $15 minimum wage may result in
disproportionate job losses in regions that have lower cost of
living and lower average incomes?
Mr. Strain. Yes. In addition to those differences, there
are also differences in the existing minimum wages. Some States
follow the $7.25 Federal minimum. Other States have
significantly higher minimum wages. And, you know, the
important thing to consider is how big of a shock will this be
to the employers of low-wage workers?
There are many businesses who will see the cost of
employing minimum wage workers double. There are some
businesses who will see the cost of employing minimum wage
workers not double, but go up by 50 percent or something like
that. And it stands to reason, and the evidence bears out, that
the larger that shock and the larger the increase, the harder
it will be for businesses to deal with that without reducing
employment.
Mr. Comer. And I will say again what I said in the first
segment of testimony this morning. I believe that we are in a
position in America now where we are finally starting to see
wage growth. I think it is a result of policies over the last 2
years from a regulatory standpoint and from a lower taxation
standpoint. Hopefully, we won't do anything to deter the job
growth that is being created just from the market. There is a
shortage of workers. It is basic supply and demand.
So I appreciate you all's testimony. Thank you, Ranking
Member Foxx, for letting me ask questions.
And I yield back, Mr. Chairman.
Chairman Scott. Thank you. The gentlelady from Oregon, Ms.
Bonamici.
Ms. Bonamici. Thank you, Chairman Scott.
And to the witnesses, I apologize I was not here to hear
you present your testimony, but I certainly have reviewed it. I
think it is important to keep in mind as we have this
conversation about the Raise the Wage Act, which I am proud to
support, that the increase is phased in. It is not all of a
sudden. And also, low-wage workers spend their additional
earnings. They go right back into the local economies.
Ms. Gupta, in your testimony, you talk about how over 31
million children, two out of every five children live in
households with at least one working person earning less than
$15 an hour. Can you talk a little bit about how--because we
talked a lot about the wage earners, but can you talk a little
bit about the children and how these low incomes affect them,
their health, their education as they are growing up?
Ms. Gupta. Yes. Thank you, Congresswoman, for the question.
Everyone should be paid fairly, including young people. And
some young people working--some young working people I should
say currently being paid the lower youth subminimum wage, they
are also students. Some of them are the sole family wage
earner. We heard from Mr. Wise this morning, who talked about
his own experience being the main provider for his family and
being unable to do so on the existing minimum wage.
The National Employment Law Center notes that of the 18-and
19-year-olds that are enrolled in college, 70 percent are
working. And so that is why we have to be paying attention to
the role that young people play in their families. For many of
them, they really are, you know, mainstream supporters and
earners for their families and have a lot of other obligations.
Ms. Bonamici. So it is fair to say that the children who
are being raised by parents making less than minimum wage are
affected as well. It doesn't just affect the wage earner; it is
affecting their families and their children as they are growing
up, because they might not have the food and resources and
healthcare they need.
Ms. Gupta. Absolutely.
Ms. Bonamici. And also, Ms. Gupta, I want to get a couple
questions in. Oregon is one of those States that prohibits
employers from paying tipped workers a subminimum wage. I said
this morning I was surprised to find out that there were other
states that allowed a subminimum wage. Research demonstrates
that workers in the seven States that have eliminated
subminimum tipped wage continue to receive tips from customers.
Businesses have not suffered hardship.
In your testimony, you discuss the origins of the tip
minimum wage, which are intertwined with the history of slavery
in this country. Why do some states still continue to allow it
and who would benefit from gradually phasing it out, as
proposed in the Raise the Wage Act?
Ms. Gupta. Well, the civil rights history I think or the
history of the tip minimum wage is crucial to understanding why
States need to move away from it. The reality is that poverty
rates for people who work for tips are more than twice as high
as rates for working people overall. And the people most
affected are women of color, low-wage earners. The median
annual income for tipped workers of color is $14,300. For black
working people, it is even lower at about $12,900 per year.
And as we noted, tipped workers have not received a raise
in 28 years, but the actual racial impact and the gender impact
of the current policies in states that have frozen the tip
minimum wage for so long really disproportionately impacts
women of color in families.
Ms. Bonamici. Thank you.
And, Dr. Reich, thank you for your testimony. The most
recent increase to the Federal minimum wage a dozen years ago
did not address inflation rates, or in my State of Oregon, we
indexed to inflation, based on the CPI.
And I wonder if you could talk a little bit about how $15
in 2024 does not equal $15 in today's dollars. When you adjust
past increases to the Federal minimum wage for inflation, how
does the Raise the Wage Act compare? Based on your research,
can you address projected effects on employment?
Mr. Reich. On employment? Well, first, the question on
indexing, there are about ten states that index their minimum
wages, and I couldn't find any difference on the employment
effects in the states that do and the states that don't.
The States that do index and have for a long time, like
Washington and Oregon, are actually a very interesting research
topic, because in the rest of the country the real minimum wage
has fallen where there hasn't been indexing and it stayed at
$7.25. So you see an increase in the minimum wage, but then in
the subsequent years the real value decreases. So, you know,
are we really observing an increase in the minimum wage when we
look at those events? In the index states, we do see those
events. So I think that is--and in those states, we don't see
negative effects on employment from indexation.
Indexation means that there is a planful, you know,
approach to the minimum wage each year, which means a small
couple of percent increase rather than the kind of sawtooth
pattern that we have, we have big increases every 10 years or
so followed by long periods where we don't.
Ms. Bonamici. Thank you.
And I yield back. Thank you, Mr. Chairman.
Chairman Scott. Thank you.
The gentleman from Kansas, Mr. Watkins.
Mr. Watkins. Thank you, Mr. Chairman.
Dr. Strain, you bring up the fact that there is a lack of
international evidence regarding the effects of doubling
minimum wage. In fact, you explained how States who increase
their minimum wage are taking on a gamble. Now, I asked for
international comps because I have lived outside the U.S. most
of my career. I have been to about 75 countries, and I have
never seen a country with more economic opportunity and more
freedom and a chance to advance as the United States.
So my question is, why is there a lack of international
evidence that might compare to what this committee is
considering today?
Mr. Strain. Well, I think it serves to highlight how major,
how big of a decision this would be for the Congress. There are
not countries that have gone up to a level like $15, because
$15 is a very high wage. There is a reason why in the United
States only until very recently no states had gone up to $15,
and there is a reason why the Federal minimum wage is less than
half of $15.
Mr. Watkins. Can you think of any other nations in
particular that might have come close?
Mr. Strain. I think Great Britain is around $12 or so.
Mr. Watkins. All right. That is all I have.
Thank you, and special thanks to Ms. Barron. I really
appreciate your willingness to come and speak with us today.
Your testimony was very moving and you are very selfless. Thank
you.
Ms. Barron. Thank you.
Chairman Scott. The gentleman yields back.
The gentlelady from Florida, Secretary Shalala.
Ms. Shalala. Thank you very much, Mr. Chairman.
Just to begin, Florida's minimum wage as of January 1st is
$8.46. It does increase with the rate of inflation, but a
living wage in Miami-Dade, in my district in particular, would
have to be almost $13. So I very much support this gradual
increase.
If I could start with Mrs. Eckhouse, I am very excited to
see you, because I get your meat through Murray's.
Ms. Eckhouse. Wow, I am thrilled. Thank you.
Ms. Shalala. I have to disclose that. So I am a big fan.
Ms. Eckhouse. Wow, that is really exciting. Thank you so
much.
Ms. Shalala. I am interested because you are in the middle
of Iowa, obviously in a small--it looks like a small town in
Iowa. Tell us a little about the turnover rate, how long your
employees have worked for you, because I have always been
interested in when you raise wages what that actually does with
turnover and retention. You obviously have done this over a
long period of time.
Ms. Eckhouse. So we opened our plant--we built our plant in
2004 and we opened it in 2005, in February. Our longest term
employees have been with us since then, just a few. And we have
had periods of greater and lesser turnover, but we do have a
lot of loyalty among our employees. They appreciate that we pay
high wage to them, as high as we can manage, that we give them
regular increases in their wage. And we have a lot of other
elements that we offer to our employees in addition to their
hourly wage or their salary.
But we have--we really--given the industry that we are in,
which is the meat processing industry, we have a relatively low
rate of turnover among our employees; and that is, as I said in
my testimony, really critical to us, because, like all
businesses, what we do is unique, but ours is possibly more
unique than others, which I realize is not a grammatically
correct formulation. But really, what we do is unusual and we
need to train people very carefully to do a good job. And it
takes a long time to train them, and to have people walk out
the door because they can get more money somewhere else, that
is damaging to us as a business and discouraging to us as well.
