Floor Debate on Minimum Wage Increases: Why now? Is This the Wrong Time to Raise Business Costs.

March 27, 2014

Hartford, CT – State Senator Toni Boucher (R-Wilton) released the following statement today re: Minimum Wage Increase to $10.10 by 2017.

“This issue has many individuals questioning why are we increasing the minimum wage now, when we already have one of highest minimum wages in the country?”

“We discuss minimum wage increases almost every year, but it is usually when there is a surplus and the state is in good financial condition. But should the legislation propose this when Connecticut is the 49th worst state for taxes, ranks 50th out of 50 states in job growth, has a shrinking gross domestic product (GDP), has more people leaving than coming in, and a shrinking labor force? Connecticut’s real unemployment is higher than 7% and closer to 10% because of the loss of people seeking jobs, many of whom have obtained employment in other states.

“Unfortunately, I have seen over time that the voice for business has decreased considerably, particularly over the last decade. The legislature once was fairly balanced, both sides of the aisle promoted positive economic and business legislation.

“Businesses now feel that the legislature has turned a cold shoulder to them to their plight. I ask them about this every day and they say they still haven’t gotten back to where they were prior to the recession and that they are just trying to stay afloat. One of the grocery stores in Hartford told us that unless you work in a small business no one can express how bad things are, and in his 38 years, he has never seen the economy in such bad shape.”

“State government is producing a stream of anti-business legislation that interferes with how businesses are run. The business voice that we would like to be represented more prominently has told us that in order to bring Connecticut back and jobs back, we have to stop promulgating these burdensome mandates.

“I just read testimony from Lake Quassapaug representatives. They believe that this wage hike will just produce higher operational costs, and increase workers compensation costs, the cost of unemployment and mandatory paid sick leave, and that they would have to pass these costs onto consumers. These are the very consumers we are talking about, minimum wage workers. They see these increased costs at the gas pumps, at the grocery stores, and on their utility bills. Indeed, businesses have few options: a restaurant can either increase the price of a burger or lay people off. In fact one business owner told me that this bill would cause a $1000 per week ($50,000 per year) increase in his payroll costs. He is constrained in increasing the price of his goods, and the only other option is to reduce the number of his employees.

“Additionally, the farm bureau talks about how this minimum wage bill is going to affect the farming industry, amounting to a 26% increase in costs from 2009. And they have assured us that they do not have the ability to increase the cost of their goods by that amount. This seems to happen far too often here. On the one hand we are trying to promote farms in Connecticut and on the other hand we also constrain them from continuing to do business. We want our farming community to continue to be here over the long haul, they have a long history in Connecticut.”

“Young and inexperienced workers who already have a higher rate of unemployment stand to lose the most to higher minimum wage mandates.

We hear from the Connecticut Business and Industry Association (CBIA) that this bill will exacerbate unemployment among the young, particularly in inner cities. I have visited many of them over the last year. The people who live there are not looking for a handout; they are looking for jobs and good schools for their children. Higher costs result in employers reducing hours and training opportunities that once provided young workers with valuable skills and the experience to move up in a working environment. This is why I have often stated that that to close the income gap we must close the education gap. Too many jobs go unfilled because we do not have as skilled and educated a workforce as exists elsewhere in the world. We must focus on education so that our fellow citizens have the opportunity to succeed.

“A restaurant manager from the 99 Restaurant and Pub explained that because they already are burdened by one of the highest minimum wages in the country, this bill would not only increase pressure on their business it would also drive up other unionized wages in the state, so it has an aggregating effect of driving up labor costs across the board that are tied to increases in minimum wage. In addition, this bill will increase costs of our recently unionized daycare providers and healthcare aides in the home, making those services less affordable for the elderly and for those who are budget constrained. Businesses are particularly concerned that a minimum wage increase will lead to an increase in FICA, unemployment compensation and worker’s compensation as well. Unemployment compensation costs increase as minimum wage increases and it is something that I will be talking about further as we continue to discuss this bill.

