Wage Hikes Popular With Voters, Strategic Headache for Businesses

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By Jon Steingart

Minimum wage increases tend to be winning propositions when put to a popular vote.

“At both the federal and state level the constant changing of regulations makes it almost impossible to strategically plan for a business,” said Chris Tyll, who owns a pizza shop and a bowling alley in Portland, Maine. Voters there approved a minimum wage hike in November that increased the wage floor to $9 on Jan. 1. It had been $7.50 per hour.

The Maine ballot question was problematic for businesses because “it dealt with three distinctly separate issues,” Tyll told Bloomberg BNA. In addition to fixed minimum wage increases over the next few years, the law establishes automatic increases tied to the cost of living.

“The voters in 20 seconds in the voting booth read a 30-word question that really is a 60 page bill,” Tyll said. They don’t have the benefit of analytical procedures that elected lawmakers use. “When you put a piece of legislation through the legislative process there’s a committee that analyzes this.”

The result is a set of rules that are constantly changing. It would be like if New England Patriots quarterback Tom Brady called a play and referees immediately moved the chains after the snap, said Tyll, who owns Pat’s Pizza and Easy Day American Food and Fun.

Uptick in Minimum Wage Hikes

Maine was one of four states during national elections in November where voters considered the question of whether to increase the state minimum wage. All of them voted yes. Voters in a fifth state rejected a legislative effort to lower the minimum wage for teenagers.

“It’s definitely picked up the last few years, both on the ballot measure and legislatively,” said Jackson Brainard, a policy analyst with the nonpartisan National Conference of State Legislatures in Denver. “Between 2013 and 2016 there have been 30 enacted increases either via legislation or ballot measure.” Some states are counted twice in the tally because they increased their minimum wage more than once in recent years. A total of 29 states and the District of Columbia currently have minimum wages higher than the federal floor of $7.25 per hour, according to data available on Bloomberg Law’s Labor & Employment Practice Center.

Minimum wage increases through ballot measure aren’t possible in all states. Washington, D.C., and 26 states have initiative processes that allow voters to propose and enact laws without the legislature’s involvement. The rest of the states either give voters an opportunity to approve or reject laws the legislature passes, or they don’t let voters weigh in at all.

The rules that govern the process for putting proposed laws on the ballot mean opposition can come in forms other than urging voters to say yea or nay. They vary from state to state, but some ways business groups may try to defeat a minimum wage increase from getting on the ballot is to challenge petition signatures from people whose voter registration lapsed, or arguing that a proposal violates a rule that ballot questions have to comply with.

That may happen in Maine.

Maine’s voter-approved law hiked the state minimum wage and also phases out the “tip credit” for workers who are compensated in part through gratuities. A tip credit allows an employer to count the compensation a worker receives from customers toward its minimum wage obligation, effectively reducing the amount a business is required to pay.

A state legislature committee held a hearing April 5 on bills that would increase the wage floor for tipped workers by shrinking the tip credit. In a second hearing the same day, the committee weighed bills that would establish a lower minimum wage for workers in training or exempt some types of worker entirely.

The legislature can’t block or change a ballot measure once voters OK it, Curtis Picard, executive director of the Retail Association of Maine, told Bloomberg BNA. “They can come in and repeal it” after it’s enacted and on the books, he said.

Chamber Challenged Arizona Measure

In Arizona, voters in November approved Proposition 206, which requires businesses to pay a higher minimum wage and provide paid sick leave. The state’s wage floor went up to $10 Jan. 1. The Arizona Chamber of Commerce and Industry led a coalition challenging the measure, alleging it violated state constitutional provisions that prohibit initiatives that involve multiple subjects or affect the state budget.

The state supreme court refused to delay the minimum wage hike while the lawsuit was pending, and ruled against the challengers March 14. That means the minimum wage remains at $10 per hour and will continue rising as scheduled until it reaches $12 in 2020, with subsequent increases on par with the cost of living.

The lawsuit over Arizona’s voter-approved initiative came as no big surprise to Jonathan Schleifer, executive director of the Fairness Project, a national umbrella organization that supports minimum wage increases through ballot measures. Business groups that want a slower minimum wage increase, or no wage hike at all, wait until voters’ interest and news coverage fade after the election.Rather than operate in “the blaring light of an election,” Schleifer said, business groups may “choose to focus their energies in the shadows of the lobbying efforts or the courts, where they think they can be more effective.”

“You can do a lot with a very effective lobbyist,” Schleifer said. “You can do a lot with a very effective lawyer.”

After the Arizona supreme court’s decision, a Chamber representative referred Bloomberg BNA to its website for comment. “We are deeply concerned about the measure’s effect on employers, employees, and the state’s overall economic competitiveness, which we argued throughout the campaign on Proposition 206,” Glenn Hamer president and CEO of the Arizona Chamber, said in a Dec. 16 blog post announcing the lawsuit. “However, despite our stark disagreements with the proposition’s proponents on policy grounds, our lawsuit is over the proposition’s constitutionality.”

Flagstaff Reacts to $4 Hike

Sometimes the rules governing initiatives make it hard for the legislature to water it down. The experience of Flagstaff, Ariz., shows how delicate it can be for a legislature to react to a voter-approved measure.

Voters in Flagstaff approved a question on the 2016 ballot that asked whether the city should phase in a $15 minimum wage over a few years and mandate a minimum wage that is at least $2 above the state minimum.

“What happened at the ballot box is that individuals who voted yes on both really and truly did not understand what the compound nature of two would mean,” said Julie Pastrick, president and CEO of the Greater Flagstaff Chamber of Commerce.“ In a community with a high cost of living like Flagstaff has, at first blush you’re just excited that you get a chance to have a raise,” Pastrick told Bloomberg BNA.

The statewide increase to $10 in January and the Flagstaff initiative that required a higher wage “meant we were going from 8.05 an hour to $12” in seven months, Pastrick said. “A hike as high as Flagstaff would see, that just causes a tremendous hit to the economy.”

The city council March 21 approved an ordinance to delay the phase-in period for the minimum wage increases. It would also put off the requirement that the city minimum wage exceed the state minimum for a few years.

But a provision in the state constitution generally bars changing voter-approved laws “unless the amending legislation furthers the purposes of such measure.” The council’s ordinance says it satisfies this requirement because it doesn’t stop the city from phasing in a minimum wage that’s higher than the state’s, which is the goal voters contemplated when they voted for the initiative.

In the meantime, Flagstaff is preparing for the minimum wage to rise July 1. It will hit the city’s small businesses hard, Pastrick said. They’ll be faced with the difficult decision of raising prices or reducing labor costs by cutting hours or firing workers, she said.

To contact the reporter on this story: Jon Steingart in Washington at jsteingart@bna.com

To contact the editors responsible for this story: Peggy Aulino at maulino@bna.com; Terence Hyland at thyland@bna.com; Christopher Opfer at copfer@bna.com

Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.

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