Ms. Shalala. Thank you very much.
Dr. Reich, I have been very interested in your work for
some time, and I am particularly interested in the discussion,
and you are talking to us a little about the offset for minimum
wage, the SNAP program, for example. And that is, by raising
the minimum wage, I believe we would save money on the
Supplemental Nutrition Assistance Program, because there would
be less people using that program as the minimum wage went up.
Mr. Reich. That is right. I looked at not just the rules,
which say that there is a ceiling above which you are no longer
eligible for the SNAP program, and that it is not really--or to
mix my metaphors up, I guess, it is not a cliff. You don't fall
off it all of a sudden. It is a gradual decline in the food
stamps that you get. And when I compared that across states
with different minimum wages and try to make everything else
controlled so that it was a controlled experiment, we found
that, indeed, higher minimum wages led to lower food stamp
expenditures as well as food stamp enrollments.
Ms. Shalala. I appreciate that.
Mr. Chairman, just raising, increasing the minimum wage in
my State of Florida to $10.10 per hour would decrease SNAP
expenditures by $290 million. So when we talk about raising the
minimum wage, we have to look at how it would offset certain
Federal programs and actually create an offset that would be
significant for the Federal Government.
Thank you. I yield back.
Chairman Scott. Thank you. The gentleman from Idaho, Mr.
Fulcher.
Mr. Fulcher. Thank you, Mr. Chairman.
I think my question is best geared toward Dr. Strain. In
our State of Idaho, approximately 65 percent of our commerce in
the tax receipts come through what would be considered a small
business or ag-based economy. And I just try to look at this,
and I understand what my good colleague from Florida just
mentioned about the potential offsets with Federal programs,
but that is taxpayer money as well. If we take that minimum
wage to $15 in our State, where does that money come from?
Mr. Strain. Well, the money comes from smaller profit
margins for businesses that can continue to employ workers. The
money comes from employing fewer workers and finding more cost-
effective ways for businesses to conduct their operations
without workers. So one obvious example of that is switching
from human cashiers to automated kiosks and things of that
nature.
You know, there is no kind of magic source of money for
these things. When Federal regulation says that you can't pay a
worker less than $15 an hour, businesses take that as a given
unless they break the law. And, of course, there is a
nontrivial rate of subminimum wage payments. The higher the
minimum wage goes, the more of a problem that will be.
But businesses take that as a given and then decide whether
or not it makes sense to hire the next worker. And the concern
is that businesses will decide it does not make sense to hire
the next worker.
Mr. Fulcher. Thank you. So in our situation potentially as
policymakers, we would need to go into this understanding that
part of the calculus, part of the result, part of the impact of
implementing this would be that we are knowingly redistributing
that revenue from one party to another, because what I am
hearing you say is that the prices would have to go up or they
would have to figure out how to put cost down in some other
area.
Mr. Strain. Yes. One way to think about it in those terms
is that you are taking money away from low-skilled, less
experienced workers and giving it to workers who get to
continue keeping their jobs, who will disproportionately be
higher skilled workers with more experience. And, you know, I
think the position that you are in is to decide whether that is
a good tradeoff.
Mr. Fulcher. Thank you, Dr. Strain.
Thank you, Mr. Chairman. I yield back.
Chairman Scott. Thank you. The gentleman from Michigan, Mr.
Levin.
Mr. Levin. Thank you, Mr. Chairman.
With permission, I would like to submit for the record a
letter from I think 10 or 12--I didn't count them--
organizations representing disability rights groups, just an
incredible range of groups, the Autism Society of America,
Disability Rights and Education Defense Fund, National Down
Syndrome Congress, supporting the bill.
Chairman Scott. Without objection.
[The information follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Levin. And, Ms. Gupta, I would like to ask you a
question about this very matter, their letter. The FLSA has a
provision, section 14(c), as you know, that allows individuals
with disabilities to be paid a subminimum wage. As your
testimony States, some are paid as little as pennies an hour.
Why is it important to phaseout 14(c) to ensure all people in
this country are paid a fair wage, as these groups are
requesting?
Ms. Gupta. Thank you, Congressman. Section 14(c) of the
FLSA was actually written at a time when individuals with
disabilities were predominantly housed in institutions and
endured long-term segregation. At that time, there were no
statutory requirements that would support individuals with
disabilities in the workplace, and individuals with
disabilities didn't actually have legal protections from
discrimination.
And when Congress passed the ADA in 1990, it ushered in a
new era, and then the Supreme Court issued their Olmstead vs.
L.C. opinion. And the reality is that people with disabilities
deserve to work alongside friends, peers, and neighbors without
disabilities. They deserve to earn fair wages, to access equal
opportunity for advancement. And the 14(c) of the FLSA has
really locked classes of people with disabilities, particularly
with intellectual and developmental disabilities, into really
degrading subminimum wage and sheltered workshops.
Mr. Levin. And I assume it almost assures their continued
dependence on family or Federal dollars of other kinds to be
able to live and have food and shelter and so forth.
Ms. Gupta. That is right. It has created an increased long-
term dependency and, of course, this also can create deeply
kind of humiliating and personal experiences that make people
with disabilities feel like kind of subhuman.
Mr. Levin. Yes. I have to say, Mr. Chairman, for 4 years I
ran the work force system of the State of Michigan, and one of
the most delightful parts of my job was handling all the areas
that help people with disabilities live independently and gain
employment. And it was probably the area I learned the most in,
but also we really do a disservice to huge swathes of our
population if we say that they don't deserve to earn a basic
minimum wage. So thank you for that.
Dr. Reich, I would like to ask you a question I don't think
has come up that much. And I don't know if there is good
research on this or not, but I feel like these discussions
about the minimum wage lack imagination. And your profession is
famous for lacking all imagination, so maybe it is an unfair
question.
There are profound, profound effects on the economy of
having more money in working people's pockets. Is there
research to show the economic impacts to the restaurant, to,
you know, the local store, to the barber shop, to the auto
dealer when people are making more money in the community, and
what happens, where that money goes and what it does to Main
Street?
Mr. Reich. Thanks for the question. I know of two studies
on spending effects of the minimum wage. One is done at the
Federal Reserve Bank in Chicago, in the research department,
and the other more recently the Federal Reserve Bank of Boston.
Both found big spending effects, because people had more
money in their pockets. And the Boston one actually looked most
closely at food--restaurant spending, rather. And it found that
while restaurant prices went up, restaurant sales also went up.
So the prices did not deter people going to restaurants at all.
Mr. Levin. You know, I think that is such a profound point.
I know from my own experience that the restaurant industry is,
you know, is a big opponent of this. And I just think that the
experience in States and cities that have raised their minimum
wage, and when you visit them they have unbelievably thriving
restaurant scenes and high, high employment.
So I really hope that we will pass this bill and we will
allow workers to have more dignity and more self-sufficiency in
our country, and it will actually help grow our economy and
make it more fair. Thank you very much.
I yield back, Mr. Chair.
Chairman Scott. Thank you.
The gentleman from Pennsylvania, Mr. Thompson.
Mr. Thompson. Chairman, once again, thank you for this
marathon hearing.
Thanks to all of our panelists that are here. I appreciate
that. I just want to make a comment, then I have got a couple
questions. My comment is, I don't know how many of you have
ever--I spent 28 years before I came to Congress serving
individuals facing life-changing disease and disability. I have
spent a lot of time in supported workshops, supported
employment sites. I spent a career trying to help adapt
equipment, help look at facilitating processes, you know, to be
able to help people achieve a competitive level of work.
And you can do all that, and there are still individuals
with some very severe complex disabilities who you throw by the
wayside by eliminating piecework or subminimum wage, you know,
folks who are just so complex in their disability. But I
challenge you if you have not, where these folks are still
working--and, unfortunately, a lot of them have lost their jobs
and are no longer able to have that sense of accomplishment,
that thing that defines them, the pride that they take.
The coolest place I have ever been is in one of those sites
on payday. And those checks, some of those checks aren't very
large, but you would think that the way they receive it was
like for a million dollars. The self-esteem, the work.
And so before you throw people with complex severe
disabilities under the bus with some type of flawed policy that
ignores the needs of the very, very disabled. We are not
talking about--you know, I worked to help facilitate people
back into life in a full and robust way. I encourage you to
check that out.
