MINIMUM WAGE S. 80 Passes! Increase for Lowest Paid Vermonters! In the final hours of the 2005 Vermont Legislative session, the House and Senate reached a compromise on S. 80 to increase the minimum wage from $7.00 to $7.25 on Jan. 1, 2006 and then increase the rate by a cost-of-living-adjustment (COLA) based on the CPI-U index every January 1st starting in 2007.

Throughout the session two versions of S. 80 were passed in the House and Senate. The Senate first passed S. 80 which would increase the minimum wage next year and every year thereafter based on an annual COLA using a national index (CPI-U). The House then passed S. 80 mandating an increase of 25 cents next year and then an annual COLA using a Vermont index (Average Weekly Wage, AWW).  After 9 weeks of sitting in conference committee, the conferees reached a compromise at the end of the last week of the session. The House and Senate concurred with the conference committee's compromise during the last two days of the session. This bill makes Vermont the first state in the country to legislate an annual cost of living adjustment to our state minimum wage. The three states with COLAs on their state minimum wage rates changes their laws based on ballot initiatives (WA, OR, and FL). This increase will make Vermont the fourth highest minimum wage in 2006 based on the status of other minimum wage legislation in other states so far this year.

Sadly, Governor Jim Douglas decided to sign the bill into law behind closed doors on June 28th, 2005. Increasing the wages of over 10,000 Vermonters deserves more public education and acknowledgement than the Governor afforded Vermont's working people with his private handling of this important bill!

Winners & Losers: Although any increase to the lowest wage rate in Vermont is a victory to low wage workers who make the general minimum wage rate, this session had several disappointments for workers especially tipped employees. In the Senate version of S. 80, there was a COLA attached to the general minimum wage rate and the tipped employee minimum wage rate. In the House, the tipped employee COLA was removed by an amendment by Rep. Marron (R-Stowe) on behalf of the Restaurant Association. The final compromise of the bill did not contain a COLA for the tipped employee rate and thus the base rate will remain at $3.65/hour. There was some confusion by legislators on whether a COLA is needed for tipped employees because every worker is guaranteed to earn the general minimum wage rate even if they do not bring in enough tips for the week (the employer pays for the gap). However, several states do not differentiate between tipped and non-tipped workers in order not to have a two-tiered system. One key issue is that the employer of a tipped worker relies on tips to pay half of their workers' salary. In the spirit of bringing all jobs up to a livable wage level we should not have a two-tier system and insure that every employer is subject to the same minimum wage rates. The VLWC will bring this issue back next session to make sure tipped employees are treated and paid fairly.

Who are Tipped Employees? In Vermont, as in several other states, we have two minimum wage rates--one for non-tipped employees and one for tipped employees. Currently, the tipped employee is defined as someone who makes more than $30 a month in tips. A tipped employee is guaranteed to make at least the general minimum wage for all of his/her hours worked in a week after adding all the tips and a base wage of $3.65/hour paid by the employer. If the worker does not make the the general minimum wage amount equivalent to the number of hours he/she worked then the employer must pay the difference (more than $3.65/hour until the employee is brought up to at least $7.00/hour in 2005).

The final minimum wage bill was also a weak compromise for workers who have not seen an increase to the minimum wage for several years during the 1980s and 1990s. If the Vermont minimum wage had been increased since 1969 based on a cost-of-living-adjustment (CPI-U) it would be $8.00/hour. Moreover, the current livable wage for a single person with no children is $12.37/hour. The Legislature did not make significant steps to account for the ground loss by years of no increase to the minimum wage, let alone addressing the significant wage gap between the minimum wage and livable wage. 

Learn More: Click here for the talking points VLWC used to argue for an increase to the minimum wage.
 

