$12 minimum wage proposal gets Senate hearing

In 2006, voters in Montana approved a ballot initiative that set the state minimum wage at $6.15 an hour, pegged to the rising cost of living.

Fifteen years later, it now sits at $8.75 an hour, a buck fifty higher than the federal minimum and not even 40 percent of the state hourly median wage.

But with rising home and rental prices, a diminished social safety net, and an ongoing pandemic that’s hit the state’s poorest the hardest, this just won’t do, contends Sen. Mark Sweeney, D-Philipsburg.

“Workers have less purchasing power today than they did in 1968,” Sweeney said Friday. “Higher starting wages are critical for restarting our economy.”

Sweeney is carrying Senate Bill 187, legislation that would set the state minimum hourly wage at $10 beginning in 2022 and then add a dollar an hour until 2024, when the then-$12 dollar minimum wage would subsequently increase relative to the consumer price index.

“It doesn’t raise taxes or give government handouts,” Sweeney told the Senate Business and Labor Committee, which heard the bill Friday. “What it does is gives hope, it allows low-income workers to reach the first rung of the economic ladder. It gives them the dignity and confidence in order to meet that next rung.”

From 8,000 to 10,000 workers in Montana are on the minimum wage, around 2 percent of the workforce. The legislation clearly would increase wages for anyone at that level, but it also would have some diminished increases for those who make slightly above the minimum wage, said University of Montana economist Bryce Ward.

“Typically you expect to see at least some ripple effect,” he said.

A spokesman for the Senate Democrats said that going from $8.75 to $12, if done in one fell swoop, would increase the wages for 135,000 Montana workers, citing a 2019 memo from the state Department of Labor and Industry on a proposal from last session to increase the minimum wage to $15.

The memo also noted that higher wages would increase state tax revenues, and reduce the burden on Medicaid and other public assistance programs.

But Sweeney’s plan is unlikely to find a particularly willing audience in today’s Helena. Republicans control both chambers of the Legislature, plus the governor’s office, and are pursuing the opposite tack, cutting the top-level income tax rate, creating exemptions for taxes on certain capital gains, and so on. Indeed, Sweeney himself said he’s not optimistic the bill moves past the Senate floor.

Conservatives and business groups took a strong stance against Sweeney’s proposal on Friday, warning of a “domino effect” that would depress employment or lead to businesses on thin margins closing down.

“We take a fundamental position that an artificial increase in wages has … unintended consequences,” said Bridger Mahlum, a lobbyist for the Montana Chamber of Commerce.

Mahlum and other representatives of private sector employers trotted out similar anecdotes about the value of taking a first job that makes up for meager pay with a host of hard-earned lessons beneficial later on in life.

He said he worked his first job at a store selling sports gear, where he saved up for a pair of sunglasses.

But this kind of narrative misrepresents the composition of the minimum-wage labor force today, Sweeney says.

Nationally, workers from 16-19 years old work under 10 percent of the total hours worked by minimum-wage workers, said Ward, citing a recent study in the Journal of Economic Perspectives. Forty years ago, that figure was 38 percent.

“The vast majority of minimum wage hours are worked by people over age 20, and that’s been true since 1979,” Ward said.

The majority of minimum wage workers are also women, so increasing pay would have the added effect of narrowing the gender pay gap, advocates say.

Some of these workers are employed by the state or for public schools. A fiscal note prepared by the analysts in the governor’s office found the proposal would cost the state $72,000 in its first year and $137,000 in the 2025 fiscal year.

Sweeney said his bill is targeted towards adults who have long been stuck in minimum wage jobs, by circumstance, lack of training or opportunity. He said he finds this kind of anecdote offensive.

“He worked hard for his sunglasses, but there’s people working hard to get their kids new shoes,” Sweeney said.

The other prominent criticism of minimum wage increases, one shared by the opponents of this bill, is that an increased minimum wage would lead to layoffs or automation that hurts workers, rather than helping them.

Sen. Steve Fitzpatrick, R-Great Falls, the committee’s chair, referenced a recent analysis from the Congressional Budget Office that found a federal plan to increase the U.S. minimum wage to $15 an hour would cost 1.4 million jobs.

Sweeney and other proponents of the bill said the proposal’s gradual structure is meant to mitigate some of those effects.

And not every business owner is opposed.

“It goes to competitiveness in our state,” testified Glenda Bradshaw, who owns a cafe in Missoula. “It levels the playing field across employers.”

Economists have been fighting over the effect of minimum wages on employment for decades, ever since a groundbreaking report in the 1990s that contradicted what was at the time conventional wisdom — that a higher minimum wage would necessarily decrease employment — Ward said.

The article in the Journal of Economic Perspectives calls the effect on employment “elusive,” a term that Ward said he largely subscribes to.