Dr. Strain, I want to just--the first question is about the
future of a lot of minimum wage jobs. As I travel around, I am
from a very rural district. You know, I go into grocery stores,
self-checkout counters now. Restaurants, there is no wait
staff, you order on electronically. Gas stations. I mean, all
just kind of a lot of places where--not everywhere, but a lot
of minimum wage jobs that I have heard referenced today, I
mean, they are low-skilled jobs and so technology is
eliminating a lot of those. It is not going to totally
eliminate them, but--and that is really why I look to a ladder
of opportunity. You want people to do better in life, help them
connect with the work that this body has already done, in terms
of career and technical education training, skills-based
education.
Dr. Strain, any thoughts on how the advancement of
technology in some of these settings where we have low-wage
jobs are impacting low-wage jobs?
Mr. Strain. Yes. I think that is an excellent point. The
cost of that technology has been going down over time. And low-
skilled workers, minimum wage workers have to compete more
fiercely in order to have those jobs. A potential risk of
raising the minimum wage at all, much less to $15 an hour, is
that just tips the cost-benefit calculus in favor of those
kiosks and that technology and away from hiring a human worker.
But there is even a more important point than that. Low-
skilled workers, even if they are no longer going to be
employed as cashiers as technology continues to get better and
cheaper, do constitute a pool of available resources for
businesses. And businesses are smart, and they are going to try
and figure out a way to use those workers.
So a $15-an-hour minimum wage not only makes it harder for
businesses to employ those workers today, it makes it much
harder for businesses to figure out how to employ those workers
in the future doing new kinds of jobs that don't currently
exist yet.
Mr. Thompson. Dr. Strain, you note in your testimony that
worker productivity is primarily a factor in wage levels. How
do education and skills development, the skills-based education
factor into productivity?
Mr. Strain. Well, they increase it. So if you are thinking
about productivity is roughly how much revenue can you generate
every hour you work for your firm? How much additional revenue
can you generate for the firm? The more skills you have, the
harder you work, the more education you have, which is a
primary way we transmit skills, the more revenue you are going
to generate, the more valuable you are going to be, the more
firms are going to compete over you and the more your wage is
going to go up in the market.
Mr. Thompson. And we have a skills gap today. And I would
just love, encourage folks to, you know, to check with the work
force investment boards, the different great agencies that are
out there, our community colleges, just the great places where
you can access this type of education.
The Federal Government is supporting that in a way more
than what we ever have in the past with this piece of
legislation that we enacted last year. And I really do think
that is the pathway to greater opportunity.
Thank you, Chairman.
Chairman Scott. Thank you. The gentleman from New York, Mr.
Morelle, is recognized for 5 minutes.
Mr. Morelle. Thank you, Mr. Chair. I will pay particular
attention to the shot clock. I apologize for exceeding my time
earlier today.
Thank you to the panelists for being here. Over the years
in the New York Assembly, I met regularly with the Center for
Disability Rights, a not-for-profit community-based advocacy
and service organization for people with all types of
disabilities. And during my many conversations with the CDR, a
recurring topic was the question of phasing out the subminimum
wage for individuals with disabilities and working toward a
Federal law, to allow those workers to earn the same wage and
not face discrimination on the basis of the discrimination.
Ms. Gupta, if I might ask you, section 14(c), the Fair
Labor Standards Act, allows for individuals with disabilities
to be paid a subminimum wage. It was written at a time when
individuals with disabilities were predominantly housed in
institutions, something that, gratefully, is no longer the case
in many places. There was no statutory requirement, as I
understand it, to support individuals with disabilities in the
workplace, and the individuals did not even have legal
protections from discrimination.
I am just curious, can you describe how our legal framework
has changed regarding those protections and supports for
individuals in all aspects of society and how this does impact
and necessitates the phasing out of 14(c)?
Ms. Gupta. Yes. As you said, Congressman, section 14(c) of
the FLSA was written at a very particular period of our
Nation's history when there really was no legal framework for
understanding discrimination against people with disabilities.
And then when Congress passed the Americans with Disabilities
Act in 1990, it really ushered in a very broad new wave of
protections, kind of a new era for people with disabilities in
our country.
And then the Supreme Court kind of further elucidated the
protections in 1999 in a case called Olmstead versus L.C. and
recognizing I think what was a crucial tenet of the ADA, the
community integration mandate. And it was there in that case
that the court said that the ADA bars unjustified institutional
isolation of persons with disabilities.
And when I was in the Justice Department, although my
predecessor started this, there was a real effort to ensure
that mandate had real meaning in the lives of people with
disabilities and to seek to make sure that where there were
sheltered workshops that were segregated facilities that really
excluded or primarily just focused on employment for people
with disabilities who had little to no contact with people who
did not have disabilities, there was a real effort to ensure
that people with disabilities could work alongside peers and
have equal opportunity to employment.
And that is why we have seen a number of states actually
now, both through litigation but happily through legislative
action, take the charge to end 14(c) and to have a phased-in
opportunity to raise the minimum wage for people with
disabilities.
Mr. Morelle. Thank you for your answer. And actually, you
answered my next question, which related to the conflict with
the 14(c) and the ADA, so I appreciate your comment on that.
Let me just in closing, six states, as you mentioned, have
completed or are in the process of phasing out 14(c). I think
Vermont and New Hampshire have completely phased out. Maryland,
Alaska, Oregon and Rhode Island are in the process of it, and I
understand Hawaii and Kentucky are at least considering it.
Can you just talk about the other benefits individuals with
disabilities experience other than financial benefits from the
phasing out of 14(c) and moving into a competitive integrated
employment setting?
Ms. Gupta. Yes. I mean, so much of what we are talking
about today is really about the dignity of work and people with
disabilities feeling the dignity of being human beings entitled
to the same protections as any other people in this country and
being able to participate in the mainstream economy with people
without disabilities, to have the opportunity, to have equal
opportunity for jobs and housing and the like.
And that this move from the ADA to Olmstead and beyond is
really about ensuring that people with disabilities have equal
opportunity and are not kind of considered, you know, folks to
be segregated out of the mainstream economy.
Mr. Morelle. Very good. Thank you again to all the
panelists for your great work.
Thank you, Mr. Chair. And with that, I ask unanimous
consent to submit into the record a 2018 report from the
National Council on Disability that renews its recommendations
for the phaseout of section 14(c) of the Fair Labor Standards
Act.
Chairman Scott. Without objection.
[The information follows:]Mr. Morelle
National Council On Disability: https://www.govinfo.gov/
content/pkg/CPRT-115HPRT36713/pdf/CPRT-115HPRT36713.pdf
Mr. Morelle. Thank you, sir.
Chairman Scott. Thank you. Thank you.
The gentleman from Pennsylvania, Mr. Smucker.
Mr. Smucker. Thank you, Mr. Chairman.
One of the opportunities I think we have here is to
implement policies that continue to lift more people out of
poverty. I know one of the goals of mine is to try to find ways
that we can give people the opportunity to connect with a good-
paying job and to provide that dignity that Ms. Gupta was just
referring to.
Dr. Strain, I would like to talk about the doubling of the
Federal minimum wage in that context. Some people believe that
doubling the minimum wage is an effective antipoverty policy.
Is that the right way to view it?
Mr. Reich. It is certainly not the way I view it. The
benefits of increasing the minimum wage are that workers'
earnings go up. But if you look at who those earnings accrue
to, they are to households that are not below the poverty line,
on the whole. So it is certainly the case that the minimum wage
is a very poorly targeted antipoverty tool. In addition, the
costs of the minimum wage are borne by workers without a lot of
skills, workers without a lot of experience. Those workers are
much lower income, on average.
And so you have this policy where the benefits go to people
who are further up the income distribution. The costs are borne
by the least-skilled, least-experienced, most vulnerable
workers in society. If your goal is to help out, you know,
middle class households, maybe that is a reasonable tradeoff.
If your goal is to help the working poor, then it is certainly
not, in my view.
Mr. Smucker. Ms. Barron, just to followup to that,
according to the U.S. Census Bureau, about 60 percent of
working age Americans who live in poverty do not work at all
and, therefore, would potentially not benefit from a minimum
wage increase. But, that said, I firmly believe that the vast
majority of Americans desire the dignity of earning that
success and would work for a living if the opportunities
existed.
Based on your experience, do you think that more than
doubling the Federal minimum wage will make it easier or harder
for unemployed Americans to find work and begin to make a
living?
Ms. Barron. In my opinion, I would think it makes it
harder. I mean, we have seen support staff jobs, which are
typically jobs that people who are right out of school take or
people, you know, low-income workers I guess you could say or
just people starting out would take, and those jobs are going
away.
