Raising the Minimum Wage in Massachusetts – An Update

Five months ago, I wrote about the signature drive to put two initiatives – raising the minimum wage and providing earned sick leave for every worker – on the November 2014 ballot. Raise Up Massachusetts, a coalition of nearly 100 community, faith, and labor organizations, far exceeded the 69,000 or so signatures required to move forward on each of these questions. But a lot has happened on the minimum wage front since then, and we’re in a critical period right now. No time like the present to bring people up to date on what’s happening.

The ballot initiative on the minimum wage would make several changes:

• First, it would raise the minimum wage from the current $8 an hour (where it’s been for over six years) to $9.25 at the beginning of 2015 and $10.50 at the beginning of 2016.
• Second, it would index it annually to inflation going forward, eliminating the need to pass a bill in the legislature (or another voter initiative) every time it needs to be raised.
• Third, it would raise the minimum wage for tipped workers, which has been at $2.63 an hour since 1999. That $2.63 represents 30 percent of the current minimum wage of $8. The initiative would raise it to 60% of the new, increased minimum wage. Thus, tipped workers would be paid $6.30 an hour (60% of $10.50) by 2016.

Before the questions go to the voters, the legislature has another chance to act. And on November 19, the day before the final Raise Up Massachusetts signatures were due in town halls across the Commonwealth, the state Senate voted (32-7) to raise the minimum wage to $11 an hour by July 2016. The Senate bill would raise the minimum to $9 an hour on July 1 2014; $10 an hour on July 1, 2015; and $11 an hour starting July 1, 2016.This goes a bit beyond the $10.50 sought by the initiative. On the other hand, the bill raises the minimum wage for tipped workers to half of the regular minimum, rather than 60%. As a result, the tipped minimum wage would be $5.50 in July 2016 rather than $6.30. It’s still a lot better than $2.63.

Almost immediately, House Speaker Robert DeLeo indicated that he wants to couple any increase in the minimum wage with changes to the state’s unemployment insurance system that long have been sought by the business lobby (more on that below). Since then a bill has been working its way through the House and there are indications it will emerge from the Committee on Labor and Workforce Development sometime very soon.

At issue are the following:

• The amount of the minimum wage increase. There reportedly are numerous representatives, undoubtedly receiving pressure from business groups, who resist going all the way to $11. As Senate President Therese Murray said when the Senate bill passed over three months ago, however, the time has come. MIT suggests that a living wage for one adult living with one child in Boston is nearly $26 a hour – far more than double even the $11 in the Senate bill. As I write this the state minimum wage is not even one-third of that. A full-time minimum wage worker in Massachusetts (40 hours a week) makes about $16,000 a year. The increase approved by the Senate would increase that to only around $22,000. Could you live on that? How well would you be living? What tradeoffs would you have to make?
• Indexing to inflation. This is important because the minimum wage often loses a significant portion of its purchasing power in between legislative increases, and (as has been the case nationally) is eroded when legislatures raise it by less than needed to keep pace with inflation. Businesses don’t like indexing because legislative inaction gives them a couple “freebee” years with cheaper labor than they’d have with it. In my view this is short-sighted: the biggest problem in our economy right now is a lack of consumer demand from the lower end of the income spectrum. Any dollars paid to minimum-wage workers will be put right back into the local economy.
• The tipped minimum wage. The restaurant lobby has been fighting hard against the increase. But the stories told to the Restaurant Opportunities Center (ROC) United about trying to make it on tips are powerful. As are the local stories on ROC Boston and the Globe‘s recent series on the local industry (Parts 1, 2, 3). ROC estimates that, nationwide, the lower minimum wage for tipped workers (the federal level is $2.13 an hour) has deprived restaurant workers of almost $20 billion in income they otherwise would have been paid. Many people think of tipped workers being mostly kids earning pocket cash. They’re generally not. The vast majority are adults supporting themselves on under $10 an hour, tips included. 1 in 3 have children. Many live below the poverty line despite working full time. And restaurants employ about 10 percent of the national workforce.
• A sub-minimum wage for teens. Another proposal has come up in recent weeks: to raise the minimum wage but create a lower minimum wage for teenagers. This is truly a terrible idea. First, many teenagers in poorer households work to help support their families. They would lose money in the deal. Second, some 80% of minimum wage workers in Massachusetts are 20 and over. A sub-minimum for teens would lead some employers to seek out those workers rather than adults subject to the full minimum wage.

And then there are those unemployment insurance “reforms.” Among the proposals are:

• To reduce the maximum number of weeks an unemployed worker may collect state UI  benefits from 30 to 26. Again, this is the last thing we need in a time of sluggish consumer demand due to unemployment, underemployment, and widespread low wages. Particularly on top of Republican refusal in Washington to extend benefits for the long-term unemployed.
• To raise the number of weeks one must work to qualify for any benefits at all, from 15 to 20. This hurts people who are out of work, find a job, then lose that job inside of 20 weeks, which happens a lot these days. And, as the always-informative Hester Prynne points out, a person who has been on the job between 15 and 19 weeks before becoming unemployed “receives benefits for a far shorter time than someone with a longer work history – so parity is already built into the system.” (Hester Prynne has more on the UI situation here and here.)
• Permanent changes to the rate table. The original plan was to have companies pay more in good times, building up a reserve for hard times to come. But most companies don’t like paying more in good times. So, going back to the mid-1990s, each year the legislature passes ad hoc “rate relief.” This left the fund without the reserves it needed when the economy tanked in 2008, and the Commonwealth had to borrow to make up the shortfall.
• A tiered system for employer payments into UI. The idea is that companies with stable workforces would be asked to pay in far less than those who chronically lay off workers.
• Changes to the eligibility of seasonal business owners, who sometimes lay themselves off and collect UI when the season ends.

There already is a UI bill for the House’s consideration, addressing some but not all of these issues. The Senate, just as President Murray promised all the way back in November, took up the minimum wage and unemployment insurance separately, passing the minimum wage bill first (because it’s urgent for struggling workers, she said) and then passing a UI bill early in February. The bill freezes the rates for three years, while raising the base income on which UI taxes are payable from $14,000 to $21,000. Sen. Dan Wolf, who chairs Labor and Workforce Development, says it is revenue-neutral. It also does create a tiered system under which, Mass Live reports, “the most stable employers would pay $153 per employee per year, while the worst-rated companies would pay $2,337 per employee annually.” A pretty big difference, I’d say. The Senate bill does not reduce the duration of eligibility or raise the number of weeks that must be worked to qualify for benefits.

Raise Up Massachusetts has been educating voters about these issues and asking them to contact their representatives in the House to demand a progressive minimum wage bill: one that indexes the wage to inflation and takes care of tipped workers, and does NOT include the sub-minimum wage for teens. Any unemployment insurance changes, with the Senate bill as a basis for discussion, can happen afterward. The public, once made aware of what’s happening, has been very supportive. If you agree, please reach out to your representative now, while the bill still is in committee, and again when a bill emerges, and let your voice be heard.