Business, Taxpayer Groups Oppose RI Minimum Wage Increase

Monday, March 09, 2015


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RI Governor Gina Raimondo is making an announcement Monday on the state's minimum wage.

Rhode Island Governor Gina Raimondo is scheduled to make an announcement Monday regarding the state's minimum wage, having run on the platform of raising the state's $9 minimum wage to $10.10 by 2016. 

And while the Governor has the consideration of the Speaker of the House and support from a number of organizations, members of the business and taxpayer community aren't sold on an increase. 

"Raising the minimum wage for any particular group of individuals without understanding the impact the wage increase will have on employers and eventually consumers is a good sound bite but an irresponsible economic decision. The question to consider is whether an increase will create jobs, reduce the number of jobs or hours worked or attract new businesses to Rhode Island. Every additional dollar spent on labor will be passed on to the customer since the additional dollar will add nothing to productivity," said URI Distinguished Professor of Business Edward Mazze.  

"Without giving the employer a benefit when raising the minimum wage in 2016, e.g. a decrease in taxes, this would not be a prudent move for the Governor or General Assembly and will raise the price of goods and services to customers," continued Mazze. "Someone has to pay!"

Turning Campaign Platform into Reality?

During the gubernatorial campaign, Raimondo ran on a platform of seeking an increase in the state's minimum wage right away.

"We should take action on this now and 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," said Raimondo. "Two-thirds of minimum-wage earners are women, so a raise would immediately help women across Rhode Island and their families."

Speaker of the House Nicholas Mattiello said that he is open to considering such an increase. 

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"I am open to the proposal to raise the minimum wage and will carefully consider the proposal again this year.  I have supported raising the minimum wage each of the last three years and I am mindful that our neighboring states have been increasing their wages as well," said Mattiello on Friday.  "I have always believed we should be competitive with our neighbors, including maintaining the standard of living for our citizens."

Raimondo has the backing of such groups as the Economic Progress Institute, who testified in favor of a legislative proposal before the General Assembly to increase the minimum wage on February 3.  

"Minimum wage workers do not earn enough to meet their basic needs.  The Rhode Island Standard of Need, a study that documents the cost of living in the Ocean State, shows that a single adult needed to earn $11.86 per hour in order to meet his or her most basic needs in 2014," said the Institute in submitted testimony. 

"Giving the lowest paid workers a raise will improve their economic security and help curb the growth in income inequality, which has been significant in the Ocean State over the past three decades," the Institute continued. "Rhode Island had the ninth largest increase in income inequality between the late 1970s and mid-2000s. Increasing the wages of our lowest-paid workers puts us on a path to reversing this trend."

The Greater Providence Chamber of Commerce however, testified that lawmakers should examine the "unintended consequences" of such an increase.  

"The chamber's testimony centered on delinking an automatic cost of living adjustment, preferring that the issue be debated by lawmakers in the context of available market data," said Chamber President Laurie White.  "We also cautioned about the unintended consequences of higher labor costs to potentially include a reduction in head count and wage compression. We suggest policymakers closely evaluate the repercussions over the next 12 months."

Mike Stenhouse with the Center for Freedom and Prosperity, who conducted a study in 2013 that found based on the minimum wage at that time, a hike to the same $10.10 per hour level now being promoted by Raimondo would "destroy almost 3500 jobs, including breadwinners from low-income families."

"It is disappointing that one of the first major acts of our new Governor is to perpetuate policies that are harmful to our state's job market and that bend to special interest demands," said Mike Stenhouse, CEO for the Center for Freedom and Prosperity. "The great irony here is that this policy will mostly benefit middle-class whites and union workers, as opposed to low-income minority families. The image put forth - that most minimum wage workers are minority family breadwinners - is simply not true.".

Taxpayer Groups Weigh in 

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Speaker Nicholas Mattiello

Taxpayer groups including OSTPA and Rhode Island Taxpayers have both come out opposed to an increase. 

