The tax would be levied on businesses with more than 250 or 500 employees — depending on the bill — and would charge business owners $1 per hour for every hour worked by an employee earning less than $15 an hour.
This legislation would give us the worst of all possible outcomes — these bills would lead to fewer jobs and higher prices. And who is most affected when the cost of living goes up in Connecticut? The poor.
Similar to how our tax on “petroleum companies” is actually a tax on the gasoline we buy, this tax would also end up raising prices. Even worse, it would raise the price of the goods that we are most dependent upon — our food and our clothing.
According to the fiscal notes on the bills, the state could rake in as much as $340 million a year by levying this tax. Some of the money would go to pay for the Department of Labor to enforce the law, the rest would either go — depending on the bill — into the General Fund or to specified agencies.
That is $340 million that will come directly out of consumers’ pockets.
The union leaders supporting this legislation say that employers who pay their employees less than $15 an hour “owe” the government money because these employees may rely on government services.
But many of the people who earn less than $15 an hour do not rely on state services, because their total combined household income is higher than the thresholds set by the state.
There’s also a double standard here.
Public institutions would be exempt from this legislation. UConn pays many of its student employees the minimum wage — currently $9.15 an hour — or near the minimum wage. As do cities and towns — think of those high school students who provide after care at many of the elementary schools.
These public employers would receive special treatment under the bills, and would be exempt from the harsh penalties they would impose on the private employers and their employees, including students who work at off-campus, low-wage jobs.
The unions are promoting this legislation as part of a bigger “Fight for $15” battle. They want to raise the minimum wage to $15 an hour.
These bills would make labor more expensive in this state, so their impacts would be similar to raising the minimum wage. When you add the $1 an hour tax, it means the owner of a large business would have to spend $10.15 for a person now making $9.15 an hour.
But this legislation is even worse than raising the minimum wage, because the money collected wouldn’t go to low-wage workers, it would go to the government.
Interestingly, the battle for these bills has pitched the Service Employees International Union (SEIU) against Local 371 of the United Food and Commercial Workers union. The leader of Local 371 told the Hartford Courant that these bills could hurt the grocery store employees his union represents.
And what happens when the minimum wage is raised?
Studies released by scholars, the Federal Reserve, and the Congressional Budget Office all say the same thing — that raising the minimum wage reduces jobs, particularly for young and low-skilled workers. Talk about ignoring the science.
Studies have also shown that raising the minimum wage doesn’t do much to alleviate poverty. That’s because many of the people who earn the minimum wage already live in households with incomes above the poverty line. Whether it’s a young person or a household member working a part-time job, most families are not solely dependent on a minimum wage job to make ends meet.
As public policy, the minimum wage was not designed or intended to be the sole support for a family. So, the question becomes, how do we help people gain the skills to move out of minimum wage jobs? And how can state lawmakers foster an economy where we get sustained job growth at all income levels?
We can look to the cities where the minimum wage will eventually rise to $15 — Seattle, Oakland, and San Francisco — to see the effects of the “Fight for $15” plan.
Oakland lawmakers recently started the process of moving toward $15 an hour by raising the minimum wage to $12.25. A painful results — one in 10 business owners said they were “very likely” to close because of the hike. Half said they raised prices in response, and a third reduced employee hours or hours of operation.
Thirty-two of the responding business owners, or 17 percent, said they had to let some of their employees go after the minimum wage went up.
Is this really the future we want here in Connecticut?
Bills like these two, and the “Fight for $15,” are based on feel-good politics, but in reality they hurt people and they hurt our state.
Suzanne Bates is the policy director for the Yankee Institute for Public Policy. She lives in South Windsor with her family. Follow her on Twitter @suzebates.
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