Economic Development

How raising the minimum wage would help some and hurt others

Gov. Tom Wolf with advocates in support of raising the minimum wage

Gov. Tom Wolf with advocates in support of raising the minimum wage Office of Gov. Tom Wolf

The clamoring for a minimum wage hike in the commonwealth seems to be falling on deaf ears for some, while it’s ringing loud for others.

Industries are shifting, workers are changing fields, and businesses are scrambling to fill job openings. The minimum wage debate in Pennsylvania is nothing new, but with the pandemic evolving the economy and how people view work, it’s turning into a whole new conversation. 

Pennsylvania’s minimum wage is the same as the federal minimum, $7.25 an hour. It last increased in 2008, when it rose by 10 cents. The commonwealth is also the only state in the northeast and mid-Atlantic regions to have the same minimum wage as the federal minimum. Further south, Virginia increased its to $9.50 earlier this year. 

Since he took office, Gov. Tom Wolf and his fellow Democrats in the state legislature have made continual pushes for a minimum wage increase. Wolf’s budget this year included a plan to increase the wage to $12 an hour, with gradual increases to put the state on the path to $15. But members of the Republican-controlled General Assembly haven't seen eye-to-eye on the proposals, and not unlike other issues in Harrisburg, they have failed to reach an agreement. 

“Increasing the minimum wage puts more money into the pockets of workers, which gives local businesses more customers,” Wolf said during a press conference earlier this summer. “Boosting wages helps businesses attract and keep good employees. Raising the minimum wage allows Pennsylvanians to work their way out of poverty, saves tax dollars, and helps local communities – especially rural communities.” 

While various Democratic proposals didn’t get serious attention from the other side, Republicans did introduce their own minimum wage increase. State Sens. Dan Laughlin and Patrick Browne proposed a more “reasonable” change in Senate Bill 672, which would increase the minimum wage to $10 an hour and permanently index it to inflation. 

“[The bill] is a pretty straightforward, simple solution to an issue we have in Pennsylvania,” Laughlin told City & State. “I’m not happy that we continue to be painted as one of the remaining states with the lowest minimum wage.” He said the $10 an hour proposal is more “realistic” because he doesn’t see an appetite for an increase to $12 an hour. 

“I think [tying it to inflation] is more of a long-term solution for the folks at the minimum wage status in Pennsylvania,” Laughlin added. “It will continue to be adjusted upward and in a more business-friendly fashion than these big jumps every 10 to 12 years.”

Amid the debate over the dollar amount, some argue Pennsylvania’s current minimum wage puts it at a disadvantage when it comes to attracting workers, but makes it more appealing for businesses. 

“The fact that we have lower wages just shows that there is no connection between wage rates and top businesses,” Michael Rashid, commerce director for the City of Philadelphia, told City & State. 

“If it were good for businesses to have lower wages, you would have a lot of people coming from Maryland, Delaware and other states to Pennsylvania to pay lower wages, but we have not seen that.”

Debates over the minimum wage come with calls from either side arguing that the status quo hurts workers and that wage increases would hurt businesses. But before any potential impacts can be considered, one has to understand who is making the bare minimum in the commonwealth and who would be affected. 

According to an Independent Fiscal Office report, more than 1 million Pennsylvanians would benefit from a $12 minimum wage, and about 1.8 million would benefit from a $15 minimum wage. Those benefiting the most are in industries such as food service, retail and educational services. But due to economic factors like automation, shifts in consumer spending and remote work, those numbers are projected to decline by nearly 20% in the coming years. 

Data from the Pennsylvania Department of Labor states that the commonwealth has a higher percentage of workers at or below the federal minimum wage, coming in at 2.5% compared to the 1.5% national average. More than half of earners at or below minimum wage have a high school diploma or none at all, and about 70% are between the ages of 16 and 24. People of color make up about 30% of minimum wage workers in the state, and women making that rate outweigh men by more than three to one. 

Many supporters of the Fight for $15 national minimum wage advocacy movement stress that the number of women of color affected by an increase cannot be ignored. The frontline workers who were regarded as heroes during the pandemic, many of whom lost their jobs during government shutdowns, are in industries like home health care, child care, hospitality and the like. They’re fighting – not only for higher pay – but also for better protections and benefits during this more challenging time.

“People who were most hurt [by the pandemic] were those in the hospitality industry, and in Philadelphia, people who work in the hospitality industry are overwhelmingly Black and brown women,” Rashid said. “We have started to get those people back to work, but we have a long way to go with the hospitality industry and even the healthcare industry. Increasing those wages would absolutely help, and companies are starting to do just that. They’re realizing they have to do it.”