"Studies have shown that typically it's students, or people of that age, who are filling positions that pay minimum wage as well as senior citizens looking to supplement their income. Minimum wage was not intended to support folks for the long haul. If it continues its up tick on a regular basis then it may very well knock those demographics out of the job market," said Pam Gencarella with OSTPA.  "If businesses are forced to pay more for the jobs that are valued at the lower wage range then prices for their products will increase and hours people work in those positions may be limited. It creates a vicious cycle. Minimum wage jobs do not move people toward prosperity. They will not get anywhere as a result of the increased cost of living. Having said that, with Walmart announcing their intention to increase the lowest wage to $10 an hour, the free market will most likely adjust on its own."

RI Taxpayers offered their perspective on the issue. 

"A higher minimum wage becomes yet another burden for businesses to bear.  Despite that, the Rhode Island General Assembly raised the minimum wage three times in the last three years, further exacerbating the state's anti-business climate," said Larry Girouard with RI Taxpayers. "The last thing that the state's businesses need is yet another increase in the minimum wage, whether now or next year."

"RI Taxpayers applauds Governor Raimondo's repeated statement that she wishes to maintain and increase jobs in the state.  Yet it has been established that jobs are lost when the minimum wage is raised," continued Girouard.   "So not only would potential employers thinking of coming to the state be turned off by this further amplifying of the state's bad business climate but actual job losses would almost certainly result.  Her move, accordingly, to increase the minimum wage a fourth time is very puzzling as it would work against her stated goal of "jobs jobs jobs"

Gary Sasse, former Director of Administration and Founding Director of the Hassenfeld Center for Leadership at Bryant University, said he believes that the evidence to raise the minimum wage is "mixed."

"Education and related market supply and demand factors have the greatest impact on wages. Therefore, state policy should focus on programs to help make Rhode Islanders more productive and competitive. Increasing the minimum wage will not enhance productivity nor make Rhode Island more competitive. Furthermore, some small business people contend that an increase in the state minimum could reduce employment," said Sasse. "I find the evidence on this contention to be mixed."

"Having said this nobody should work forty hours a week and be in poverty. Walmart announced that it will be increasing its minimum wage to $10 per hour in 2016. This indicates that there is room to increases wages for low wage workers," continued Sasse. "Therefore, on balance a modest increase in the Rhode Island minimum wage is a recognition of the economic realities confronting some unskilled workers."


Related Slideshow: Inauguration 2015: Ten Issues Raimondo Can’t Hide From

Rhode Island's first woman Governor Gina Raimondo will have the official inauguration ceremonies for the office on Tuesday, January 6.

And while Raimondo's ascension to the state's top post is of historical significance, the new Governor faces a number of immediate challenges of serious significance.  

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The fate of the historic 2011 pension reform is back in the courts -- for now. After a mediated settlement was rejected last year, it was back to the drawing board for the challenge to the legality of the state's landmark pension reform.  And while that decision hangs in the balance -- will it be decided in the courts, or will a new settlement be reached -- some, including GoLocalProv Mindsetter Michael Riley, have predicted that Providence's municipal pension system to be on the verge of collapse. Raimondo has to not only deal with the potential ramifications of alterations to pension reform at the state level, but the viability of municipalities themselves -- and none as important as the Capital City.  As goes Providence, goes the state. 

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The potential for the City of Providence to declare bankruptcy was subject of debate during the Mayoral campaign, and some question whether it is on the table.  "We will always struggle with half of our tax base untaxable.  We will always have to manage intensely our budget.  We're not going to cut our way, or tax our way, out of the doldrums," said newly elected Council President Luis Aponte in December.  "I would say that everything should be on the table."  Raimondo has warned against the state's cities and towns "teetering" on the brink of bankuptcy.  With Providence in a precarious position, Raimondo can't hide from acknowledging the city's fiscal health and future.