“The debate on minimum wage is just one example of our government’s intrusion into how businesses are run. On the one hand we say we are open for business and on the other had we shut the door on them. Labor costs are already too high and yet this legislature entertains bills in addition to minimum wage, such as standard wage proposals, prevailing wage mandates that have increased the cost of construction, and also passed a paid sick leave bill that has negatively impacted employers. Mandates like corporate surcharges on profit that were meant to be temporary and the Business Entity Tax, all add to Connecticut’s anti-business reputation.

“A recent example from one of my towns is a young entrepreneur who is growing his business from 8 employees to 40. He was counseled not to go to 50 because these mandates equate to a twenty five percent increase in the cost of each new hire. His investors regularly tell him to relocate outside of Connecticut to save costs.

Minimum wage increases affect one of the most expensive payroll costs for employers, workers unemployment compensation. If minimum wage goes up, then unemployment compensation costs also go up. In fact, businesses just received a new assessment from the state that averages to $42 dollars more per employee due to the need repay a loan that the state took out to extend unemployment insurance. When this minimum wage hike goes into effect, this assessment will go up even further. If the legislature passes this minimum wage increase, the additional assessment should be reduced to compensate for additional costs. In order to reduce this costs, I propose an amendment that states that (prior to closing the accounts for the fiscal year ending June 30, 2014, if the Comptroller determines there exists an unappropriated surplus in the General Fund, the Comptroller shall transfer sixty million dollars of any such surplus to the State Treasurer who shall apply such funds to the interest due on advances made to the state from the federal unemployment account.)

“I don’t believe that the state should dictate what a business pays an employee, but if in fact it decides to do that, let’s balance that additional cost by removing the new assessment.

“Some reports show that in states where minimum wage laws are high, they have correspondingly high unemployment rates and where minimum wages are low, there are correspondingly low unemployment rates. The Congressional Budget Office has said that national legislation to raise the minimum wage to $10.10 can mean over 500,000 job losses.

“When we see that data, it should give us pause. This minimum wage increase is being proposed at a time when Connecticut has not regained its economic footing. As we have not recovered 50% of the jobs we have lost since the recession this is not the right time to mandate a wage increase. A more common sense approach would be to wait until the business climate improves, rather than kicking our businesses when they are down.”

“It was only a year ago that the governor’s spokesperson said that the governor has long been supporter of minimum wage, but that while he supports it, he said we should be mindful of the needs of businesses in this economic climate. In fact a short while ago, the Office of Fiscal Analysis reported that the recommended increase would add $531,000 to contracting costs in 2015, 2016 and 2017, and the potential of $1.3 million dollars in additional costs to state government. When they say addition costs to state government what they really are saying is that that this results in additional costs to the taxpayer.”

“Many people are asking, why are we considering this bill now, during such a difficult economic recovery? The reason is that a lot of state and national attention has been focused on minimum wage as a political wedge issue and it is being promoted by Governor and the President here in Connecticut. I believe this is a distraction from enacting policies that could improve the economy and the job market, and could stop more people from moving out of the state.

“We should be enacting policies that reduce the cost of doing businesses, not entertaining policies that increase those costs.”

“The argument that opponents of minimum wage are lacking compassion is not true. The wages of low income workers are far from their only lifeline. The state currently pays 100% of insurance premiums for low income workers, it provides, food, rental and heating assistance. Low income residents qualify for the Earned Income Tax Credit which is provided in Connecticut in addition to the federal program. This is distributed every year to people who work but do not pay income taxes. In total these benefits may amount to more than a minimum wage. I believe Connecticut residents would rather have a job and educational opportunities that advance them to a higher salary.”

“In conclusion, I would maintain that a higher minimum wage is not really a raise, since people would end up paying more at the cash register. As I have stated many times, by adding to the cost of labor, a business can only do one of two things, increasing the cost of a good, or lay an employee off. And today, given the pressure on prices, there is only one outcome and that is laying people off. In addition workers also need to buy those goods and services which could cost more. The extra money that they might earn from a minimum wage increase would be offset by the higher costs of the goods they may need to buy. It’s like putting money in one pocket and taking it out of the other.”

“When Hartford says that it is open for business no one believes it anymore, especially when more mandates are enacted every year. Power should reside in the marketplace not the statehouse when it comes to running a business.”