On January 30, 2019, Pennsylvania Governor Tom Wolf reiterated his goal for an increased state minimum wage, putting pressure on the state legislature to raise low income workers’ salaries to $15 per hour. Twenty states across the country chose to increase their minimum wages last year with changes set to take effect at the beginning of 2019. Despite the external trend, Pennsylvania has not raised its minimum wage since 2009, and it appears as though it still will not.
Pennsylvania is one of 21 states that does not require employers to pay workers a higher wage than the federal minimum wage, despite the fact that all neighboring states’ minimum wages are at least $1 per hour higher than Pennsylvania’s. Governor Wolf has been pushing to catch up with these neighboring states since he took office in 2015. In recent months, he has aimed to surpass them. Wolf’s initial proposal during his first year in office was to raise the minimum wage to $10.10 per hour—a $2.85 jump from its current position which would put Pennsylvania in line with twelve other states that have minimum wages higher than $10 per hour. Since then, Wolf has only gotten more ambitious. Wolf’s most recently proposed $15 per hour minimum wage would gradually take effect with scheduled 50 cent increases over six years. The proposed increase would start at $12 per hour at its enactment (proposed for July 2019), and reach $15 per hour by 2025 when it would then be tied to inflation. If successful, Pennsylvania’s state-wide minimum wage would be the highest in the country.
Unfortunately for Governor Wolf, he may be asking for too much from Pennsylvania lawmakers. While a minimum wage increase is beneficial for one segment of the population, it has vast implications for businesses and commodities. Most businesses use the minimum wage as a starting point upon which to offer raises and promotions based on merit and skill acquisition or as a reward for remaining with the company longer. Mandating an increase to this starting wage would have a detrimental impact on businesses which may no longer be able to offer competitive wage increase programs. With stagnant wages, employees may be more inclined to look for employment elsewhere.
Further, businesses—particularly small businesses—often have a difficult time meeting wage increase demands since there are not backup savings to absorb the extra expenses. Instead, the expenses often come out of a business’s bottom line. As a result, the costs are usually passed on to the consumer in the form of an extra dollar or a few cents sprinkled on top of existing prices. For smaller businesses which may have higher production costs than a large factory, these price increases may be significant; perhaps significant enough in some cases to drive off business for cheaper options in neighboring states.
Wage increases (especially when dramatic) can also cause hiring freezes, layoffs, and/or hours being cut as businesses reflect on how many employees they really need versus how many they can afford. Thus, even though existing employees may fare better in the short-term, assuming they retain their hours, those looking for work may be out of luck in the long-term until existing employees leave or new opportunities open up. For smaller businesses with few employees to begin with, this may result in terminating and eliminating useful positions to avoid going out of business.
Based on the dramatic increase of more than double the current minimum wage that Governor Wolf is seeking, it is unlikely that his plan will pass the Republican-controlled House and Senate without significant compromise. While Republicans may be open to the idea of a minimum wage increase, $15 is almost certainly off the table. For most states that have chosen higher minimum wages of $10 per hour or more, the cost of living is generally higher for their citizens, so a higher minimum wage might make sense. For Pennsylvania, where the cost of living outside of larger cities like Pittsburgh and Philadelphia is relatively low, such a dramatic increase does not necessarily make sense at the state-wide level. This is good news for smaller businesses in Pennsylvania since a minimum wage increase—particularly a dramatic one—is unlikely for the next few years.
This article was written with contribution from Sarah Rothermel, 3rd year law student at Widener Law Commonwealth.