Of all the metropolitan areas in the nation, Philadelphia has one of the lowest minimum wages. And with the cost of living and goods increasing, the minimum wage leaves workers with less and less buying power over time. The U.S. Department of Housing and Urban Development’s guidelines state that a person should not spend more than 30% of their income on housing. For a low-wage worker in Philadelphia, that would mean only $400 a month for housing. 

Coming out of the pandemic, workers are beginning to speak up, and for the most part, businesses are listening. Many businesses have taken matters into their own hands to raise wages and offer better benefits for employees. Part may be in the response to the calls for fairer treatment, but a lot can also be attributed to the increased demand to fill job openings. 

Jon Myerow, owner of Tria and Bar Poulet in Philadelphia, said he came up with a plan last year to offer a $15 an hour minimum wage, eliminate slower shifts and implement a service charge in an effort to increase the pay for his employees. 

“It’s all supply and demand,” Myerow said. “So many people have left this industry, and probably for good. A lot of people are rethinking what they want to do, so it’s up to businesses to make it a better industry to work in.” The argument over whether the openings are due to a worker shortage or a wage shortage is more complicated than it seems. Myerow said that while his changes have helped him retain and recruit more staff, he’s still consistently short a few workers. 

Critics of increasing the minimum wage claim that workers aren’t jumping to fill open positions because they’re satisfied with collecting unemployment benefits. Proponents say that workers choosing unemployment benefits over low wages isn’t a knock on those out of work, but on businesses seeking employees.

“That’s not good for our economy, and that’s not good for our society for it to be more advantageous to stay home than to be employed. It’s a challenge, but it’s just not good public policy,” Rashid said. 

Someone making $7.25 an hour would earn $290 in a 40-hour work week. Eligible claimants have been able to get $300 a week, in addition to state unemployment compensation, during the federal pandemic unemployment period that ended earlier this month. 

“You have employers who say, ‘We can’t find workers to come back to work because they’re making more on unemployment than we’re willing to pay’ … The workers are there. You’re just not paying enough to attract them to come work for you,” said Thomas Oppel, executive vice president of the Washington, D.C-based American Sustainable Business Council. 

The American Sustainable Business Council, or ASBC, is an organization representing more than 250,000 businesses advocating for sustainable and equitable business policies. Oppel said that while traditional business organizations weigh the costs between higher wages and lost jobs, or the economy and the environment, ASBC believes those are false choices. 

“Over the last 15 years, wage growth for CEOs … has risen dramatically, but wages at the lower end of the economic ladder have been stagnant, or when compared with inflation, have decreased. That’s simply not fair, but it’s also not good for the economy because it denies people the opportunity to be both more productive, as well as to increase their consumption,” Oppel told City & State.

Myerow said that with many businesses struggling coming out of the pandemic, it could be an inflection point for the service industry. “It’s going to be a very Darwinian moment. You either have the ability and resources to compete for staff and for guests, or you don’t. A pretty tough industry to begin with just got that much more difficult,” he said. 

Gene Barr, president and CEO of the Pennsylvania Chamber of Business and Industry, agrees that this could be a turning point for the hospitality industry, but that “punitive blanket mandates” would risk jobs, especially for the low-income earners people are advocating for. 

“While some workers would certainly benefit from increasing the minimum wage, others would be negatively impacted, many of whom may be from the very low-income families we want to help,” Barr said. “The current proposal on the table in Harrisburg would be especially damaging for the restaurant industry, which employs over half of the minimum wage earners in Pennsylvania. Restaurants that have survived the pandemic so far may be barely hanging on following the state’s business shutdown orders and capacity restrictions.”

That’s why raising the minimum wage is proving to be more difficult for small businesses and mom-and-pop shops that often rely on high school students and other low-wage workers for staff. Barr said the state should consider other policies, such as improved job training programs and tax credits to better support low-wage earners instead of mandating wage increases. 

On the other hand, Oppel said increased wages can save the state money in the long term. He argued that with more disposable income, businesses get more returns from increased consumer spending and fewer people need to rely on state programs for assistance. 

“You’re going to put more money into people’s pockets, which means they’re going to be able to save more and spend more,” he said. “By making them more productive and increasing their wages, you remove the number of people who have to rely on those support programs.”

In an effort to appease everybody, Laughlin said his more moderate approach takes into account feedback from small businesses within his district. Although most small businesses are already paying at least $10 an hour, he’s considering including in his bill a 90-day training wage, which would be lower than the minimum wage, to help businesses transition while onboarding new employees. 

Laughlin said most Republicans recognize that costs have increased “substantially,” for many families, particularly over the last year. His proposal, SB 672, is gaining traction in the Capitol. 

“Frankly, I think now’s the time,” he said. “I’ve already started talking to people behind the scenes … building support, and I think we’re getting pretty close.”