In Seattle, we have a chain called Red Robin, and they
employ a lot of people across the State and across the country,
I believe. And due to the $15-an-hour minimum wage increase,
they went ahead and wiped out all of their support staff. Now,
that is bussers and hosts and food runners and things of that
nature. And these are, again, jobs that, you know, when you are
first starting out of school, I started that way. I started as
a busser. And, you know, you work your way up through that
industry.
So, you know, I think people that are unemployed looking
for jobs to start out in any sort of industry probably are
going to have trouble, if something like Red Robin is an
indicator.
Mr. Smucker. There has been some discussion about teens,
teens entering the work force.
Ms. Barron. Yes.
Mr. Smucker. And my son is 16 years old, has several
different jobs, is, by the way, thrilled with that one job was
$9.50 per hour. But I was part of a presentation recently--I
would just like to get your reaction to this--measuring the
success of people who enter the work force.
And in the view of this presenter, he was showing
statistics that where he believed that having a job during high
school was one of the best indicators of whether someone would
be successful after that. Do you agree with that?
Ms. Barron. I do agree with that. And my son is going to be
turning 16 next week. And, you know, I have raised him since at
a very young age to start to work. You know, whether that is
doing dishes at home or now he currently has a job walking
dogs.
Mr. Smucker. I was speaking to an owner of a restaurant in
my area, a mixed bar and grill, saying that, you know, people
who have been there for some time were earning well over
$40,000 per year and more. And his view, as an owner of a
business who enjoyed providing jobs for teens, said that would
be much more difficult to do if they had to start at $15 an
hour. Do you see that as well?
Ms. Barron. Yes. At the restaurant where I work, we are
trying to hire people now that, you know, have way more
experience. So, again, we don't have those support staff jobs.
So now we have to hire--you know, if we are hiring bartenders
and such like that, we are looking at people that have had a
lot of, lot of experience. And, again, those are hard to find,
because now we are going to a service charge. And so people
with a lot of experience have actually moved out of the city.
So we are seeing people leaving the city, because the minimum
wage increase is impacting how they make their money.
I honestly--I mean, for young kids, I think of myself when
I was 17 coming out of high school. And my mom worked in a
restaurant. She got me a job bussing tables. And I think about
how I worked my way up through the industry, and it has allowed
me to survive and do some of the things that I wanted to do in
my life. And I think about myself at 17, 16 years old, and
wonder about the kids nowadays. Like my son, like I don't know
what he is going to be doing, you know, if he starts in the
restaurant industry. I am trying to tell him don't do that,
but--
Mr. Smucker. Thank you.
Chairman Scott. The gentlelady from Michigan, Ms. Stevens.
Ms. Stevens. Thank you, Mr. Chairman, and thank you for
this wonderful day of hearings on a very important topic. And
thank you to our incredible panelists for being here today.
Your testimonies have mattered a great deal.
As someone who was managing a multimillion dollar federally
funded portfolio focused on the future of work in the digital
age of manufacturing in the age of automation before I was
running for Congress and was now in Congress, it is obvious
that the question around the future of work must be undergirded
within our present reality, that the question of our economic
orientation is, how do we choose to value human work and what
are we handing over to automation versus what are we giving to
people.
The question of has a hamburger--excuse me, has a machine
ever been able to buy a hamburger? No, that machine never has,
that we must live in a human-driven and oriented economy.
So I have got four quick questions for Dr. Strain, who I
believe you are, you know, capable of answering these. Could
you answer quickly, what is the yearly income of a person
living in poverty?
Mr. Strain. The yearly income of a person living in
poverty?
Ms. Stevens. Yes. What is our federally indexed rate for
somebody--
Mr. Strain. It varies, depending on how many children you
have in the household. Say $20,000 dollars.
Ms. Stevens. Ok. And what is the income of a person working
full time at the minimum wage?
Mr. Strain. A person working full time at the minimum wage
is $15,000, roughly.
Ms. Stevens. And do you know how much our Federal
Government spends on SNAP benefits a year?
Mr. Strain. Not precisely, no.
Ms. Stevens. Ok. And so I take it you don't know how many
are working full time who may happen to be utilizing SNAP
benefits?
Mr. Strain. Who are working full time who are utilizing
SNAP benefits? Not--
Ms. Stevens. Yes, the percentage of our work force. Ok.
Well, we can do that as a question for the record after the
hearing.
So, Ms. Gupta, quickly for me, can you describe for us what
this means to work full time in the U.S. at the poverty rate?
How does this impact a person's access to healthcare, to equal
opportunities? What does this mean for women, and particularly
what does this mean for women of color?
Ms. Gupta. Yes. I mean, this means that women and women of
color are harmed by--there is a pretty significant gender pay
gap, and it targets in particular women of color because they
can't access and won't have as much security around healthcare,
and transportation, and additional money to support their
families. And so there is a lot of--you want me to do this
quickly, so I will just say that women of color in particular
are deeply harmed by these kinds of policies and their ability
to actually enter the mainstream economy.
Ms. Stevens. Well, there is lots of narratives to share
around this important topic, and I appreciate your deep and
thorough testimony that covers this, and thank you for being
here with us today.
Mr. Brodeur, you gave a great testimony, and I come from
the great State of Michigan where increasing the minimum wage
is overwhelmingly popular in my home state. And as I talked
about the future of work in the digital age of everything, it
certainly means a great deal to you, someone who is
representing the largest robust automotive supply chain in the
country. But I would love for you to share a little bit more
about your experience and your work, particularly how did you
see increasing the minimum wage as stimulating or revitalizing
cities or towns across your state? What impacts did that on
your local economies?
Mr. Brodeur. You know, thank you for the question because
Massachusetts, I think, has had a little bit of a different
perspective because we have done what you all started to talk
about doing here in terms of gradually raising the minimum
wage. Starting in 2015, we did a round dollar year minimum wage
increases. We took a year off, and then with the most recent
legislation, over the next 5 years we will go up to $15.
So we do not have the problem that I think is built into
the system you currently have where if you don't raise it, then
it becomes harder to raise it, and then there is an
argumentative that is a shock to the system, so we better not
raise it, so folks get left behind.
What I think is really important for you people to
understand about Massachusetts and why I appreciate the
question is particularly from the morning session. I heard
Boston talked about maybe two or three or four times as, you
know, a wonderful place but a very high wage, high expense
place, and therefore, all of Massachusetts must be the same.
That is not at all the case. We have rural areas, particularly
in Western Mass, that struggle with some of the issues that I
have heard about here today.
In some places, median income is less than half of what is
in Boston. We also have gateway cities. My friend from Greater
Lowell can tell you about Lowell and Lawrence and some of those
surrounding communities that essentially were--were really
industrial dynamos but have struggled a little bit to make the
transition that Boston and Cambridge already have into the
digital economy, the service economy.
So when we thought about how to approach the minimum wage
and how to target things, we viewed it as an opportunity to
raise folks up, to put money into people's pockets so that
those parts of the economy that aren't entirely Boston-driven
will have an opportunity to participate in that success. And
that was part of--you know, we kind of did a lot, quite
frankly, in the last legislative session around raising people
up.
This was an important part of it, but again, we approved
that we needed to give folks the opportunity to invest in
themselves, and really, get off the ground floor, to get
education, to get into some of the middle skilled jobs that we
are desperate to fill in Massachusetts.
Ms. Stevens. Well, thank you for doing that work, and I
yield back the remainder of my time.
Chairman Scott. My distinguished colleague from Virginia,
Mr. Cline.
Mr. Cline. Thank you, Mr. Chairman. I appreciate everyone's
time today, and I noted with interest the comments of my
colleague from Michigan talking about the industries that are
there. And it is a different economy than the economy of my
State, the Commonwealth of Virginia, and different than
Representative Brodeur's Commonwealth of Massachusetts, another
commonwealth. But we do share similarities in that there are
rural parts and suburban parts that have more robust economies,
more diversified economies.
And so I wanted to start by asking Dr. Strain. The effect
of an increase in the minimum wage on unemployment is fairly
straightforward. You have noted that in your testimony. Is
there an indirect inflationary pressure on the cost of goods
and services in an area, say, rent or other types of products
that an increase in the minimum wage may influence?
Mr. Strain. Yes. So when a business faces an increase in
the minimum wage, they have to absorb that cost somehow. One
way to absorb that cost is by having fewer workers work there.
Another way to absorb that cost is by raising prices. And you
see that when the minimum wage goes up, the prices that
businesses that employ minimum wage workers charges also go up.
