Should policymakers raise Pennsylvania’s minimum wage?

Gov. Tom Wolf with Pennsylvania Chamber of Business and Industry President and CEO Gene Barr.

Gov. Tom Wolf with Pennsylvania Chamber of Business and Industry President and CEO Gene Barr. Commonwealth Media Services

Pennsylvania’s minimum wage has rested at $7.25 an hour since 2009, when the last of a series of federal increases kicked in. Since that time, state officials have fielded many calls to raise the state’s minimum wage, but the rate has remained the same.

Gov. Tom Wolf has been one of the loudest advocates in the state for raising the wage, repeatedly calling for state lawmakers to increase the minimum wage immediately to $12 an hour, with yearly, phased-in increases to $15. 

The closest Wolf came to increasing the state’s $7.25 minimum wage was in 2019, when he and Senate Republican leaders agreed to raise it to $9.50 in exchange for Wolf dropping a plan to expand overtime eligibility for salaried employees. That proposal, however, was opposed by House Republicans and ultimately died in committee, never becoming law. That hasn’t stopped Wolf and lawmakers from continuing conversations on whether or not to increase it, however.

This year Wolf once again called for an eventual increase to $15, while two Senate Republicans — Sens. Pat Browne and Dan Laughlin — have suggested a more modest increase to $10, while also indexing it to inflation. The future of both of those proposals is unclear, as Republican legislative leaders, as well as members of the business community, have significant reservations about what a government-imposed minimum wage increase would mean for the Pennsylvania economy.

City & State reached out to several experts on how state legislators should approach raising Pennsylvania’s minimum wage: Gene Barr, the president and CEO of the Pennsylvania Chamber of Business and Industry; Marc Stier, the Director of the Pennsylvania Budget and Policy Center; and Greg Moreland, the Pennsylvania state director for the National Federation of Independent Business. The responses have been edited for length and clarity.

How should lawmakers approach the minimum wage debate in Harrisburg?

Gene Barr: As the debate continues at both the state and federal levels, policymakers should keep in mind the demographics of the average minimum wage earner in Pennsylvania. Minimum wage advocates always argue that a parent earning minimum wage simply cannot afford to raise a family. We agree and believe most lawmakers and Pennsylvanians would support policies that help these families. But why the obsession with raising the minimum wage when, according to the state Department of Labor and Industry, 84% of minimum wage earners in the state don’t even have children and nearly 7% are younger than 25?

The job loss resulting from government mandated wage increases is real and a reduction in jobs is the last thing the Commonwealth needs as we work to move past this health and economic crisis. Rather than punitive blanket mandates, we encourage lawmakers at all levels of government to pursue policies that help low-wage earners without risking jobs, like stronger job training programs and more targeted support to low-income families. Numerous states, for example, have implemented a state Earned Income Tax Credit to supplement the federal program, which targets support to lower-income working parents.

Marc Stier: It’s time for the PA General Assembly to adopt Governor Wolf’s plan to raise the minimum wage to $12 on July 1 and in increments to $15 by 2027. Doing so would help our recovery from the pandemic recession as it would add $4 billion in wages this year all of which will be spent in local economies. By 2027 it will increase wages for over a quarter of the work force and add $6 billion to the economy. 

The minimum wage was meant to be a living wage for adult workers—and 80% of those who would benefit from an increase in the minimum wage are adults. 

The minimum wage was created in 1938 when the economy had not recovered from the Great Depression. It was originally set at roughly half the median and has been at that level often in the past. But it has declined to a bit more than 30% of the median. Creating a minimum wage helped us recover from the Great Depression. It will help us recover from the pandemic recession.

Greg Moreland: Pennsylvania is an extremely diverse state with regard to urban vs. rural communities. What works in one town, may not be feasible in another. Rather than setting arbitrary values for minimum wage, the legislature should work on policies that assist Pennsylvanians in attaining their maximum potential wage. Rather than creating barriers to employment (Pennsylvania requires over 250 professions to obtain a license to work), the legislature should work on developing the workforce of the future with regard to education and training. Pennsylvania small business owners have been hampered with unnecessary regulations that have driven up the cost of doing business. This has led to reduced profits and lower wages for workers. With nearly 163,000 individual regulations on the books, Pennsylvania businesses have experienced an enormous burden when dealing with bureaucratic red-tape. Allow the free-market to operate.

How would a minimum wage increase impact the job market in Pennsylvania?

Gene Barr: The impact a government mandated wage increase would have on jobs cannot be ignored. 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. The prospect of negative consequences is not a matter of “if”, but “how much” – a fact validated by input from countless employers, as well as nonpartisan economists from the PA Independent Fiscal Office and Congressional Budget Office, whose 2021 report concluded that a $15 minimum wage would result in lost jobs for 1.4 million American workers; a figure the CBO estimated could increase to as many as 2.7 million workers.

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. The proposed elimination of the tipped wage system they utilize means many would somehow have to manage a roughly 240% increase in labor costs in just a few months – 240%. Think about requiring any business to absorb that kind of cost increase, let alone a business that has been prevented from fully operating for over a year. Advocates for this proposal are either disconnected from reality or indifferent to the plight of these struggling small business owners and their workers.

Marc Stier: The best evidence we have is that a modest increase in the minimum wage will not cost any jobs at all—and may even increase them. Studies, including one by the NY Federal Reserve, have shown that low wage employers directly across our borders with New York and Maryland have not only increased wages but increased employment. Employers can afford higher wages when they are raised for all businesses, which allows them to pass some of the cost on and absorb the rest because they have less turnover and training costs, and higher productivity in their workforce. And a higher wage increases consumption which enables employers to produce more and employ more people. 

Greg Moreland: Many small businesses are struggling to keep their doors open after the capricious, arbitrary, and nonsensical COVID-19 mitigation efforts by state and local elected officials. Many other businesses closed their doors permanently in 2020-21, never to open again. Employers, if forced by the government to pay higher wages, will increase prices or offset their costs by cutting hours, benefits, overtime, and manpower while seeking cost efficiencies like automation. I don’t believe a wage increase will have the intended outcomes promised by some.

Is Pennsylvania at risk of losing workers to neighboring states with a higher minimum wage?

Gene Barr: Employers from a range of industries are struggling with workforce shortages – the National Federation of Independent Business monthly jobs report for March reports 42% of employers responded they had job openings that could not be filled. Employers are doing everything they can to compete for workers, which is why so many with open positions, even those in typically lower-pay industries, are offering significantly higher starting wages and even signing bonuses.

Employers are competing amongst each other for workers and, for those employers near the state border, that means businesses in neighboring states as well. Those who can will offer competitive wages to attract and retain workers, irrespective of the minimum wage discussion in Harrisburg.

Losing workers to other states is certainly conceivable though no more of a concern for employers than losing workers to their competitor down the street.

Marc Stier: That is already happening! Pennsylvanians are working in New York, Maryland, and New Jersey because wages are higher there. And, they often spend their higher wages across the border, too. Pennsylvania businesses and our economy as a whole suffer as a result.

Greg Moreland: In Pennsylvania, the market has forced many small businesses to compete for available workforce. This has led to a direct increase in wages. The notion that there are hundreds of thousands of adults who are working full-time and making minimum wage is simply incorrect. This month the Congressional Budget Office released a new analysis on the $15 minimum wage. They found that workers would see an overall wage gain and 900,000 workers would be able to move above the poverty line. However, this comes at the cost of 1.4 million jobs for other Americans. People aren’t moving due to minimum wage concerns. People are moving to other states like Florida and Texas because of their business-friendly policies.