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Are minimum wage increases the answer to poverty in the pandemic recession?

SHARE Are minimum wage increases the answer to poverty in the pandemic recession?
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Employee Evan Wallers moves batteries at Batteries Plus Bulbs in Lehi on Friday, Feb. 5, 2021.

Annie Barker, Deseret News

With national discussion on raising the minimum wage as a form of pandemic relief, two state legislators are pushing for Utah to go further in helping families survive.

“First and foremost, there’s dignity in work. We want people to be able to be self-sufficient and take care of themselves,” said Rep. Clare Collard, D-Magna, who is sponsoring HB284 to start raising the minimum wage in Utah to $12 an hour by July 1, eventually reaching $15 by mid-2026.

Her bill has yet to be assigned to committee for a hearing in the Utah House.

It is a quicker initial jump than that proposed by President Joe Biden, which would move to $9.50 an hour this year if approved and $15 in 2025. Utah state Rep. Ashlee Matthews, D-West Jordan, says she plans to also offer a wage bill that would follow more closely to Biden’s proposal but also differentiate rates for urban and rural areas in the state.

The current federal minimum wage is $7.25 an hour, where it’s been since 2009. A person working 40 hours a week for a year earns $15,080 at that rate.

Will raising the basic wage be a boom or a bust for workers? And what about businesses as they try to recover from the COVID-19 pandemic that has devastated many parts of the economy for the past year?

Depends who is asked.

Helping move people up versus eliminating jobs

Collard said she sees raising the minimum wage as the only straight solution to bringing people out of poverty. She said other efforts to help low-income workers, such as affordable housing or child-care for working mothers, don’t have enough impact.

“I’m not talking about giving handouts to people, I’m talking about giving people a way to earn a living wage,” Collard said.

Another advocate sees it as the only way to help as prices continue to rise, especially for housing in Utah.

“With the drastic increase in cost of living over the years in Utah, an increase to the minimum wage is necessary to help our communities make ends meet and care for their families,” said Lauren Simpson, policy director for Alliance for a Better Utah.

But some are concerned about a downside.

According to Phil Dean, public finance senior research fellow at the Kem C. Gardner Policy Institute at the University of Utah, the worker might benefit from the wage increase, but “I worry about those that could lose their job or not get hired in a job in the future.”

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Employee Karyn Scofield, center, helps a customer at Batteries Plus Bulbs in Lehi on Friday, Feb. 5, 2021, as the store’s owner, Serenity Jones, looks on.

Annie Barker, Deseret News

That is something Serenity Jones, who owns a Batteries Plus Bulbs store in Lehi, sees as a possibility.

“For me, personally, as a small business owner, I can’t raise my prices enough to supplement that kind of pay,” Jones said.

As an owner of a franchise store, Jones is required to remain open on Sundays, though she knows she’ll lose money given that its not a huge shopping day in Utah.

“If you ask any small business owner, the two main expenses they have are their employees, and their inventory. And almost always, employees are more than inventory,” Jones said.

Jones said those Sundays are a huge drain already, by having an employee sit and do essentially nothing. If the minimum wage was to increase as proposed, Jones said that many businesses like hers will have to raise prices or fold.

“I can’t raise my prices enough to supplement that kind of pay,” Jones said.

Matthew Weinstein, state priorities partnership director for Voices for Utah Children, said Congressional Budget Office numbers for the nation don’t support the fears of businesses closing down.

“There is increasing evidence, including from the states that passed recent minimum wage increases, that the fears of job loss from higher minimum wages were overstated, at least prior to the pandemic,” he said.

Livable wage or training wage?

Collard thinks the minimum wage should be a livable wage. She said many of her constituents say they are working “two to three jobs” at minimum wage to just get by.

To afford a two-bedroom apartment in Salt Lake City, she said, a person must make at least $19 an hour. In her own district, that rises to $22 as a household would need to have an annual income between $32,520 to $45,760 to afford only the housing costs in Salt Lake City, let alone living expenses.

Yet Jones and Dean don’t believe minimum wage and living wage should be linked, that a minimum wage was always meant for those people who are just starting out in the workforce with no job history or skills.

“It’s down at a lower place, because when you’re starting out in the workforce, you have a lot to learn about being an employee. It takes more time to train you on how to be an employee,” Jones said. “Every single one of my employees I have to train completely to do the job.”

Jones said the minimum wage position that is offered by an employer is supposed to be an “entry-level position.”

“The whole idea that the minimum wage is to be a livable wage is not realistic,” she said.

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Employee Karyn Scofield stocks items at Batteries Plus Bulbs in Lehi on Friday, Feb. 5, 2021.

Annie Barker, Deseret News

Stepping stone to a better economy

Jones said that she sees her employment as a “sort of stepping stone” to better skills and therefore better jobs in her employees’ future. Instead of mandating the higher pay, she thinks the focus needs to be on education and training in trade jobs.

Dean echoed the argument. He said as workers gain more skills “they can demand higher wages” and that Utah’s economy has “a lot of opportunities out there” for those who are looking.

Collard sees rising wages for workers as a win-win situation for businesses owners like Jones and the employees.

She explained that having a “living wage” from one job allows a person to “purchase goods and services” such as rent, car payments, clothing for their families, food for their table and even insurance. It “stimulates the economy.”

“They’re not saving it, they’re living on it,” Collard said.

Mark Welker, president of the Point of the Mountain Chamber of Commerce, says he understands a higher wage can act like a stimulus, but not always.

“You’re looking at a totally different situation here. To give that kind of increase to an entry-level job, it just doesn’t fit,” Welker said. “You are going to do more harm than good.”

He says the wage increases multiplied by the number of employees isn’t just a concern for small businesses owners.

“We have companies who have several hundred or several thousand employees and most of them are entry level and they can’t cover that increase in cost,” Welker said.

Melva Sine, president of the Utah Restaurant Association, warns the timing is not good for the increase, especially for Utah’s third-largest industry.

“We know that the restaurant and other service industries are in a state of needed repair and recovery,” she said. “And anything that jeopardizes that recovery ... right now is not the time for a minimum wage change.”

But Weinstein warned that “if (the legislators) don’t pass a higher minimum wage or an earned-income tax credit to help low-income Utahns work their way out of poverty, they could end up with a successful voter initiative (like in Florida) that creates an outcome that they would not be happy with.”

In November, Florida voters approved changing the state’s constitution to gradually raise the minimum wage to $15 by 2026.

To one worker, it is a “class issue.”

“My greatest issue with workers only making $7.25 an hour, is that prices have gone up, inflation has increased, etc. Where is that money going? Certainly not to the employees,” said Emma Roberts, a bartender in Salt Lake City. “It’s gone into the pockets of the employers while they continue to deprive the employees of a fair wage.”

She continued: “It pains me to see neighbors say that the minimum wage should be lowered, and that their fellow humans are undeserving of a higher wage, even though those industry employees work so much harder than most people I know.”