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Battle Heats up over Minimum Wage in RI Governor’s Race

Monday, January 27, 2014

 

To raise -- or not to raise -- the minimum wage in RI? That is one of the questions in the 2014 governor's race at the moment.

The debate over raising -- or not not raising -- the minimum wage in Rhode Island has recently taken center stage in the 2014 gubernatorial race, and community leaders and academic experts are weighing in on the political and economic implications on both sides.  

"Rather than looking at ways of retaining and creating jobs, candidates running for office have found a new way to attract voters who earn a minimum wage in Rhode Island, namely, increase the minimum wage. This is the candidates way of giving "street money" to get people to the voting booths," said URI Distinguished Professor of Business Edward Mazze. "To support their position on raising the minimum wage, they may be using studies that have weaknesses in their methodologies. I recommend further study before doing anything. Minimum wage is not a competitive tool in attracting businesses."

However, gubernatorial candidates General Treasurer Gina Raimondo and Providence Mayor Angel Taveras, and supporters in the community including the Economic Progress Institute, are arguing for an increase over the current $8.00 level of up to $10.10.

"The minimum wage isn't designed to solve every economic problem facing the state, but it very important to improving the economic well-being of workers and generating economic activity. Putting more money in the pockets of workers will put more money in the cash registers of locals businesses which will increase demand and help create jobs," said Kate Brewster with the Institute, who have been pushing for the increase to $10.10 since last year.

Proponents on the Record

Should the state's minimum wage be $8, or raised to $10.10, as some proponents are advocating?

Eric Hyers, campaign spokesperson Raimondo, told GoLocal, "As she said in her kickoff speech, Gina strongly believes that we need to increase the minimum wage. But we can't wait to provide a meaningful adjustment until 2018. Just as our entire congressional delegation is fighting for swift action to raise the minimum wage in two years at the federal level, we should be doing the same right here in Rhode Island."

Hyers continued, "Gina will work to raise the minimum wage to $10.10 by 2015 and then index it to the cost of living so that politicians can't play games with people's lives. Two-thirds of minimum wage earners are women so a raise would immediately help women across Rhode Island and their families. People are really struggling and we need to act with urgency to help out working families."

Last week, Taveras sent an "urgent petition" to supporters proposing raising the minimum wage to $10.10. "If you are ready to give 65,000 hard-working Rhode Island families the raise they need, click here to show your support," he wrote.  

"It is exciting to see issues that are critically important to the economic security of Rhode Islanders being raised so early in this campaign," said Brewster. "We should continue to build on the progress that has been made over the last two years by making incremental increases so that we can reach a more adequate wage for hardworking Rhode Islanders."

Roger Williams University Professor of Political Science June Sager Speakman told GoLocal, "In my opinion, the increase in the minimum wage is certainly in the best interest of the 25,000 or so people who would immediately benefit from it. And, many economists believe that the negative impacts on the businesses that pay these wages are minimal and can be easily absorbed by the businesses through productivity increases, slight price increases and so on. We need to hear more from all the candidates about their plans for job creation, job training, business development, infrastructure improvements, education. Those are the areas that have broad and deep impact on the state's economy, and ultimately on its workers and businesses."

Speakman spoke to the role that the campaign year played in the debate.

"Campaigns always temper policy discussions....this will not be an issue in the primaries because there is agreement within the parties. It's the general election where the issue will come into play. And, as always, to win, candidates need more votes than the other guy, but also need to dollars to campaign for those votes," said Speakman. "Policies that benefit the working and middle class have resonance with lots of voters; policies that appear hostile to the business community alienate some of the big donors. Populist themes are picking up steam nationally, and in the media. If that is maintained, that creates an atmosphere that supports worker-friendly policy positions."