H. 72, Unlawful Employment Practices Bill Passes, passed both bodies last week on Equal Pay Day (April 19^th). The bill is currently in front of the Governor who is expected to sign it into law. H. 72 will make it unlawful for employers to retaliate against their workers for discussing wages. It also makes it illegal for employers to include a clause in the personnel manual dictating that workers cannot discuss wages and then force workers to sign the document. This bill is a great victory for low-wage workers who will have further protection to discuss wages and then possibly start a union. Also, women and people of color will have additional protection when trying to discover differences in salaries and compensation rates for equal work with male, white co-workers. VLWC worked in coalition with the Vermont Commission on Women, Business & Professional Women (BPW), and others to push this bill forward.

H. 403, Livable Wage/Basic Needs Study Passes
H. 403, a bill to continue the Basic Needs Budget Study& Livable Wage Calculations Passes! This bill was introduced to instruct the Vermont Joint Fiscal Office (JFO) to calculate the livable wage figures on an annual basis within the Basic Needs Budget Study. As introduced, the bill also instructed the JFO and Legislative Joint Fiscal Committee to review the methodology for the Study every two years. The livable wage figures are a vital resource for setting wages and for expanding the discussion on poverty by providing an alternative economic indicator (livable wage vs. federal poverty line). Many Vermont workers, non-profit organizations, governmental agencies, and businesses use the Study and livable wage figures for such purposes. During the last week of the session the Senate amended the bill to produce the study every other year with a supplement report during the interterm year to reflect major changes in the cost of living in Vermont. The House concurred with the changes in the last days of the session. The livable wage figures will now be produced on a 2 year basis. The next study is schedule to be produced in January of 2007.

Read the 2005 Basic Needs Budget: http://www.leg.state.vt.us/jfo/Reports%20by%20Subject.htm

VOTING RECORD ON H. 403
Note: Roll Call was called on the Second Reading of the H. 403 on April 20, 2005. No Roll Call was called in the Senate.

Yeas	Nays	Absent
Allard of St. Albans Town Ancel of Calais Audette of S. Burlington Barnard of Richmond Bohi of Hartford Botzow of Pownal Brooks of Montpelier Chen of Mendon Clarkson of Woodstock Condon of Colchester Copeland-Hanzas of Bradford Corcoran of Bennington Cross of Winooski Darrow of Dummerston Donahue of Northfield Donovan of Burlington Dowland of Holland Edwards of Brattleboro Emmons of Springfield Evans of Essex Fallar of Tinmouth Fisher of Lincoln Frank of Underhill French of Randolph Gervais of Enosburg Grad of Moretown Green of Berlin Haas of Rochester Head of S. Burlington Heath of Westford Hosford of Waitsfield Howard of Rutland City Howrigan of Fairfield Hunt of Essex Hutchinson of Randolph Jerman of Essex Jewett of Ripton Johnson of South Hero Kainen of Hartford Keogh of Burlington Kiss of Burlington Kitzmiller of Montpelier Koch of Barre Town Kupersmith of S. Burlington Larson of Burlington LaVoie of Swanton Leriche of Hardwick Lippert of Hinesburg Lorber of Burlington Maier of Middlebury Malcolm of Pawlet Marek of Newfane Martin of Springfield Martin of Wolcott Masland of Thetford McCullough of Williston McFaun of Barre Town McLaughlin of Royalton Milkey of Brattleboro Miller of Shaftsbury Minter of Waterbury Molloy of Arlington Monti of Barre City Mook of Bennington Nease of Johnson Nitka of Ludlow Nuovo of Middlebury Obuchowski of Rockingham Orr of Charlotte Partridge of Windham Pellett of Chester Perry of Richford Peterson of Williston Pillsbury of Brattleboro Pugh of S. Burlington Randall of Troy Reese of Pomfret Rodgers of Glover Rusten of Halifax Smith of Morristown Sweaney of Windsor Tracy of Burlington Trombley of Grand Isle Valliere of Barre City Wright of Burlington Zuckerman of Burlington	Adams of Hartland Allaire of Rutland City Bartlett of Dover Bostic of St. Johnsbury Branagan of Georgia Brennan of Colchester Canfield of Fair Haven Clark of St. Johnsbury DePoy of Rutland City Donaghy of Poultney Endres of Milton Errecart of Shelburne Helm of Castleton Houston of Ferrisburgh Hube of Londonderry Hudson of Lyndon Johnson of Canaan Kennedy of Chelsea Kilmartin of Newport City Komline of Dorset Krawczyk of Bennington Larocque of Barnet Larrabee of Danville Lawrence of Lyndon Livingston of Manchester Louras of Rutland City Marcotte of Coventry Marron of Stowe McAllister of Highgate Metzger of Milton Miller of Elmore Morley of Barton Morrissey of Bennington Myers of Essex O'Donnell of Vernon Otterman of Topsham Parent of St. Albans City Peaslee of Guildhall Shaw of Derby Smith of New Haven Sunderland of Rutland Town Westman of Cambridge Winters of Williamstown	Aswad of Burlington Atkins of Winooski Baker of West Rutland Clark of Vergennes Deen of Westminster Dostis of Waterbury Dunsmore of Georgia Flory of Pittsford Keenan of St. Albans City Klein of East Montpelier Niquette of Colchester Potter of Clarendon Schiavone of Shelburne Seibert of Norwich Severance of Colchester Shand of Weathersfield Sharpe of Bristol Winters of Swanton Wood of Brandon Young of Orwell

