Coming Wednesday 4/2: House Debate on Minimum Wage (AND Unemployment Insurance AND Domestic Workers)

On Wednesday, the House Ways and Means Committee released its bill covering not only the minimum wage but also unemployment insurance and protections for domestic workers. Amendments to the bill were due on Friday in preparation for debate this coming Wednesday.

By Friday’s deadline, a total of 99 amendments had been filed. Among the subjects of greatest interest,

  • Tipped minimum wage: Amendment 88, sponsored by Democrat Tricia Farley-Bouvier of Pittsfield and 40 co-sponsors, would raise the tipped minimum wage to $5.25, half of the regular minimum wage of $10.50 proposed by the House bill.
  • Providing for future automatic increases in the minimum wage by tying it to the Consumer Price Index: Amendment 50, sponsored by Democrat Russell Holmes of Mattapan. This amendment has no-cosponsors, which likely means that the word went out that minimum wage indexing is DOA in the House and members’ time would be used more productively on other subjects.

It is still entirely unclear what will happen after the House passes its bill. Even though both the House and Senate will have acted on both the minimum wage and unemployment insurance, their bills will be like “ships passing in the night,” because, as reported earlier, the House declined to use either the minimum wage or unemployment insurance bills passed by the Senate and instead is starting at Square One with an entirely new bill. No House-Senate conference committee will be appointed to work out the differences until this standoff  is resolved. (A HT to Brian from Health Care for All, who points out that the U.S. Congress, not widely known as a model of cooperation, has found a way of resolving these conflicts.)

More on the amendments filed:

  • The majority (55) were filed by the distinct minority (31) of House Republicans. They include the cuts to Unemployment Insurance eligibility and benefits that many businesses have been asking for.
  • The restaurant industry is very well represented among the Republican amendments, with proposals including an exemption from any minimum wage increase, and the establishment of a “meals tax holiday” in July. (The most alarming of the restaurant amendments, entitled “Equity for Restaurants,” would take away the authority of the Board of Health to revoke a restaurant license for health code violations, granting only the lesser authority to impose a series of fines, increasing as the number of violations total six in a six-month period. Note to self: find out which restaurants are pushing this amendment and don’t eat there.)
  • DINO award to Representative Paul McMurtry (D-Dedham) for sponsoring an amendment to establish a two-tier minimum wage, one for adults and one for teenagers, and for suggesting that the concerns expressed by former Representative and Boston Mayor Marty Walsh about the need for more jobs for teenagers would be alleviated by this proposal.
  • The amendment topic on which there’s the most bipartisan agreement is a proposal to increase the state’s Earned Income Tax Credit, under which the state’s taxpayers help low-income working families by providing them with an annual subsidy at tax time. The GOP’s rather surprising enthusiasm for the idea is the result of gubernatorial candidate Charlie Baker’s endorsement. He’d rather boost this anti-poverty program instead of increasing the minimum wage. (Is it me, or is it true that the only time that Republicans are interested in having government help the poor is when it appears that private business is going to be asked to do so?)

After this week’s debate, stay tuned to see if the House and Senate reach agreement on any of the many issues now in play.

Yesterday’s Minimum Wage Fracas – What Was THAT About?

UPDATE, March 25: Forecast for minimum wage bill: mainly preposterous, with gusts reaching absurdity.

After last week’s scrapped takeoff, House Representative Tom Conroy announced today that the House will release its bill dealing with the state minimum wage and the unemployment insurance system very soon. The new House bill will add yet a third issue to the mix — workplace protections for domestic employees.

The Senate has already acted on the first two issues (minimum wage and unemployment), but it hasn’t acted on the workplace protections issue. The procedural result of the action the House is planning to take will, like the bill the House hoped to launch last week, “reset the process” and will require the Senate to act again on minimum wage and unemployment. But this time, the House will not need to go through the Labor Commmittee, because the workplace protections bill is no longer in that Committee. Instead it is in the House Ways and Means Commmittee and will apparently serve as the vehicle for the House to act on all three issues at once.

After charging that the Senate rather than the House is the true “obfuscatory body” here, Representative Conroy added that “this process issue should not get in the way of politics.”

OK, here’s another suggestion – how about not letting this political issue (of the sibling rivalry sort) get in the way of helping people?

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ORIGINAL POST, March 21

If you’re following the campaign to increase the state’s minimum wage, yesterday was something of a head-scratcher.

A quick recap – in November, the State Senate passed a bill that largely tracked the minimum wage increase proposal that is making its way to the statewide ballot in November. The Senate bill would increase the minimum wage to $11 over three years, increase the minimum wage for tipped workers to 50 percent of the regular minimum wage, and provide for automatic increases in the minimum wage in the future by tying the wage to the Consumer Price Index. In response, House of Representatives Speaker Bob DeLeo pronounced the Senate bill too unfriendly to the state’s business interests and proposed pairing any minimum wage increase with changes to the state’s unemployment insurance (UI) system to reduce those business costs. Many in the business community want to see those cost reductions come in the form of eligibility and benefits cuts to unemployed workers who file UI claims.