Against an Increase

"Every member of the business community that I have spoken with agrees that the Democratic plans for a huge minimum wage increase would be wrong for the Rhode Island economy and for the people who need jobs. It will continue to be a significant issue for at least the early part of the campaign while the General Assembly is considering what to do," said Republican gubernatorial candidate Ken Block. "I will be active in opposing it and encouraging others to help me put pressure on the legislature. If the Assembly does the right thing and decides against the increase, I expect the Progressive Democratic candidates for Governor will continue pushing it to rally their base in the fall, so I’ll continue to oppose it."

Block cited specific research examples to support his position. "Boosting the minimum wage is a job killer. In an exhaustive examination of research conducted over the last 20 years, economists David Neumark (UC-Irvine) and William Wascher (Federal Reserve Board) determined that 85 percent of the best research points to a loss of jobs following a minimum wage increase," said Block.

He continued, " A high minimum wage is also touted as a tool to reduce poverty, but this claim fails to stand up on closer examination. In the 28 states that raised minimum wages in the four years prior to passage of the last federal minimum wage increase, economists from Cornell and American Universities, writing in the Southern Economic Journal, found no associated reduction in poverty rates. Census Bureau data show that approximately 60 percent of people living in poverty are not employed, so they would get no benefit from a higher minimum wage. Census Bureau figures also show that the family income of the majority of minimum wage workers is $50,789, far above the poverty line."

"I think supporters of the minimum wage increase are sincere and well-intentioned, and I share their hope for a state economy that supports well-paying jobs for everyone who wants to work. They have been convinced by Progressive partisans like Treasurer Raimondo and Mayor Taveras that government can impose this result," said Block. "However, I’m convinced – and the facts bear me out – that giving Rhode Island the highest minimum wage in New England simply won’t do the job. What we need is a flourishing market economy with government policies that welcome the investors who create jobs."

Mike Stenhouse with the RI Center for Freedom and Prosperity said that a raise to $10.10 would cut 3400 jobs from the Rhode Island economy.

"It's one of the most politically misunderstood topics out there -- it's a tool used by the left to their advantage," said Stenhouse. "I'd like to see the studies that Taveras and Raimondo are pointing to. "

Calls for Reform

Gary Sasse, the former Director of Administration, said he would support an increase in the minimum wage -- if it was linked, however, to "structural economic reforms."

"Nobody who works a full-time 40 hour a week job should live in poverty and be dependent on government assistance. Therefore, I support an increase in the minimum wage. However, at the state level an increase in the minimum wage would best meet its objective if it was linked to structural economic reforms," said Sasse.  "These would include tax and regulatory relief to reduce the cost of doing business in a highly cost-competitive environment. It should also encompass education reforms and a more aggressive workforce development program funded at scale. This will require additional state spending for education and workforce initiatives."

URI economist Len Lardaro offered his views on the debate.  "What's raising the minimum wage going to do? You're treating symptoms, not problems. The problem is the labor force is grossly inadequate in terms of skill levels. K-12 performance is getting better, but far below where we need to be."

"I've harped on this...Rhode Island needs in-house due diligence," said Lardaro. "You can rename the EDC whatever you want...you can rename it the second coming, you're shuffling the deck. There needs to be a staff of 2 or 3 economists with PhDs and extensive experience detailing the economic impacts of policy changes. We almost never do due diligence."

"It's the most magnificent scam I've ever seen, the legislature does nothing, and then the Governor gets blamed," said Lardaro. "There's nothing he can do, he can't say "this is what we're going to do". The General Assembly holds all the power. It's ironic with the unemployment rate, you have elected officials saying we should stay the course -- I thought when I first read it, I saw "stay the curse". 


Related Slideshow:
7 Strategies for Rhode Island Economic Development in 2014

What will it take to move the Rhode Island economy forward in 2014?  GoLocal talked with elected officials, candidates, and leaders for their economic development plans in the coming year. 

Below are key elements of the economic priorities for Governor Lincoln Chafee, Speaker of the House Gordon Fox, Senate President M. Teresa Paiva-Weed, House Minority Leader Brian Newberry, gubernatorial hopefuls General Treasurer Gina Raimondo and Ken Block, and RI Center for Freedom and Prosperity's Mike Stenhouse.  