Voting Record: House Vote on S. 80, Increase the VT Minimum Wage (2005)
 

Voting Record: Senate Vote on S. 80, the VT Minimum Wage (2005)
Note: Based on roll call vote February 11, 2005, final vote on June 4, 2006 was by voice, not roll call.

MINIMUM WAGE TALKING POINTS: 

Didn’t we just raise the minimum wage in Vermont?  Haven’t we done enough?

The VT Legislature last adjusted the minimum wage in January 2003 which enacted two increases in January of 2004 and 2005.  While the Legislature has done much to raise the minimum wage over the past 8 years (25 cents in 1996, 40 cents in 1997, 10 cents in 1998, 50 cent increases in 1999 and 2000, 50 cents in 2004, and 25 cents in 2005), there was little, if any, gain in the 1980s and early 1990s.  Thus, in real dollars, those at the bottom of the wage scale have lost ground since 1969 – a time when a four-person household with one wage earner making the minimum wage could still meet their family’s basic needs.

How many Vermonters earn the minimum wage?

The current minimum wage in Vermont is $7.00/hour ($14,560/year).  According to the Department of Employment and Training’s 2003 OES data, excluding tipped employees: 

§         6,247 jobs paid less than $7.00/hour ($14,500/year) as of December 31, 2004.
§         7,052 jobs pay between $7.01 - $7.49/hour  ($14,581 - $15,579 annually)
§         6,881 jobs pay between $7.50 - $7.99/hour ($15,600 – 16,619 annually)

This equals 13,299 jobs that currently pay less than $7.50/hr., and 20,180 jobs that pay less than $8.00 /hr.

What is a COLA?

It is a cost-of-living-adjustment and when attached to a minimum wage law it acts to maintain real wage levels by adjusting the wage with changes in inflation.  A COLA would eliminate the real pay-cuts associated with a constant minimum wage when prices continue to climb.

If the minimum wage had kept pace with inflation since 1969, it would currently be pegged at $8.00/hour ($16,640year).  If a COLA had been attached to the minimum wage back in 1969, the median annual increase would have been $0.10/year while the average annual increase would have been $0.15/year. If the federal minimum wage (currently $5.15/hour) was adjusted for inflation using a COLA since 1968 it would have been $8.78/hour in 2004.

Who else receives a COLA?

Cost-of-living-adjustments are a standard part of most workers’ lives – except those who are the lowest paid.  For instance, there is a COLA for state and local government employees, social security recipients, and most salaried employees.  Even the federal poverty measure is adjusted annually.

Voters in the state of Washington passed a COLA minimum wage initiative in 1998, which went into effect in January 2001.  Their state minimum wage is based on changes in the Consumer Price Index.  On January 1, 2003, the hourly wage increased from $6.90 to $7.01; on January 1, 2004, it went up to $7.16; on January 1, 2005, it increased to $7.35. 