Yesterday began with a post to BlueMassGroup by House Labor Committee Chairman Tom Conroy introducing the House proposal. It would increase the minimum wage to $10.50 over three years, slightly less than the Senate proposal, and it would not make future increases automatic. The UI changes in the House bill would not have included any cuts to benefits or eligibility (as the employers were undoubtedly hoping), but instead would have reallocated the costs among employers, with employers whose workers used the UI system more often (the so-called “frequent fliers”) paying more than employers whose workers rarely used it. As it happens, the Senate passed a UI bill in February that took a very similar approach to reallocating the costs of the system.

So, in substance, it is fair to say that the Senate and the House were reasonably close on the minimum wage and unemployment insurance. The differences, one might think, could be worked out in the conference committee process.

But there was a big problem yesterday, and it was procedural, not substantive. The House wanted its bill to originate in the Labor Committee. That would have meant that the bill would then go to the House for passage and then over to the Senate. But what about the bills — both minimum wage and unemployment insurance — that the Senate has already passed? They are both sitting in the House awaiting action. If the House started the process over by having the Labor Committee act, then the Senate would have to schedule new debates and essentially re-do the work it has already done — a penalty for having acted first.

And that’s pretty much the point. House leadership hates it when the Senate goes first. Under the State Constitution and by tradition, the House goes first on any bills that raise tax revenue and on the annual budget. The House seems to feel that example should be followed in all cases, even in those cases where the deadline for the joint committees to have finished their work has passed. As it happens, that day was the day before yesterday. After the deadline has passed, a committee can take action only if both the House and Senate agree, and yesterday the Senate declined to let the Labor Committee do so.

Representative Conroy, understandably upset at losing the opportunity to move his bill forward, accused the Senate of pettiness. But from the Senate’s point of view, the problem is that the House so rarely goes first these days. All the committees, including the Labor Committee, include more House members (who number 160 in total) than Senate members (who number 40 in total), so the House completely controls the committee process. (You could make the argument that because Senators represent four times the number of people that House members represent, the committee membership really ought to be adjusted. But it hasn’t happened.)

So in order to preserve the Senate’s opportunity to act, they adopted Rule 19, which allows them to introduce and act on a bill that has not yet been through the committee process. The Senate used that rule to introduce and pass both its minimum wage and unemployment insurance legislation.

So what happens now? The Senate could agree to let the Labor Committee act, which would mean re-doing their work after the House has finished and postponing the final resolution of these issues. With only four months left in the legislative session and much, much more work to be done, one might wish for a simpler way out of this impasse, and fortunately one exists. The House can use the bills that the Senate has already passed as their vehicles for acting on minimum wage and unemployment insurance. We’ll see if — and when — they do.

UI “Reform”: Let’s Count the Savings (this won’t take long)

House Speaker DeLeo said again this week that he plans to couple legislation to increase the minimum wage with changes to the unemployment insurance system that businesses want. Meanwhile, the coalition that secured far more signatures than necessary to put the minimum wage increase on the November ballot, Raise Up Massachusetts, has taken the position that pairing the two bills is unacceptable.

So as the standoff continues, let’s take a closer look at one of the UI changes that top every corporate wish list: eliminating the “lenient qualification requirements” that allow Massachusetts workers to qualify for UI after 15 weeks of work in the prior year, when many states require 20 weeks. Some facts:

  • An unemployed worker in Massachusetts who has worked for only 15 weeks receives benefits for a far shorter time than someone with a longer work history – so parity is already built into the system.
  • People whose work histories are short because they work in jobs clearly intended to be seasonal positions are not eligible for UI. In his Globe column stating that they are eligible, Scot Lehigh must have forgotten about the part of the UI law expressly excluding them. Not even business groups are making this claim.
  • According to Associated Industries of Massachusetts, one of the largest employer trade associations and a big advocate for this change (and therefore without any reason to lowball its potential savings), estimates that it will reduce costs by $30 million annually. Let’s put that number in context: the total amount of money collected in 2012 to pay the UI benefits earned by unemployed workers was $1.767 billion. Thirty million dollars represents 1.7 percent of that total.

The argument from business, therefore, is that Massachusetts needs to try to become a more competitive place for employers by revamping our “antiquated and expensive” UI system so that it excludes more unemployed workers and leaves them to fend for themselves unless our state’s tattered safety net can help them. All for employer savings of (at most) 1.7 percent, and at a social cost that hasn’t been estimated yet. Got it.

