Pennsylvania proposes minimum wage increase
Two weeks ago, Governor Ed Rendell announced his intention to increase the minimum wage of Pennsylvania by making incremental changes from the current federal level of $5.15. The minimum wage would increase to $6.25 by 2006 and $7.15 by 2007, with later possible increases if the standard of living goes up.
Governor Rendell made the announcement of this new initiative at a rally of labor unions and supporters on September 5. Within Pennsylvania, about 254,000 workers will benefit if the proposal is enacted into law.
The governor has said he initially waited to let the federal government take action on the issue. However, the federal government did not act in accordance with Governor Rendell?s wishes. In March, when Congress passed an overhaul of the federal bankruptcy law, two amendment proposals by Senators Kennedy (D?Mass.) and Santorum (R?Pa.) to increase the minimum wage to $7.15 and $6.25, respectively, were voted down in the Senate. The last time the federal minimum wage was increased was in 1997.
Governor Rendell is no stranger to wage rate increases. In late July, he approved a controversial pay raise increase for members of the Legislature. Though he declined to accept a pay raise himself, the increase has drawn sharp rebukes from all corners of the state. This has led many to accuse the governor of proposing a minimum wage increase to mollify the objectors. But in an interview after the rally, Rendell denied that this was his intention.
However, Rendell has said that considering what the government did in July, lawmakers should not consider a minimum wage hike ?out of the question.? During the rally, Governor Rendell remarked, ?If lawmakers can get a pay increase, so can the poorest working Americans in Pennsylvania.?
There is already a debate over the proposal. Business interests were predictably against it. Kevin Shivers, the Pennsylvania director of the National Federation for Independent Business was quoted as saying, ?We think if you?re going to raise the minimum wage, you might as well hand out pink slips with the paychecks.?
Labor feels that the current minimum wage is inadequate. The Pennsylvania AFL-CIO website reads: ?The minimum wage has become a poverty wage. Someone who works 40 hours a week 52 weeks a year for the minimum wage will make $5,000 less than what the federal government says is needed to keep a family of three out of poverty. A single parent with one child working the same schedule will come up $2,000 short.?
Previously, Governor Rendell had argued against raising the minimum wage. Although the last time the state raised the minimum wage was in 1988, Rendell feared that doing so before neighboring states would harm Pennsylvania competitively.
However, policy analysts argued that employers would still be permitted to raise wages voluntarily to keep workers and attract workers. Some of these fears have been quieted recently, as states like New York and New Jersey have increased minimum wages to $7.15 by 2007. These proposals would put Pennsylvania nearly on par with its neighboring states.
The question of the economic cost and benefit remains. Prior to the early 1990s the universal belief was that higher wages were positively correlated with job loss. But this belief changed somewhat after a 1994 study carried out at Princeton University by two economists. After a minimum wage increase there, they carried out a survey of fast-food restaurants and found that the amount of jobs increased.
Following their results, they put forth the theory that without the involvement of government, employers may have been paying amounts below a level necessary to avoid negative economic effects. They also suggested that employers offering higher wages may motivate their employees to perform better, contributing to less absences and better performance. However, there remains data correlating a minimum wage increase and job losses.
The Post-Gazette reports that Rendell believes ?people will say this will hurt our economy.... That clearly isn?t the case.? Supporters state that Pennsylvania?s economy is strong, and that higher wages will only increase its economic strength. Only time will disclose the state?s future policy outcomes.