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Business Pleas Fail to Delay Virus-Era Minimum Wage Increases

Oct. 5, 2020, 9:30 AM

Covid-19 hasn’t slowed the march toward a $15 an hour minimum wage in several states and cities, as business groups mostly strike out at persuading public officials to postpone scheduled increases.

Scheduled increases took effect in recent months in more than 20 states and cities from Los Angeles to Connecticut, even as the number of confirmed coronavirus cases surged in parts of the U.S. and businesses navigated partial closures, new safety protocols, and customer capacity limits. More than a dozen other states are set to raise their minimum wages for the start of 2021.

The higher labor costs hit employers at a time when they’re still struggling to recover from a pandemic-induced recession and government aid money such as the Paycheck Protection Program is running out, business advocates say. Federal government efforts to pass an additional economic aid package have been bogged down by disagreements between House Democrats and the Republican-led Senate and White House.

Worker advocates, on the other hand, argue low-wage employees need the pay increases now more than ever and that minimum wage increases will boost the economy via consumer spending.

Thus far, business proponents have failed to convince any state to postpone a scheduled increase—with the exception of Virginia, which delayed a 2021 wage increase by four months before Gov. Ralph Northam (D) signed it into law. Two California cities, Hayward and San Carlos, also voted earlier this year to postpone their wage increases.

Illinois Gov. J.B. Pritzker (D) let a state-mandated increase to $10 take effect on July 1, over the objections of business groups including the Illinois Manufacturers’ Association. Maryland officials are set to let a Jan. 1 increase go forward, despite a broad business-relief proposal from the Maryland Chamber of Commerce that includes postponing it.

Increases also went ahead as planned in July in the District of Columbia, Nevada, Oregon, San Francisco, and elsewhere.

“We just haven’t been able to get their attention on this,” said Tim Goodrich, executive director of state government relations at the National Federation of Independent Business, a small business advocacy group. “We’ve been arguing that increasing labor costs at a time when businesses are struggling to stay open makes no sense at all.”

‘A Lot of Noise’

Continuing to increase wages makes sense because service workers face the same or worse financial challenges they faced pre-pandemic plus the health risks of working in public-facing jobs during a pandemic, said Ben Zipperer, an economist at the Economic Policy Institute, which supports higher minimum wages.

He also noted generally broad public support for wage increases, demonstrated by successful ballot measures such as those in Arkansas and Missouri in 2018.

“We’ve heard a lot of noise about” states being urged to postpone wage increases, “but not much definitive action,” he said. “One of the reasons why critics of the minimum wage haven’t been very successful at winning delays is that minimum wages are actually a pretty popular political issue.”

Still, the pandemic might have contributed to less legislative activity this year to further expand minimum wages. States with phased-in $15 minimum wages on the books doubled in 2019, when Connecticut, Illinois, Maryland, and New Jersey enacted legislation, joining the earlier $15 adopters of California, Massachusetts, and New York, plus the District of Columbia.

In 2020, only Virginia has enacted a minimum wage law with a path to $15, and even that legislation requires another vote by state lawmakers in 2024 if they wish to continue scheduled increases beyond $12. Florida could join the list if voters approve a ballot measure in November to put a phased-in $15 minimum wage in the state constitution.

Off Ramps Bypassed

State legislatures have been preoccupied with virus response, but even in places like California, Connecticut, and Maryland where state law provides an option to delay minimum wage increases without legislative action—sometimes called “off ramps”—governors and other officials have opted to let scheduled increases go ahead.

California Gov. Gavin Newsom (D) said in July that delaying the state’s Jan. 1 increase would only make life harder for front-line workers who have “borne a disproportionate share of the economic hardship” of the pandemic. The statewide minimum wage is set to rise to $13 an hour for employers with 26 or more employees and $12 for smaller businesses, although many California cities have their own higher minimum wages.

In Maryland, state law gives the three-person Board of Public Works the option to delay scheduled minimum wage increases by one year if economic conditions call for it. The board adopted a report in late September acknowledging a drop in the state’s employment numbers during the previous six months.

Gov. Larry Hogan (R), one of the board’s members, vetoed the new minimum wage law in 2019 before state legislators overrode his veto.

Nevertheless, the board’s other members—the state’s comptroller and treasurer—said they oppose postponing the upcoming increase, and a spokeswoman for Hogan, Shareese DeLeaver-Churchill, confirmed by email that Maryland won’t be postponing the scheduled increase. The state’s hourly wage floor will rise to $11.75 on Jan. 1, a step on its way to $15 in 2025.

New York Gov. Andrew Cuomo (D) has the option to delay the state’s scheduled wage increases in December, after the state’s budget division publishes a required annual economic impact report. The state’s minimum hourly wage is set to rise Dec. 31 to $15 for Long Island and Westchester County and to $14.50 for the rest of the state outside New York City, which has already reached a $15 minimum wage.

Cuomo’s office and the state budget division didn’t respond to inquiries about the governor’s plans.

“It’s NFIB’s hope Governor Cuomo will step in after the report is produced and delay the minimum wage increases,” Goodrich said by email, yet he conceded, “the politics are tough in NY.”

‘Perfect Storm’ for Massachusetts Businesses

In Massachusetts, a scheduled increase to $13.50 per hour on Jan. 1 is one of several labor cost increases looming for small businesses, said Jon B. Hurst, president of the industry group Retailers Association of Massachusetts.

As with New York, Hurst said the political climate in Massachusetts makes it unlikely the wage increase will be postponed. But unlike New York, Massachusetts law doesn’t give the governor power to delay the increase on his own; legislative action would be needed.

“We aren’t being Pollyanna at all here and thinking that Massachusetts is going to delay that increase, but I think these things have to be discussed in the scope of overall small business costs,” Hurst said.

On top of the minimum wage increase, the state’s new paid leave law begins paying benefits in January, small businesses are facing an average 8% increase in health insurance premiums for small-group Affordable Care Act plans, and unemployment insurance rates are expected to jump significantly, Hurst said. This comes at a time when sales at some small retail and restaurant businesses are still down 50% from a year ago, he added.

“I foresee a real perfect storm,” he said. “It’s not just minimum wage.”

To contact the reporter on this story: Chris Marr in Atlanta at cmarr@bloomberglaw.com

To contact the editors responsible for this story: Martha Mueller Neff at mmuellerneff@bloomberglaw.com; Andrew Harris at aharris@bloomberglaw.com; Karl Hardy at khardy@bloomberglaw.com

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