This is, you know, kind of a double-edged sword for those
minimum wage workers in that sense because a lot of the
customers of businesses who employ minimum wage workers are low
wage workers themselves. So you give a worker a raise with your
right hand, and then you take it back or some of it back at the
cash register with your left hand.
Mr. Cline. And so those States that are pushing for a
higher minimum wage are adjusting to the cost of living in
their respective States, and I think what you are seeing are
different States facing different pressures.
Representative Brodeur, you may be able to answer this. In
Massachusetts, with regard to a Federal minimum wage, there is
a support for a floor in the wage versus a set dollar amount,
all States shall pay a minimum wage of X. But would there be
any kind of support for an increase in the minimum wage beyond
an adjusted amount that reflected the cost of living? I mean,
would you want to increase the minimum wage if the cost of
living mandated an increase to $15, and you all were given a
choice to increase it to $20? Would that be something that you
all would entertain in Massachusetts, or would you want to
target it more toward the cost of living?
Mr. Brodeur. We just got to the 15 thing, and that was a
big lift, so we would like to take a little bit of time off, I
think.
One thing we did not do is indexing, and I know that is
part of the chairman's bill. And I think one reasons it is part
of the chairman's bill is because what historically was a
bipartisan, well supported kind of regular process where the
minimum wage would go up has become something of a political
football. Quite frankly, that hasn't happened in Massachusetts.
One thing that is interesting about the commonwealth and
our legislature is any bill that is filed gets a hearing, and
every session folks file bills around minimum wage in many
flavors, quite frankly. So it is kind of always on our mind. It
is always a topic of discussion. It is not something we do and
then hope it goes away--
Mr. Cline. If in a state like Virginia or a state that is
more rural where you may not have the inflationary pressures or
the pressures on cost of living to increase to a full $15
minimum wage, should a state be able to adjust it to something
less where it maybe more accurately reflects the cost of living
for that state?
Mr. Brodeur. I don't think so, respectively. When I think
back to the original setting of the minimum wage toward the end
of the Great Depression, there was a national floor, and what
we have heard from people that are way smarter than me, both in
this panel and the panel before, is if we kept up with
inflation and productivity, where would that be on the national
level? It would be somewhere between 12 and 18 to 22, it
sounded like.
Mr. Cline. As a former fellow State Representative, I would
rather leave that to the states to make that decision as it
specifically applies to each state's cost of living.
But I appreciate it, and I yield back, Mr. Chairman.
Chairman Scott. Thank you. The gentlelady from
Massachusetts, Mrs. Trahan.
Mrs. Trahan. Thank you, Mr. Chairman. Thanks again for
bringing us together to hear this important panel. I am so
proud that Massachusetts--well, I am so proud to be from
Massachusetts for a number of reasons, and it is because of
Senator Brodeur's work not just on this issue but on
healthcare, education, on gun violence prevention. We are one
of the states leading on raising the wage, and for that I am
grateful.
There is no one more well suited to speak before us today
than you, and in terms of what it took, the collaboration and
thinking creatively to get this done. In your testimony, you
talked about the importance of coalition this to pass the grand
bargain that resulted in both paid leave and raising the wage.
I love that your approach was inclusive and truly people
powered, so my question. In your testimony, you mentioned that
it was a strategic decision to invest in the working families
of Massachusetts while also being a positive step forward for
our business community. During that same period, Massachusetts
businesses demonstrated relative stability and growth.
So I am wondering if you can talk about some of the
specific positive feedback that you heard from Massachusetts
businesses in terms of raising wages.
Mr. Brodeur. There was certainly not unanimity of opinion,
and that is why it was a grand bargain. There was give and take
across a range of issues, both within paid family medical leave
which was a more complicated, quite frankly, and challenging
piece to put together because there were so many moving parts
and the minimum wage piece and some other issues.
And we heard from--you know, we talked to folks, you know,
one or two-person operations, folks in my district to some of
the biggest employers in Massachusetts. One thing that everyone
recognized was that both programs were incredibly popular, that
there was tremendous support across the spectrum for the
general idea of both initiatives, maybe not particular details.
You know in terms of the minimum wage, Mass, Inc. which is
an organization that you are familiar that others might not be,
a nonpartisan kind of think tank and polling entity that tested
the waters on how popular or how supportive the public would be
of these things, and they were popular across the board.
Republicans, Democrats, IUndependents all supported it.
So what I think we needed to do, and why it was such a long
process, is we needed to start with paid family medical leave
and some fact-finding and some exploration, and we all needed
to kind of speak the same language and understand what kind of
benefits we were trying to provide, what would actually help
working families, what would be impediments.
And we tried to be respectful of that and listen to what
the business community in certain segments already provided in
terms of wages and benefits and made sure that we didn't
reinvent the wheel, that we didn't take away something that was
better than what might be complemented or implemented under any
particular plan.
And I think that went a long way toward building trust, for
lack of a better way to say it, and having constant
communication, having some significant disagreements for sure
along the way but recognizing that this was coming, and it is
important to working families, it is important to the economy
of Massachusetts, and you know, and then kind of putting the
pieces together.
And it was a humbling process to be a part of because you
don't see a lot of progress on big issues these days, and I
think that is unfortunate, and I don't think that needs to be
the case.
Mrs. Trahan. Yes, thank you. It was a testament not just to
your leadership but I know that the grand bargain was in
concert with our Republican Governor Baker as well as the many
groups that you mentioned. Can you just discuss the
implementation and the timetable for Massachusetts to
transition to the $15 minimum wage?
Mr. Brodeur. I can. So it will be over 5 years, and first--
let me make sure I get this right. The first 3 years will be a
dollar increase, and then the final 2 years will be $0.75
increase, ultimately bringing it to 2023. On the tip wage, we
did not eliminate the tip credit, but we did expand. Compared
to some of our peers, we had a very low tip credit. Not as low
as the Federal tip credit for sure, but that will grow over the
same timeframe up to $6.75 when it is done in 2023.
Mrs. Trahan. Great. Thank you so much. Thanks so much for
all of your time. I yield back.
Chairman Scott. Thank you. The gentleman from Georgia, Mr.
Allen.
Mr. Allen. Thank you, Mr. Chairman, and I appreciate
everyone being here today. I come from the State of Georgia who
is the best state to locate your business 6 years in a row. I
was a small business owner in that state, and in Georgia, we
pay the wages according to our employee's skill set. It is a
free market environment, a growing economy that grows job which
grows opportunity which grows wages. We reward a good day's
work. My Democrat colleagues don't want to believe that we can
produce economic opportunity in concert with growing wages
without the government interfering.
Signing the front of the paycheck and providing folks with
a good job has been the greatest honor of my life. That is why
I oppose the Raise the Wage Act. This one size fits all, top
down government regulation will destroy millions of hard-earned
jobs and turn our growing economy and wage growth into decline.
Democrats have focused on economic growth and getting the
American people back to work. Free market initiatives that we
know grow wages and grow jobs.
Dr. Strain, millions of jobs were created by our strong
economy thanks to lower taxes and deregulation. How would
raising the minimum wage to $15 hurt all of these economic
gains we have been able to achieve?
Mr. Strain. Well, I think it is certainly the case that we
have seen the low wage labor market doing a lot better over the
last few years. A hot economy really has benefited that group
of workers. We have started to see wages grow at a more rapid
pace, for example. We have been seeing vulnerable workers,
workers with disabilities, workers who have been incarcerated
getting jobs at higher rates, and this is all wonderful news.
I am very concerned that doubling the Federal minimum wage
will put a halt to a lot of that progress and will really gum
up the works of job creation for workers without a lot of
skills and without a lot of experience.
Mr. Allen. Three hundred and four thousand jobs in January.
Mr. Strain. That is quite a few.
Mr. Allen. Yes. Do you agree that raising prices is not
always an option for many businesses?
Mr. Strain. Raising prices is not always an option for many
businesses, particularly businesses in more competitive product
markets. And again, you know, you have to raise prices quite a
bit to absorb a $15 an hour minimum wage. This is not a $9 an
hour increase we are talking about. This is doubling the
Federal minimum.
Mr. Allen. Right. So how would a business double its rate
of pay and not raise its prices?
Mr. Strain. Well, I think it would be hard for a lot of
them to do that.
Mr. Allen. Which then causes the cost of living to
increase--
Mr. Strain. Some of those businesses might invest in
technology instead of hiring workers.