In addition, the state of Oregon passed a ballot initiative for a minimum wage COLA that began on January 1, 2004.  The wage increased to $7.25 from $7.05 on January 1, 2005.  The increase was due to a 2.6% increase in the consumer price index for the previous year.  Florida passed a similar provision in the most recent election.  In addition to Vermont, California, Illinois, Massachusetts, and Rhode Island have also proposed COLA legislation in recent years.

Who are the low wage workers?  (a sampling) (2003 DET data)

Occupation	25th percentile
	Hourly wage	# of jobs in each occupation that  pay  this wage or below
Dining room & cafeteria attendants & bartender helpers	$6.72	135
Dishwashers	6.86	440
Cashiers	6.96	2,548
Combined food prep. & serving workers, incl. fast food	7.07	835
Cooks, fast food	7.21	270
Food preparation workers	7.10	670
Child care workers	7.39	560
Counter attendants, cafeteria, food concession & coffee shop	7.11	273
Counter and rental clerks	7.38	313
Stock clerks and order fillers	7.25	830

 

Aren’t minimum wage jobs mostly held by teenagers?

According to 1999-2001 Current Population Survey (CPS) data, 60% of all workers earning less than $8.00/hour are over 30 years old. Some may argue that if an adult worker is hired at minimum wage, they soon receive a raise.  But the above data suggests that many adults over 30 are stuck in jobs that pay less than $8.00/hr.  As a result many workers often have 2 or 3 jobs in order to meet their family’s needs. 

According to 2001 DET data, 46% of jobs in Vermont require only short-term on-the-job training.  Therefore, even if low-wage workers received more education and training, many of the jobs available in Vermont would still pay low wages and offer limited chances for advancement.  This indicates that many adults work in low-wage jobs because of a lack of options and out of necessity, not because their household can survive on these wages.  In fact, more and more families need two incomes to meet their basic needs.  For those families with two wage earners, the value of the second income is greatly diminished by child care expenses. This problem is exacerbated by the fact that so many women work in relatively low-wage jobs.

In addition, since welfare reform has resulted in decreasing welfare rolls, many of these former recipients – mostly single parents – are now working in the low-wage labor market.  A Center for Budget & Policy Priorities study of Oregon (1998) indicates that raising the minimum wage can substantially boost the earnings of parents leaving welfare for low-paid employment.  As the safety net is stripped away, minimum wage increases have become even more important to these single parents raising children.   

How can we raise the minimum wage in a weak or unstable economy? 

When more money is placed directly into the hands of low-wage workers, they spend it immediately on basic needs, therefore circulating more money into our economy.  This is a very effective form of economic stimulus.

In addition, the current fiscal crisis and budget cuts in Vermont mean fewer public benefits.  The lowest wage workers will have to make up this difference so that their basic needs will not go unmet.  To ensure that the most vulnerable workers aren’t hit harder than before, increasing the minimum wage is imperative, particularly in times of recession.  The choice is clear: we can increase the minimum wage and support greater self-sufficiency, or we can allow the value of the minimum wage to further erode, creating greater dependence on already stretched public programs.   

Minimum wage critics who said that raising the minimum wage would end the economic boom are now saying the minimum wage can’t go up because the boom is over.  The reality is that the minimum wage can go up – recession or not.  These critics often say that the market should decide wage levels, not the government.  Given the degree to which many businesses already benefit from market interventions, it is inconsistent to selectively argue that the market should be left to its own devices in the case of determining wage levels.  Businesses that pay poverty wages indirectly rely upon state and federal assistance programs to make up the difference between these wages and what it costs their employees to live.      

Won’t more Vermonters loose their jobs?

According to a recent Economic Policy Institute study, there is no evidence of job loss from the last federal minimum wage increase.  The EPI study failed to find any systematic, significant job loss associated with the 1996-97 minimum wage increase. These results are similar to other studies of the 1990-91 federal minimum wage increase, as well as to studies of several state minimum wage increases.  For example, a Center on Budget & Policy Priorities 1998 study of the impact of Oregon’s minimum wage increase ($1.25 in 2 years) found that employment did not decline, but instead rose by 4% in retail trade, the industry most affected by the wage increase.

