Policy and politics

There is an old saying that a rising tide lifts all boats. Well, last summer’s political imbroglio in Harrisburg over the pay raise Pennsylvania lawmakers voted for themselves may have a tsunami-like effect in raising the minimum wage for hundreds of thousands of Pennsylvanians in 2006.

In 2005, the General Assembly voted to raise the pay of its members 16 percent to 34 percent, prompting a flurry of outrage by citizens groups and more than one biting editorial in local newspapers. Perhaps smarting from the criticism it received over its new compensation, the General Assembly now seems poised to pass a bill (House Bill 257) that would amend the Minimum Wage Act of 1968 to increase Pennsylvania’s minimum wage in three stages to $7.15 an hour.

Pennsylvania’s minimum wage is $5.15 an hour, the federal minimum wage. If passed, the new law requires that employers raise the minimum wage to $6.00 an hour effective sixty days after the passage of the legislation; to $6.75 an hour effective January 1, 2006; and to $7.15 an hour effective January 1, 2007.

These raises would be further augmented by modest cost of living increases based on the regional Consumer Price Index (CPI) effective each January 1 thereafter. The legislation, which is based on a similar statute passed in New York last year, is also not unlike new minimum wage laws now in effect in 17 states and the District of Columbia.

Groups on both sides of the issue have been waging a policy battle over the merits and demerits of the proposed increase. Pro-business groups cite studies that indicate a raise in Pennsylvania’s minimum wage would result in more than 10,000 lost jobs in the Commonwealth and would cost the state’s economy more than $350 million.

On the other side, proponents of the bill argue that an increase in the minimum wage would benefit more than 750,000 Pennsylvanians, many of whom barely live above the federal poverty line. With the looming specter of rising oil prices this winter as a result of Hurricanes Katrina and Rita, the bill’s sponsors argue that the proposed legislation will give economically at-risk Pennsylvanians a much-needed boost.

Proponents further argue that nearly 45 percent of Americans now live in states with higher minimum wages than mandated by federal law and that Pennsylvania needs to join this growing trend.

Gubernatorial politics will also play a role in the issue as Governor Edward G. Rendell, preparing to run for a second term, promised to make the pay raise a top agenda item. As a candidate in 2002, Rendell was opposed to a raise in the state’s minimum wage.

With labor on board and Rendell seeking to woo a potential voter pool of 750,000 minimum wage workers, the governor has made the issue a top priority.

Administration as well as Hill-watchers do not feel that Republican opponents of the bill will be able to muster enough support from legislators still reeling over the furor created by their 2005 legislative pay raise to stop the minimum wage bill from becoming law.

If Pennsylvania enacts the new law, approximately 16.3 percent of the work force would benefit from the increase. Most workers affected are adults between 19 and 25; seniors and women also make up a strong percentage of the minimum wage population in Pennsylvania.

Business owners in hospitality, food service and other areas which rely heavily on a generally low-skilled work force will be most directly affected by the changes. While the minimum wage law is not yet a reality in Pennsylvania, affected business leaders should begin preparing now for several years in which their labor costs will rise.

While public policy reasons will certainly fuel the rise in the minimum wage, state politics will, as ever, be a strong motivator behind what the legislature and the governor eventually do.

Jack Thomas Tomarchio is a shareholder in the Philadelphia and Washington, D.C. offices of the law firm of Buchanan Ingersoll PC. He is a member of the firm’s Government Relations Section and co-chair of the firm’s National Security Practice Group. Reach him at [email protected].

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