Mr. Allen. Yes--
Mr. Strain. Some of those businesses will--
Mr. Allen. They are going to figure out a way. Yes.
Ms. Barron, how has the Seattle minimum wage hike affected
your working career?
Ms. Barron. Well, I lose money on a daily basis. It is as
easy as that.
Mr. Allen. Yes.
Ms. Barron. And it is due to my employer having to
navigate--
Mr. Allen. Yes.
Ms. Barron [continuing]. the higher wage. So he went to
taking away tip lines and going with a service charge. And
under that service charge, I don't make as much as I could. And
there is no way for me to maximize my income with my job, so it
has changed my job quite a bit. It has pretty much stagnated
what I could make.
Mr. Allen. So the government said we are going to raise
wages, and your wages went down?
Ms. Barron. Yes.
Mr. Allen. Ok. Your testimony talks about your friend who
started her own pizza place.
Ms. Barron. Uh-huh.
Mr. Allen. Tell us about that and what happened to your
friend?
Ms. Barron. So my friend Retu, she has been in the service
industry as long as I have. She decided she wanted to try her
hand at being an owner, and she started a pizza place called--I
think it is called Z pizza, And she employed I think about 10
people, and then the minimum wage came. So she had her business
for about 5 years, and she looked at the books and she said I
can't make the numbers work. And she even went to our city
council and said look. If you want to see, you know, try to
make them work for me because I don't understand. I can't make
it work, and so she just--instead of struggling, she just went
ahead and closed it because she couldn't do it.
Mr. Allen. Ok. Well, thank you so much for your testimony,
and I yield back, Mr. Chairman.
Chairman Scott. Thank you. The gentleman from Maryland, Mr.
Trone.
Mr. Trone. First of all, I want to thank everybody for
their long day today, but it is a really important subject that
we are embarked on. Raising the minimum wage is, plain and
simple, the right thing to do for hard-working Americans. We
heard a lot today from many people that have never owned a
business, never been an employer, that raising the wage is bad
for business.
Well, I started a business 30 years ago as an entrepreneur.
I was the first employee. Guess what? I figured out how to make
it work, and now that business employs over 7,000 folks across
America in every region, every area of the country. We also
employ hundreds of returning citizens as they deserve a fair
wage too. But paying a fair wage was not just the right thing
to do. It is the key to our success. The key to our success was
paying a fair wage.
Higher wages lead, we spoke about earlier, lower employee
turnover, reduced recruiting and training costs. But at the end
of the day, happier customers. Ms. Eckhouse, in your testimony
you also connected, and Ms. Shalala was talking about it,
higher wages with lower turnover so the growth of your
business.
Could you talk a little bit about the piece that we don't
touch on enough here, and that is all the productivity gains,
the efficiency gains, the awesomeness of having team members
that know a business and care about the customers, and those
folks stay with you. They stay with you long times, long term,
because they make a good wage, and they have good benefits. So
could you talk about and give us some insights on how important
that is?
Ms. Eckhouse. Well, thank you for your question. It is
really critical to us to have people who work for us, whether
they are working out in the fields selling what we make or
whether they are working at home with us in the plant making
what we sell who really understand what we are making, how it
is sourced, how it is processed in our plant, how it is sent
out in the world for people to consume.
And if they don't understand that, they cannot do a good
job. And once they do a good job, they become invested in the
process. They learn about it. They come up with ideas. If they
have been with us for enough time, they can see improvements
and suggest them to us. So we end up having a business that is
not just a top-down business where we are telling people what
to do. People are able to buildup from the bottom and because
they fully understand the process, and they are invested in
working for us because they can make an income that allows them
to support their families.
Mr. Trone. I think you hit on what is such an important
point that nobody really talks about, and that is a business
isn't run from top down. A business is run on ideas, great
ideas, and that is what makes it success. And when the team
members are empowered, the team members feel like they are part
of the team because they are paid appropriately. They are paid
fairly. That is when they have those insights, those ideas to
make the business more efficient, more productive.
So I commend you on running that type of business. That is
just the right way to do things.
Ms. Eckhouse. Thank you. I really believe that the labor is
worthy of his or her hire, and we have to honor that.
Mr. Trone. Without question. Dr. Reich, you mentioned in
your testimony business can adjust to a minimal wage increase
in several ways. They go from a low wage, high turnover model
or what I chose, a higher wage, low turnover model. I shared
some of my experiences. What does research tell us about how we
quantify, quantify the actual cost of employee churn, employee
turnover?
Mr. Reich. Thanks for that question. I happen to have
published an article on that subject in the Journal of Labor
Economics a few years ago, so--and actually, way back when I
was a graduate student in the 1960's, I developed the idea of
duly labor markets, that labor markets do differ. Some are high
wage, low turnover, some are low wage, high turnover. And this
paper I just published a few years ago actually showed that
when the minimum wage went up that employee turnover went down
quite a bit.
There are other studies that had already shown a
correlation between the wage and turnover. This was really a
study where we felt we had a causal identification. And as to
the amount, well, it varies by industry depending on what the
costs of training are and where the vacancies are.
In low wage industries like restaurants or in certainly big
box retail, turnover each year is over 100 percent. These are
firms that are constantly looking for work. They have very high
vacancy rates. There is a cost of vacancy. This is even more
true when the unemployment rate is very low. And those are big
costs that we don't, you know, talk about in Econ 1, in the
simple supply and demand model. But when we add those costs in,
those are substantial. We think they don't totally--savings on
recruitment and retention costs don't totally offset increases
in the wage costs, but they might offset maybe 20, 25 percent
of it on average, obviously more in some industries than the
others.
We couldn't look at the kinds of points that you are making
about productivity or customer satisfaction so that might
possibly add to that effect as well.
Mr. Trone. Thank you very much. That is all, Mr. Chairman.
Chairman Scott. Thank you. The Ranking Member, Dr. Foxx.
Ms. Foxx. Thank you very much, Mr. Chairman. I want to add
my thanks to all the witnesses who have been here today. We
have been here practically all day, and we are going to be here
a little while longer. We have heard a lot of the same
arguments over and over again.
I do think some Democrats, and maybe one on this committee,
understands the free market, how it really works and the
opportunities it creates for Americans from every walk of life.
You know, I grew up in a house with no electricity, no running
water, and I have been working since I was 12 years old. And my
husband and I did run a business, so I know what it is like to
create jobs, to try to keep jobs going, and to meet a payroll.
And I think almost every member of our committee on this side
of the aisle understands that, so I know Mr. Trone isn't
talking about our folks not knowing how to run a business and
what it takes.
But it seems to me that there are people not always
understanding the opportunities that the American way of life
creates for Americans or maybe how smart business owners are in
this country. After all, we have gotten to be a great country
because of the capitalistic system.
But I think the reason we have been here all day and we
have been hearing these points made over and over and over
again is perhaps some of our colleagues are trying to convince
themselves and the rest of us that a socialist campaign talking
point could actually be good policy, but I am not sure it
worked.
So I want to thank our witnesses who have come here today.
I especially want to thank Ms. Barron for giving voice to those
Americans who aren't in lockstep with the labor interests
driving this misguided campaign to eliminate jobs, particularly
you, Ms. Barron, understanding you took time away from your
workplace to be with us here today.
We want to see wages go up for every working American,
every single one, and they do go up for Americans. We are
seeing more wage growth than we have in decades because of the
smart economic policy that has empowered workers. Pushing back
on heavy-handed regulations and giving Americans real tax
reform has opened up opportunity and wage growth that actually
helps American families.
And we know, one of our witnesses has already said, that
employers are already free to pay higher wages than minimum
wage, and it works. And guess what? Other employers understand
that too. The law already allows it. But why do our colleagues
want to force the government to run everybody's life in this
country? The growth we are experiencing right now makes a $15
Federal mandate look like the political stunt it really is.
Washington doesn't need to be making any more decisions for the
people of this country.
The dysfunction we have all experienced and all commented
upon the last couple of months is all the proof we need that
decisions about worker paychecks certainly shouldn't be up to
anybody in this city. We can spend our time trying to justify
socialist ideas as mainstream, or we can spend our time looking
for ways to put money in people's pockets by their earning that
money and not taking it from one person's pocket and putting it
in another one. We can sustain era of growth and opportunity.
On our side for the sake of American workers, we are going to
stay focused on the latter.
And with that, Mr. Chairman, I yield back.
Chairman Scott. Thank you. The gentlelady from Washington,
Ms. Jayapal.
Ms. Jayapal. Thank you, Mr. Chairman, and thank you all for
being here. I know it has been a long day, and we appreciate
it.