Prev Next

Governor Lincoln Chafee

"My goal is to have the state continue to focus on the fundamentals.  We will invest in education, workforce development and infrastructure , and provide aid to  cities and towns to lessen the burden on property taxpayers.  I’m confident that these investments and our focus on the basics will allow Rhode Island to exceed Moody’s predictions.”
Prev Next

Speaker Gordon Fox

"Among the many pieces of legislation the House will address will be issues of higher education affordability, expanding apprenticeship opportunities, and offering help to our manufacturers.  We will also look closely at our tax structure to make sure we are competitive with our neighboring states, including the corporate tax and the estate tax, and I will carefully review the recommendations of the commission studying our sales tax.”

Prev Next

Senate Pres. Paiva-Weed

Greg Pare, spokesperson for the Senate President, said that the Senate is planning to issue recommendations soon on workforce development initiatives to address the skills gap among Rhode Island job seekers.

"An example of a proposal anticipated in that report is the elimination of state’s Indirect Cost Recovery on the Job Development Fund, which is about $1.2 million this year. Those funds would be directed towards job training and skills development programs to provide immediate impact and help workers gain the skills necessary to succeed in today’s economy."

Prev Next

Gen. Treasurer Raimondo

"To grow our economy, we need to make Rhode Island a leader in manufacturing again.  Great things can happen at the intersection of government, higher education, and the private sector.  Rhode Island is lucky to have thriving institutions in each of these three sectors, and we need to foster collaboration among them to find solutions to our challenges, and spark our economy.  

By promoting partnerships in high-growth areas, [Rhode Island Innovation Institute] will help grow our manufacturing base, and create new, high-quality jobs."  

Prev Next

Ken Block

"First, we need to fix Rhode Island’s broken Unemployment Insurance program. The state’s Unemployment Insurance tax, paid by employers, is ranked worst in the country by the Tax Foundation. It is one of the factors that makes Rhode Island an uncompetitive place to do business. Also, it is inherently unfair that a large group of businesses are effectively subsidizing the payrolls of a small group of businesses who misuse the system. There is a simple change to state law that can fix this problem."

"Rhode Island’s temporary disability tax (TDI) is broken, and places an unnecessarily high tax burden on Rhode Islanders. This tax, paid for by employees, will be reduced by changing the way we manage the program. As Governor, I will substantially reduce the cost of purchasing this insurance by requiring that Rhode Island’s program adhere to national norms."

"To best encourage new job creation, I propose the following tax incentive: exempt from future capital gains taxes any new investments in Rhode Island-based businesses. This change would create a powerful incentive for investors who are deciding where to locate a new business, or where they relocate an existing one. This proposal has the potential change the economic playing field for Rhode Island."

Prev Next

Minority Leader Newberry

“It would be overly ambitious to set being #1 as a goal right now, but we think 25, the middle of the pack, is a reasonable goal to set, one we think we should pursue, and one we can achieve,” said Newberry. "One of the initiatives is a requirement that every bill receive a fiscal evaluation before it can be heard by committee, better insuring that legislators know the real cost of the legislation they are acting on."

"Another proposal would exempt social security income from RI state income tax, making Rhode Island more tax-friendly for our seniors and keeping them here rather than migrating to more tax-friendly states."

“Strong action is way overdue here. Nearly 60% of Rhode Islanders now believe that the state is headed in the wrong direction. We think they’re right, and our central goal is to get it turned around."

Prev Next

Mike Stenhouse

"As part of the Center's 2014 Prosperity Agenda we recommended that the state:
 
Repeal or rollback of the state’s regressive sales tax; or the requirement that families have no choice on what schools best educate their children; or punitive estate taxes that drive wealthy people to other states; or restrictions on out-of-state companies to sell health insurance in RI; or the minimum franchise tax, which stifles entrepreneurship; or corporate welfare, to level the playing field; or even renewable energy mandates that drive up costs for every family and business …"
 
 

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Comments:

Odd Job

arguing about how many matches each one has while standing knee deep in gasoline.

