Battle Heats up over Minimum Wage in RI Governor’s Race
Monday, January 27, 2014
"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
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
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
"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.
Governor Lincoln Chafee
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.”
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."
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."
"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."
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."
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