I want to just correct the record on a couple of things. I
was on the committee that raised the $15 minimum wage. I am
glad to see one of my constituents here, and I appreciate your
traveling here, although I imagine perhaps you don't support my
position on this issue based on your testimony. I certainly
appreciate hearing from you.
And I will tell you that we heard all of the arguments
through months of testimony about what this was going to do to
destroy the economy in Seattle, about all the restaurants that
were going to close. And we went back through recently all of
the restaurants that came to testify before us, and the
majority of them had actually opened new restaurants, new
restaurants.
And so I will just say that you just need to look at our
booming economy in Seattle to understand that the minimum wage
law has worked and, in fact, we even heard the same arguments
when we indexed minimum wage to inflation back in 2001, that
this was going to destroy our state's economy, that it was
going to create problems. People were going to flee to other
states. But people including, I think maybe Ms. Barron, moved
to Washington State in part because we have a booming economy
and jobs to take.
I also just want to respond to the comment about a
socialist campaign talking point. Let me just tell you that on
our committee was one of the wealthiest capitalists, proud
capitalists in our state, Nick Hanauer, who consistently has
said over and over again that when workers do better, companies
do better. When companies do better, the economy does better.
When the economy does better, workers do better. It is a cycle
that actually works over and over again.
We also had a small business owner, a tremendous number of
small business owners and restaurant owners who have been doing
the right thing for a long time. That included my friend and
local Seattle restaurant owner Makeney Howell. And she said it
best when she went to the White House Summit on Working
Families back in 2014, and she said the economy--this is her
quote. The economy is built from the bottom up, not the top
down. Every job should be an economy-boosting job.
Makeney for years, even before our law went into effect,
would pool her tips and distribute them equitably to all the
workers so that you take away that discrepancy between front of
the house workers who may earn a lot in tips, and there were
some workers who were earning a lot in tips who saw those tips
go down, but it was because it was being shared with people in
the back of the house.
And so these are really important--there has been a lot of
talk about Seattle today, and I am thrilled that is the case,
but let me tell you as somebody who actually helped craft that
law, who was on the front lines of making sure we heard the
testimony, that the testimony that we continue to hear is
simply not accurate.
Does it mean that Ms. Barron is not correct in her wages?
Of course I am not saying that, but I did want to ask you, Ms.
Barron, about the organization that you are affiliated with. It
is called the Full Service Workers Alliance of Seattle. Is that
correct.
Ms. Barron. Correct.
Ms. Jayapal. And are you aware that the FWSA is part of a
group called the Restaurant Workers of America?
Ms. Barron. It is not part of the Restaurant Workers of
America. That is not correct.
Ms. Jayapal. Well, I have the research showing that it is
part of a national network of server groups called the
Restaurant Workers of America.
Ms. Barron. It is not part of the Restaurant Workers of
America. The Full Service Workers alliance is a group that I
cofounded with a friend of mine. We are a loose group of about
1100 full service workers, and that includes front of the house
and back of the house.
Ms. Jayapal. Thank you. Are you aware since you.
Founded the organization, I assume you are, that a former
FSWA member so severely misrepresented his role in the group
and the details of the Seattle Secure Scheduling Law in a King
5 TV news interview that the station's news director was forced
to pull it down.
Ms. Barron. That is incorrect. That is incorrect. If you
watch--
Ms. Jayapal. Ok. Well, I would be happy to take that
information from you so that we understand because this is what
our research has shown and I wanted to make sure--
Ms. Barron. Well, your research is incorrect.
Ms. Jayapal [continuing]. that people know what the
organization is. So let me turn to Miss Gupta. The Fair Labor
Standards Act when it was passed excluded certain classes of
workers in a compromise to appease Southern States. Those
workers tended to be women and people of color, and the
vestiges of those policies still impact those communities
today.
Thank you for make the arguments in your opening Statements
that this is actually a women's issue. Can you speak about how
raising the minimum wage would help right some of those
economic wrongs?
Ms. Gupta. Yes. Thank you, Congresswoman.
African American and Latino working women in particular are
overrepresented in low pay jobs and women of color are more
likely than any other group to be paid the lowest wages.
Gradually raising the Federal minimum wage to $15 an hour by
2024 and indexing it to median Federal wages and ensuring that
working people are actually able to cover basic expenses like
housing, food, and transportation would be a huge, huge win for
working people.
Working mothers, especially, are likely to be paid low
wages, and that is why for the leadership conference,
representing a broad constituency of communities of color and
women, this particular bill would go a long way to closing the
gender pay gap but also addressing kind of structural
disparities that are created through racial difference.
Ms. Jayapal. Thank you very much. I see my time has
expired. I yield back.
Chairman Scott. Thank you. The gentleman from Texas, Mr.
Castro.
Mr. Castro. Thank you. Perfect timing. So I guess I ask
this question. I just obviously came here from another meeting,
but who has been opposed to a minimum wage increase over the
last few years on the panel? Anybody else? And I guess what has
been your main opposition?
Ms. Barron. I am losing money. I am losing income because
of the $15 an hour minimum wage increase.
Mr. Castro. And do you think that it should be less? Do you
think it should be, like, $11 or just no minimum wage or $6 an
hour?
Ms. Barron. Well, I think I would leave that up to you
folks to determine that, but all I know from my experience is
that I am losing money because of loss of tips, because of the
rise in the minimum wage, and I don't feel that workers' voices
in the full service industry have been represented at all in
this talk.
Mr. Castro. So I guess your point is that you are not
against a minimum wage. You think that $15 is not the right
amount?
Ms. Barron. As everything is proposed at this point in
time, I am finding myself as days go on opposed to the rise in
minimum wage altogether.
Mr. Castro. You would freeze it.
Ms. Barron. Yes. I would like to have a tip credit in
Washington State, and we are not having that conversation. We
are, I guess, not allowed to have that conversation in
Washington State.
Mr. Castro. I guess let me ask you. The reason I ask is the
U.S. Chamber of Commerce for years would not support increasing
the minimum wage, even by a penny. I mean, at all. And I know
that obviously you are in the service industry. Are you a
waitress?
Ms. Barron. Yes.
Mr. Castro. That is different from somebody working at,
say, Whataburger in Texas or somewhere else?
Ms. Barron. Right.
Mr. Castro. So you have been opposed for a while to a
minimum wage increase, even one cent on minimum wage?
Mr. Strain. Yes. I would be opposed to raising the Federal
minimum wage at all.
Mr. Castro. And I guess why is that? So you don't think it
should ever be raised? I mean, 50 years from now it should
never be raised?
Mr. Strain. In my view the primary focus should be on
providing economic opportunity to the least skilled, least
experienced, most vulnerable workers in our society. Those
workers are the workers who will bear the cost of a minimum
wage increase. If you raise the minimum wage by one penny, how
many of them would be worse off? You know, I don't know. Not
nearly as many as if you--
Mr. Castro. No, but you would agree also that their
expenses go up, the cost of living goes up, people need a
higher wage, right?
Mr. Strain. Another reason to be opposed, another reason
why I am opposed is because there are better tools that
Congress has to help those workers. Expanding Federal earning
subsidies puts more money in the pockets of the working poor
and actually increases employment rather than reduces
employment.
So when thinking about how to help these workers, I think
Congress should look at the full range of options and not only
focus on the option that is going to put a lot of them out of
work.
Mr. Castro. Sir, I guess I disagree with you on your first
point about not increasing the minimum wage, but I mean, you
understand that other people that are opposed to increasing the
minimum wage are also opposed to the subsidies you are
describing.
Mr. Strain. I am only speaking for myself, Congressman.
Mr. Castro. Ok. I think part of the reason that we have
gotten here and part of the reason that there is such
frustration with the income inequality in this country is
because the U.S. Chamber of Commerce and major business
organizations have not taken the lead even though some
companies on their own, including members of the Chamber of
Commerce, have actually raised their own minimum wage on their
own. And it is interesting that is an instance where private
industry has actually been ahead of the main industry group
that is coming to Washington and in their name arguing against
raising the minimum wage by even one penny. I think that--
Mr. Strain. I don't know--
Mr. Castro. I am in my comment part here. Thank you for
your answers to my questions.
And I think that this could have been a very different
conversation over the years if different groups and
organizations had worked in earnest and in concert, not even
necessarily with the Federal Congress but with the states and
with their own workers in making an earnest attempt to raise
the minimum wage.