Redd Ratt

Professor Speakman said that a 25% increase in the minimum wage

In my opinion an increase in the minimum wage is certainly in the best interest of the 25,000 or so people who would immediately benefit from it. And, many economists believe that the negative impacts on the businesses that pay these wages are minimal and can be easily absorbed by the businesses through productivity increases, slight price increases and so on.

Does the professor understand that "productivity increases" means less jobs.

Professor Lardaro is going to have a heart attack. The morons in the Rhode Island electorate and the politicians they elect should be charged with attempted murder. Yes I vote, but not one of the people I voted for got elected.

Mark St. Pierre

Lets faceit, minimum wage employers will just raise the price of their products if they have to pay an increase in minimum wage. I.E....fast food joints, donut shops, etc.

joe pregiato

Raising the minimum wage is strictly a campaign issue designed to buy votes. And it easily translates into an opponants meanness. But the argument that an increase is "easily absorbed" is BS. Somewhere, somehow, the expense is passed on. If a small biz allocates $100,000 for 10 part time minimum wage jobs, and the minimum wage goes up 10%, then either they will afford only 9 employees, or they will raise prices. It's simple. To say it's easily absorbed, is like telling you Gas prices are going up 10% (35 cents), but don't worry, it's "easily aborbed".

G Godot

If Rhode Island actually had a vibrant economy where you didn't need to "know somebody" to get a good job, the competition for qualified workers would extend to the minimum wage level, and higher wages would be required to obtain a sufficient workforce.
Here, the goose was killed by the union hacks long ago, well educated kids can't find jobs, and there's no more juice in the orange.
Want to improve the minimum wage, improve the ECONOMY, and wages will follow. Otherwise your DREAMIN'. FDR said "a rising tide lifts all boats", not when there's no water in the river.

G Godot

Of course liberal mensa candidates think there's ALWAYS more money", just ask the "government" to print some.

barry schiller

I'm really disappointed Ken Block has joined the opponents of any increase in the minimum wage. Perhaps he thinks he needs to do this to win the GOP primary.

If the minimum wage is raised a bit some proces will go up, some jobs may be lost (as labor costs increase) or gained (as purchasing power increases) but my take on the research is that it has a small effect and difficult to measure. However, the benefit to people really facing low wages and a nasty struggle to survive is real for many thousands. Wages are set with so much power to the employer who has contacts with all the big shots, the low income workers have no economic leverage, no union, no redress other than endure, hope to move up, or give up and live rougher. Thus it seems mean spiritied to me to deny them at least a keeping up with inflation (and a catch up since it has fallen way behind.)

Wuggly Ump

If you raise the minimum wage prices go up, as many have stated. What is not being said is that when the prices go up the minimum wage increase won't do those earning it any good.

Prices being higher means the value of the dollar goes down, everyone's dollar value goes down. So when you mandate a minimum wage everyone actually gets a pay cut. This is inflation.

You can not artificially create wealth, it is only created by work. More experience, training and skill, the higher the price that is paid for your labor.

Johnny cakes

To Mazze, Lardaro, Stenhouse and Block: Here are 22 research studies which show that “minimum wage increases do not cause job loss,” and are actually favorable to the business climate - http://www.businessforafairminimumwage.org/news/00135/research-shows-minimum-wage-increases-do-not-cause-job-loss

Show me and others that you are not once again talking through your a**es. Cite the URLs for the peer reviewed research which informs your opinion about the detrimental effects of raising the minimum wage.

john paycheck

good message to people outside the state.


great message to build the economy

Joyce Bryant

Rhode Island NEEDS JOBS, not the usual B S from the Democratic party, but as we all know in this state, "Stupid is as stupid does."