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Raimondo was already the subject of one investigation by former Securities and Exchange Council (SEC) lawyer and Forbes contributor Edward Siedle in 2013 -- and is now poised to be under scrutiny for another.  Siedle first confirmed with GoLocal in late November that he plans on a follow-up look at the state's pension investment strategy, and has the funding to do so. Raimondo can't hide from the fact that she is still under scrutiny for her hedge fund strategy, despite moving up the food chain from being the state's General Treasurer. 

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HealthSource RI

Now that former HealthSource RI head Christy Ferguson is out, and Anya Rader Wallack is in, the question still remains -- what is the future for Rhode Island's Obamacare vehicle?  Federal subsidies to assist states with their exchanges are scheduled to stop at the end of this year.  Raimondo's opponent Allan Fung ran on a staunchly anti-Obamacare platform, arguing the costs to businesses, program costs itself, were unsustainable.  A close look (or possibly battle) at the General Assembly will put the program under scrutiny for its cost-effectiveness -- and the new Governor will be expected to provide leadership and guidance on the question of viability.  

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General Assembly

In a state with a legislature that is inarguably more powerful that the executive branch, who the Governor opts to serve as his --or her -- top government relations staffers is critical.  Governor Chafee had several -- Steve Hartford headed up policy before replacing Richard Licht at the Department of Administration and Stephen Kavanagh was head of Legislative Affairs.  Raimondo's choice of who will be her key conduit(s) in the State House chambers is a key decision that should be made known shortly, as the General Assembly convenes just after official inauguration ceremonies for the Governor on Tuesday. 

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More Staffing

While Raimondo has filled a number of key positions with hires and nominations -- Chief of Staff, Director of Administration, Commerce Secretary, Directors of Labor and Training, Human Services -- there are still high-level decisions that need to be made, and soon.  DCYF. Transporation. DBR.  Legal counsel.   Raimondo has opted to retain several high ranking posts (AT Wall at the Department of Corrections; Janet Coit at DEM).  Some very important staffing calls will need to take place in the coming weeks for Raimondo.  

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Education Commissioner

The fate of the Deborah Gist, Commissioner of the Rhode Island Department of Education, is in the air.  The deadline to extend Gist's contract was supposed to occur six months prior to its end date in June, but as that has now come and gone, the future of Gist, who has been the helm since being appointed in 2009, is uncertain.  The Board of Education could still address Gist's contract in the coming months, but ultimately Raimondo will have to weigh in who she wants to be RI's education leader -- Gist, or someone else.

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195's Future

Raimondo during her campaign made a public showing of support to develop the 195 land in Providence into a manufacturing hub.  Touting the establishment of an "innovation institute" as an anchor for the corridor, Raimondo will need to realize how to make her proposal a reality -- especially given as the first purchase and sales agreement on the land has been for a student dormitory, providing little indication of the interested parties -- and potential business interest in the land moving forward. 

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Outsiders, Insiders

Raimondo has put together a team of individuals who happen to have achieved most of their professional accomplishments -- outside of Rhode Island.  Her Chief of Staff.  Nominations for Secretary of Commerce. Director of Labor and Training.  While the Administration has a number of high-profile Democrats, they are not from Rhode Island.  While some question how well they could know the inner-workings of RI state government, others have lauded that new perspectives offer a fresh change from insider politics.  How well will the new guard in the Administration square up with the old guard In General Assembly -- Senate President M. Teresa Paiva Weed and House Majority Leader Nicholas Mattiello, among others?

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Budget..and Bankruptcies

With the embattled Coventry Fire District declaring bankruptcy in December, the issues with the cash-strapped department are far from over.  After Central Falls declared bankruptcy in 2011, now another state-appointed receiver has opted to go with the option of last resort. Raimondo will no doubt have to address the ongoing situation in Coventry, but also the precedent moving forward for other municipalities considering the big "B".  The state is already facing a possible $200 million budget deficit, with further issues ahead with gaming receipt shorthalls looming, not to mention the impact of a possible pension reform settlement. How much more can cash-strapped cities and towns take?


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