But that has not happened now for decade, longer than a
decade, that those conversations have happened. And so we find
ourselves in a country where income inequality has grown, where
workers have gotten very frustrated, where there is in American
society now, I think, a real resentment at the fact that
people--that you get more and more billionaires in our country,
and you have a lot of people that may have a job but feel as
though they have no future in their work. And that is where we
find ourselves today.
I yield back. Thank you, Chairman.
Chairman Scott. Thank you. The gentlelady from Illinois,
Ms. Underwood.
Ms. Underwood. Thank you, Mr. Chairman, for calling this
hearing, and thank you to all the witnesses for appearing here
today.
I am going home to Illinois 14th tomorrow to hear what our
community has to say about this issue, and I am glad to have
the opportunity to hear from experts like you today.
Mr. Chairman, I would also like to ask for unanimous
consent to submit a letter from advocate Aurora Health in
Illinois for the record.
Chairman Scott. Without objection.
[The information follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Ms. Underwood. Thank you. I think many people don't realize
if you're working full time to support your family right now at
the Federal minimum wage, you are making $15,080 a year. That
is not a livable salary anywhere in America today, and so I
would like to learn more about how gradually raising the
minimum wage can help workers and small businesses.
Ms. Eckhouse, you have been paying a livable wage since you
started your small business almost 20 years ago. In that time,
have you seen the livable wages you pay contribute to lower
levels of turnover, and would you say that this has been better
for your bottom line?
Ms. Eckhouse. Thank you for your question. Yes. We have
seen lower turnover than we might have as expected in our
business, and that has benefited our company. It benefits us in
a lot of ways. We have more knowledgeable employees, we have
more committed employees, and we are all able to work together
to improve what we make.
Ms. Underwood. That is great. And is it your experience
that because you pay a livable wage and therefore have less
turnover, you are able to dedicate more time to growing your
business instead of a cycle of hiring and training new
employees?
Ms. Eckhouse. Yes. That is correct. And our employees are
also able to contribute to better management of our business
because they have been there longer and are more familiar.
Ms. Underwood. And so you would say that paying a livable
wage is an importantly part of your small business's success.
Is that right?
Ms. Eckhouse. Yes, I would.
Ms. Underwood. I am really encouraged by research showing
that gradually raising the minimum wage can help reduce wage
inequality and have a positive effect on women's economic
security, so I really appreciate Miss Gupta's comments. I would
like to just pivot for a second.
Professor Reich, what does the current research say about
the impact on health outcomes? I am a nurse, and so often I
like to ask about the health impact as a result of the increase
in the minimum wage.
Mr. Reich. And thank you for that question. This is a very
new area in my minimum wage research is to look at the health
impacts, and there are about 20 studies, and they are not
unanimous. No economists never are unanimous, so that is not a
negative sign. But there are definitely good studies, high
quality studies that show that higher minimum wages reduce
smoking rates, they reduce obesity, they reduce prediabetic
conditions.
In a study that I have done but I have not yet published,
they reduce suicides. There would be, like, 700 fewer suicides
a year with every 10 percent increase in the minimum wage.
Ms. Underwood. Wow, those really powerful findings. Thank
you.
I appreciate your testimony this afternoon. I do also
recognize it has been a long day and know how important this
issue is for workers, for business owners, and for the future
growth of our economy in this country, so thank you for your
service, and I yield back my time.
Chairman Scott. Thank you. And I recognize myself for
questions. And I would like to begin by responding to the idea
that this is a socialist talking point. I would point out that
Arkansas and Missouri recently by referendum passed increases
in the minimum wage or a similar track to what we are doing in
this bill by votes of well over 60 percent.
Representative Brodeur, who has been helped in
Massachusetts by the minimum wage increase?
Mr. Brodeur. Working families certainly have been. Again,
as I started in my opening remarks talking about we see teens
that are about 20 percent of our teens supplying 20 percent of
the household income, you know, for folks that are really at
poverty level. That is huge, and it leads to, you know, some of
the results that Dr. Reich was talking about in terms of those
dollars leading to better outcomes for families over the long
term.
It has also provided opportunities for folks to again to
advance themselves. Education, we all agree, is the pathway to
success both early ed and an environment where the family is
more stable. Kids have more success, and those young adults
that are trying to get higher ed or a certificate or whatever
the case may be to improve their opportunities in the job
market also benefit.
Chairman Scott. Thank you.
Dr. Strain, in your testimony, you indicated there are
better ways to help the working poor. I think you mentioned the
earned income tax credit. Is that what I understand you are
referring to?
Mr. Strain. Yes, Mr. Chairman.
Chairman Scott. What are the other ways of helping the
working poor?
Mr. Strain. Well, another way is through the child tax
credit which has a refundable component that can go to support
low-income Americans. Another way is to expand education and
training programs. I think apprenticeships offer a particularly
promising path forward to building worker skills which will
allow them to be more productive and command higher wages.
There are many, Mr. Chairman. There are many.
Chairman Scott. If you could supply those for the record
after the hearing, I would appreciate it.
Mr. Strain. Of course.
Chairman Scott. Professor Reich, the 2014 Congressional
Budget Office study showed a significant job loss. I understand
there have been subsequent studies that come to different
conclusions. Can you say what the overall body of research
shows about whether or not low income workers are worse off as
a result of an increase in the minimum wage?
Mr. Reich. The CBI doesn't do its own research on this
topic. It just builds on and uses the research that other
people have done, and they looked at the studies as of 2014
some by me, some by other people, and they basically took an
average between those two as the effect on teens. That is not a
very good scientific method because some of the studies are
better than others.
And they had to extrapolate from what the effect is on
teens the effect on adults, and they arbitrarily came up with a
number, a ratio of one-third because adults on the whole are
better paid. That again is not a very good basis. More
recently, we have studies that look at not only teens and
restaurant workers but all workers, all jobs.
Dr. Zipperer, who was on the panel this morning, is the
author of one of those studies, and it is a study--I think that
it is stunning study. It has been described as the best minimum
wage paper since the 1990's, and I agree. It is going to be the
defining study. It is probably going to come out in the top
economics journal in the world. It shows no negative effects.
Chairman Scott. Does the research show how restaurants
react to an increase in the minimum wage as far as the way they
treat their workers?
Mr. Reich. Yes. Well, first of all, you know, not
everybody's paid at the minimum wage in a restaurant or any
other industry, so the actual increase is usually about half.
The actual increase in cost is usually about half. In labor
costs, it is usually about half what the minimum wage increase.
If the minimum wage goes up 10 percent and the labor cost
increases about 5 percent, and labor is only about a third of
operating costs.
So the actual increase in prices, full pass-through is
maybe 1 to 2 percent, especially when you take into account
turnover savings. So that is the main adjustment mechanism, not
reductions in employment. And by the way, it does increase
automation for those jobs that can be automated, but many jobs
in restaurants cannot be automated.
Food prep is very, very difficult to automate. You cannot
automate making a peanut butter and jelly sandwich, for
example. It has been tried. And so you know, automation isn't
just something that is free. It has to be actually--there has
to be a technology for it.
Chairman Scott. Thank you very much. My time has expired,
and I want to remind my colleagues of the process for
submitting additional materials, and I want to thank our
witnesses for their participation today. What we have heard has
been very valuable.
Members of the committee may have additional questions and
we ask the witnesses to please respond to those questions in
writing. The hearing record will be held open for 14 days to
receive those responses, and I would ask the colleagues to
submit those questions within 7 days so that the witnesses have
ample time to respond.
This hearing has demonstrated the benefits of increasing
the Federal minimum wage to $15 by 2024, the benefits for
workers, businesses, and the economy. No American working full
time should be living in poverty, and by gradually increasing
the minimum wage, you cannot only elevate the standard of
living for nearly 40 million American workers but also put
money back in their pockets to support local businesses.
And without objection, I ask that the letter and documents
from the business for a fair minimum wage and the Economic
Policy Institute be entered into the record and without
objection, so ordered.
[The information follows:]Mr. Scott
Economic Policy Institute: https://www.govinfo.gov/content/
pkg/CPRT-116HPRT36711/pdf/CPRT-116HPRT36711.pdf
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman Scott. We look forward to continuing the
discussion as we advance the legislation.
Is there any other business to come before the committee?
If not, the meeting is adjourned.
[Additional submissions by Ms. Adams follow:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
[Additional submission by Mr. Courtney follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
[Additional submission by Ms. Davis follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
[Additional submissions by Mrs. Foxx follow:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
[Whereupon, at 5:36 p.m., the committee was adjourned.]
[all]