Ted Geisel

Johnny Cakes, Those are some interesting studies but you are missing part of the point. Let's assume, as you state, that employment doesn't decrease. That doesn't mean it won't hurt the most vulnerable. With a higher wage more people come into the labor pool (especially with unemployment so high in RI). Those with less education and experience get pushed out. There is no net change in employment but the people who needed the increase the most lose their jobs.

Wuggly Ump

@ Johnny cakes

Do you really think raising minimum wage has no effect? Do you think if we just make minimum wage for everyone a million dollars year it would solve the problems? At that rate business should be booming, RI would be the economic capital of the world.

At the web site you mentioned there is a list of businesses that back the minimum wage, support them buy their products. That's your way of supporting the minimum wage. If you shop at Wal-Mart make sure you offer to make up the difference in pay to a clerk that assists you with your purchase for their time with you.

Business owners can pay their employees what they feel the job is worth. If they want to pay more they will. If the State would become more business friendly, more jobs would become available, making good workers with skill, training and experience more valuable to keep. This is what causes wages to rise in a true economic engine.

Johnny cakes

With typical American arrogance and ignorance, people get on this thread and pontificate as if they know what they are talking about.

How many peer reviewed studies have you completed or papers have you written on the effects of an increase to the minimum wage? Have you and the political economists, Mazze and Lardaro, written a scholarly exegesis on the minimum wage? How did you form your opinions? Did they come from God’s mouth to your ear?

Have you read any of the conclusions of these 22 studies - or anything which contradicts them?

As it is with Mazze, Lardaro, Block and Stenhouse - you are simply talking through your ass.

Art West

"Raise the minimum wage!"

Great emotionally evocative pandering for votes; not great jobs policy.

How about actually trying to attract skilled, higher paying jobs to our state? How about creating a low-tax, more reasonably regulated business environment that enables non-retail businesses to locate here and enables educated, skilled young people to actually stay in this state?

And if the politicians do succeed in raising the minimum wage, they must offset the increase in business expense by reducing taxes and costly regulations by an equal amount. Otherwise they're just pushing price increases on to consumers.

joe pregiato

Johnnie Cakes: Why not raise the minimum wage to $25 then?

Johnny cakes

Joe: I don’t respond to inane questions or hypotheticals. Unlike you and others here, I don’t pretend to know something I haven’t studied. All I know is that people who have done the studies and researched the data on increasing the minimum wage have demonstrated fairly conclusively that you and others here are full of sh*t.

joe pregiato

No Johnnie...ONLY people with a political agenda say that raising the minimun wage won't hurt jobs or raise prices--that it can be "absorbed" Use your head before you call EVERYONE who disagrees with your upside down logic as full of sh*t. That's why I asked you "why not $25/hr??? Huh? Why not? So $25 hurts jobs and prices but a lesser amount HELPS?

Art West

Joe,

Your question is reasonable, and I'd like to hear Johnny's answer to it.

Wuggly Ump

Johnny cakes Here's a link to an essay with an opposing view. All studies are noted here also, including ones from the U.S. Joint Economic Committee, Dept. of Labor and Bureau of Labor Statistics.

http://www.downsizinggovernment.org/labor/negative-effects-minimum-wage-laws

Rich B

I'm disappointed in Ken Block as well. But you've gotta hand it to him, he sure knows how to cherry-pick his statistics: "In an exhaustive examination of research conducted over the last 20 years, economists... determined that 85 percent of the BEST RESEARCH points to a loss of jobs following a minimum wage increase," said Block.

85% of the BEST RESEARCH? Wow. He could of said that 100% of the best research indicates the same thing, but that would have been too greedy, right?

Block continued, "Census Bureau figures also show that the family income of the majority of minimum wage workers is $50,789, far above the poverty line."

The family income of the MAJORITY of minimum wage workers is $50,789? What does that mean? Is it an average? On average, how many working age minimum wage workers are in these families? Are all family members working minimum wage jobs? The last time I checked, $8/hour x 40 hours/week x 52 weeks = $16,640.00. Even with two full time minimum wage workers, that would barely pass the $33,000.00 mark.




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