Wolf’s minimum wage hike needs to bring tipped workers along with it: Editorial

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Penn Live

February 8, 2017

If there was one, clear flash point in the $32.1 billion budget address that Gov. Tom Wolf offered to a joint session of the Legislature on Tuesday, it was his renewed call to raise Pennsylvania’s minimum wage.

The York County Democrat admirably wants to boot the state’s minimum from the current $7.25 an hour, where it has remained since 2009, to $12 an hour, arguing that it’s both a matter of fairness and economic commonsense.

“It’s long overdue in Pennsylvania, and we think $12 is the right rate to catch up and provide a fair wage to those employees and their families,” administration Budget Secretary Randy Albright said during a briefing with reporters on Tuesday.

Wolf’s office has projected that its plan – taking the current minimum up by 65 percent – would provide as many as one million Pennsylvania workers with total additional income of $3.5 billion annually.

That infusion into the economy, the administration added, would yield $33.9 million in new personal income tax collections, and an additional $61.4 million in sales tax collections.

And that’s all good news.

But there is still one class of workers that wouldn’t see the benefit of any wage hike, and it’s one that has largely been left out of the discussion nationwide:

They are tipped workers, such as waiters, waitresses and bartenders, whose main wage hovers somewhere around $2 an hour in most states. That includes Pennsylvania, where they are paid $2.83 an hour, according to a published report. 

Federal labor laws allow employers to pay these workers less, so long as their earnings add up to the minimum by the time they clock out.

Usually, that’s the case. But one bad night can mean a worker goes home with empty pockets. And employers, who are required to make up the difference, aren’t always so magnanimous, as Five-Thirty-Eight reported. 

Fortunately, the tide is starting to turn.

Last year, Maine voted to become the eighth state to eliminate its tipped minimum wage, Five-Thirty-Eight reported. That means that, once the law takes effect, those workers will earn the same minimum wage as everyone else. There’s also a nationwide campaign to get more states to follow suit.

As Five-Thirty-Eight notes, when the tipped wage was established in 1966, Congress set it at “50 percent of the applicable minimum wage rate. At the time, the minimum wage was $1.25, which made the tipped wage around 63 cents, and it was due to increase whenever the minimum wage went up.”

“In 1996, however, President Bill Clinton struck a deal with Congress that raised the minimum wage while leaving the tipped minimum at $2.13 an hour. It has remained frozen at that level ever since,” the site reported.

That offends fairness and logic by any measure.

In 2015, Pennsylvania state Sen. Daylin Leach, a Montgomery County Democrat, launched an unsuccessful effort to abolish the tipped wage. His office says he plans to reintroduce his plan in this year’s legislative session as well. 

According to research by the Economic Policy Institute, more than one in 10 workers nationwide is employed in the hospitality sector, meaning that they are subject to this two-tiered wage system.

The economic uncertainty attached to this two-tiered system means that this class of workers experienced a poverty rate more than twice the rate of other workers, the think-tank’s research found.

Predictably, both legislative Republicans and the state’s business community have pushed back against Wolf’s proposal, arguing that it would be a job-killer. 

“You’re taxing job-creators,” Senate President Joe Scarnati, R-Jefferson, a former restaurant owner complained in the wake of Wolf’s speech.

But that orthodoxy was defeated in a landmark study by University of North Carolina researcher William Lester, who studied the economic effects of seven decades of minimum wage hikes since 1938. 

The result?

“Of the nearly two dozen federal minimum wage hikes since 1938, total year-over-year employment actually increased 68 percent of the time. In those industries most affected by the minimum wage, employment increases were even more common: Fully 73 percent of the time in the retail sector and 82 percent in low-wage leisure and hospitality,” Seattle entrepreneur and venture capitalist Nick Hanauer wrote in a column for PBS NewsHour.

With more states raising their wages, it’s long past time for Pennsylvania to join their company. But any serious debate should also include tipped workers as well.

Wolf and lawmakers should keep that in mind as this debate advances.

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