New economic models that look specifically at low-wage labor markets help explain why there is little evidence of job loss associated with minimum wage increases. This model recognizes that employers may be able to absorb some of the costs of a wage increase through higher productivity, lower recruiting and training costs, decreased absenteeism, and increased worker morale.

Moreover, the Vermont occupations that would be most affected by a minimum wage increase (i.e. cashiers, fast food, and child care workers) cannot move their operations to another state with a lower minimum wage.  They are geographically-based jobs that must be done in Vermont.

Won’t raising the minimum wage hurt small businesses? 

The 1999 Act 21 Summer Legislative Study on Livable Income found that the minimum wage ($5.75 at the time) could be increased to $7.00 /hour in the year 2000 without negatively impacting the overall Vermont economy (see REMI model analysis – Issue #3).  These findings included the impact on small businesses.

Although DET cannot publish data on exactly where minimum wage earners work due to confidentiality, we know that the majority of low-wage jobs in Vermont are in occupations such as cashiers (retail), fast food service, and housekeeping cleaners (service).  The largest employers in these industries are not small businesses -- they are typically large corporations; many of them based outside of Vermont.  In fact, 73% of the jobs in Vermont are with large employers. 

Moreover, minimum wage jobs are usually characterized by high turn-over.  The financial costs associated with high turn-over rates can be significant.  Some studies estimate that it costs, on average, $3,000 to replace an employee (advertising, hiring process, training, productivity levels, etc.).  Paying wages that workers can live on means that productivity levels will rise, turn-over and absenteeism rates will go down, and workers will have more money to buy goods and services.  All these factors could actually improve the bottom line of many businesses in Vermont.

Won’t increasing the minimum wage lead to inflation? 

There is no good evidence one way or the other that increasing the minimum wage will lead to increased inflation. There are examples over the last thirty years when wage hikes did not spur inflation and other times when inflation occurred with no wage hikes.  The bottom line is that inflation has been constantly on the rise, whether workers received a wage increase or not. Since the last time the minimum wage was raised nationally in 1997, the economy has created millions of new jobs and inflation has fallen to its lowest level in a generation.  

From a low-wage worker’s perspective, during high inflationary periods their meager income is worth even less, and it’s even harder to make ends meet.  If we want to avoid adding more families to the public assistance programs, and support those who have moved from welfare to work (often moving into low-wage jobs), then we must protect the buying power of the lowest paid workers.

While much emphasis is placed on inflationary concerns for wages on the low end of the wage scale, little is ever discussed about wage increases of high paid salaried workers.  For instance, today CEOs make 531 times the wage of the average worker compared to 85 times the average worker in 1990, according to a report by United for a Fair Economy (http://www.faireconomy.org).  Had workers’ pay risen at the same rate as CEOs, their annual 2001 earnings would have been $101,156 instead of $25,467.  According to the Institute for Policy Studies, had the minimum wage grown at the same rate as CEO pay, it would have been $21.41 in 2001. 

What do other states have as a minimum wage?

The federal minimum wage currently set at $5.15 /hr. has not increased since 1997 and has lost 37% of its purchasing power since 1968.  In response to lack of U.S. Congressional action on the minimum wage, 14 states plus the District of Columbia have raised their state minimum wage.  Below is a listing of these states and their respective minimum wages, as well as a listing of New England states’ minimum wages.
 

New England in 2005

Connecticut             $7.10

Maine                     $6.35

Massachusetts        $6.75

New Hampshire       $5.15

New York                $6.00*

Rhode Island           $6.75

Vermont                 $7.00

Other States in 2005

Alaska                    $7.15

California                 $6.75

DC                          $6.60

Delaware                 $6.15

Florida                    $6.15 (COLA)*

Hawaii                     $6.25

Illinois                     $6.50*

Nevada                    $6.15

Oregon                    $7.25 (COLA)

Washington $7.35 (COLA)