by Howard J. Grossman, AICP
The expression, “a dollar here, a dollar there” applies to Pennsylvania state government as well as all county and local governments who prepare and implement budgets.
Consider the role of the Pennsylvania Independent Fiscal (IFO) office which was created in 2010 under the terms of P. L. 1269, No. 120, under which they provide revenue projections for use in the state budget process along with impartial and timely analysis of fiscal, economic and budgetary issues to assist residents and the General Assembly in their evaluation of policy decisions. One of its more recent steps was to look at the proposal to raise the minimum wage from $7.25 to $12 per hour. This important analysis is being driven, in part, by the role that has occurred to raise minimum wages nationally (not yet happened) and what seems to be developing in some states to have already raised the minimum wage to up to $15 per hour. There are potential employment impacts, income effects and implications for General Fund revenue and expenditures.
In recent months, a staff member of that office made a presentation to the central Division of the Pennsylvania Economy League in Scranton and discussed the results of the analysis. The proposal demonstrates that the minimum wage per hour would be raised to $12 on July 1, and that there would be a raise by $0.50 cents per year in the Commonwealth each year until July 1, 2026, reaching a level of $15 per hour on July 1, 2026. Every year thereafter, the minimum wage would be raised by an annual cost of living adjustment based upon the Consumer Price Index for All Urban Consumers (CPI-U) for the Pennsylvania, New Jersey, Delaware and Maryland region. The proposal also removes the ability of employers to count tips when calculating an employee’s hourly wage. In other words, employers must also pay employees the regular minimum wage. Thus, the idea is to significantly raise wages that have not been changed in many years. The IFO looked at several areas of interest that would impact the change, and some of these include the following:
■ Use of Census data for 2018 which show a considerable drop in non-tipped Pennsylvania workers earning under $10 per hour and a large increase in workers earning $15 per hour or more.
■ Current analysis assumes that some of the negative employment effect manifests itself as a reduction in hours worked, as opposed to lower employment.
■ The proposal treats tipped workers the same as other workers. A more limited analysis is performed for tipped workers.
■ New research suggests that the proposal for $12 per hour could have a more moderate effect on employment opportunities due to new census data.
■ The analysis incudes accounting for secondary workers.
■ The Pennsylvania labor market continues to be tight. Therefore, higher minimum wage will cause less disruption that if there were a slack in the labor market.
The study suggests that the $15 per hour figure has not provided sufficient study as yet to warrant anything beyond speculation. There is an examination of wage in some other states. There is also a look at some studies that have been done such as the Institute for Research on Labor and Employment, The congressional Budget Office, the Upjohn Institute and at least nine others. The results are compiled by the authors as follows:
■ Moderate increases in the minimum wage likely have a modest negative impact on employment.
■ More moderate effects could be expected if a higher wage rate is phased in.
■ Similar to other states and cities, the Pennsylvania labor market for low-wage workers is not perfectly competitive.
■ Other factors should be included in an analysis
■ Pennsylvania does not resemble Seattle or other large cities that have recently enacted large minimum wage increases.
■ A handful of national firms have recently increased wages for low-wage workers. Some include Walmart, CVS, Costco, Amazon, Target and others.
Much other information is supplied in this report. Here are some likely results if wages are increased in this region.
■ There is a need to consider the 2020 Census results as a key indicator of what impact wage increases would have, although phasing in becomes a key factor in thinking about changes in wage hours and it would be likely that the region would follow what occurs in state legislation.
■ Some type of analysis should be considered regionally that could demonstrate a true picture of what is likely to occur when and if such changes are made.
■ The various tables shown in the report and the impact of change on workers needs to be addressed regionally as more data is made available that can be utilized at the sub state levels.
■ Since much of this region relies on service jobs, the impact would be likely significant in the region assuming such changes occur statewide and a special analysis would be a helpful tool in thinking about wage changes across the Pocono-Northeast.
■ Such issues as general price impacts, general fund revenues, impact on state and local government expenditures, impact on safety net programs, income mobility of low-wage workers, impact on tipped workers and other elements become extremely critical both inside the region and the remainder of the Commonwealth.
The report concludes with a summary of gains and drawbacks from the proposed $12-an-hour increase and many of these conclusions would undoubtedly be found in this region. Therefore, the report should become a strategic document to be evaluated in coming months since this proposal is likely to be discussed in the General Assembly of Pennsylvania.