The “Five Stages” of Opposition to a Minimum Wage Increase

The 2014 Legislative session has gotten underway, and employer groups opposed to an increase in the state’s minimum wage are firing warning shots and charting diversionary tactics to try to keep this very popular proposal at bay.

For example, on Monday, Associated Industries of Massachusetts, popularly known as AIM and one of the largest employer trade groups, endorsed a version of the familiar “Walmart Strategem” — that a better approach to alleviating poverty would be for the state to pick up the tab by increasing its Earned Income Tax Credit. But even if the state doubled the size of this program, eligible families would see an average increase of maybe $400 or so, almost nothing compared to an increase in the minimum wage. (Also, does anybody really recall AIM making a big priority of expanding this taxpayer-funded program before? ed. – AIM says they have supported in past but not claiming “big priority”)

For the upcoming minimum wage battle, it seemed to me that those of us in support ought to have a guide to the various lines of attack we may anticipate. And so, borrowing from the work of Dr. Elizabeth Kubler-Ross to track the grieving process and a variety of other human ailments, here are the “Five Stages” of Opposition to a minimum wage increase.

First Stage: Denial. In this stage, the subject is given to repeating statements such as “this can’t be happening,” and “it is impossible that the order of the universe might be altered.” An example from our friends at Mass. Fiscal Alliance, who cannot contemplate such a development:

[Employers must] develop a campaign plan that addresses their largest two concerns: making payroll and knowing where their income is going to come from…by increasing the minimum wage rate, you are making it almost impossible for many to win; the rules are being changed for them.

Denial generally proves to be only a temporary defense and is soon followed by the other stages.

Second Stage: Anger. In this stage, the subject wants someone to blame and lashes out in anger that is often misdirected or displaced onto others. An example from our friends at AIM, in which anger is displaced onto the co-workers of those who would benefit from a minimum wage increase:

[Increasing the minimum wage] causes multiple problems for employers. It can erode morale among workers as existing employees become angry that newer or lower-skilled colleagues are making nearly as much or, in some cases, more than they are. That anger can in turn accelerate turnover as the result of employees quitting.

Third Stage: Bargaining. In this stage, as it becomes evident that the unwanted event might nonetheless occur, the subject attempts to negotiate conditions under which it might be acceptable. An example from our friends at the Mass. High Technology Council:

[Although employers] do not support the Senate’s approach to raising the minimum wage as a stand-alone proposal, there is a considerable change in opinion when cost-reducing reforms to the Unemployment Insurance system are considered as an inseparable component of the minimum wage proposal.

Fourth Stage: Depression. In this stage, the subject feels despondent and bleak about the future. As the debate progresses, we may expect to see evidence of this stage in the form of a downturn in business confidence as employers are surveyed about their outlook and the prospect of a minimum wage increase clouds their horizon.

Fifth Stage: Acceptance. In this stage, the subject finally begins to feel that things are going to be okay after all. Those of us who support a minimum wage increase hope that with acceptance also comes the realization that employers and employees are not engaged in a zero sum game, and instead, we all do better when we all do better.

Onward!

Heads I Win, Tails You Lose (More from the Unemployment Insurance Front)

In our last episode, employers in the Bay State, a little sore after the passage by the Senate of a $3 per hour increase in the minimum wage, were contending that any minimum wage increase must be paired with a reduction in the Unemployment Insurance (UI) costs employers pay. After all, if workers are getting something, it would only be fair if employers got something too. And what they want is for the state to cut back in various ways on our “overly generous” UI benefits. (If you’re curious, those benefits provide a maximum of $679 per week — before federal and state income taxes are deducted — which is the equivalent of an annual salary of $35,308. Many unemployed workers who even qualify for these benefits receive far less.)

Everyone agrees (in theory at least) that the Unemployment Insurance system should be forward funded — that is, funding should grow during good economic times when unemployment is low, providing a reserve to be drawn on during bad times when unemployment is high. To that end, lawmakers adopted a schedule to determine annual UI rates for employers. The primary purpose of the schedule was to maintain the fund at adequate levels. A secondary purpose was to provide employers with certainty and the ability to plan ahead.

The problem has been that while employers may approve of the forward funding in theory, they don’t like forward funding in practice. Whether we’re enjoying good economic times or suffering through bad ones, employers feel that it’s always a good time to lower their UI rates.

Let’s climb into the Wayback Machine and go back to September, 1997. Times are good and more Massachusetts residents than ever are working. The unemployment rate is under four percent, the lowest in years. Would this not be a good time to save up for the next recession’s rainy day? No, not really. The fund is in good shape, say the employers, so in fact it is the perfect occasion to lower employer costs by cutting UI taxes. Despite warnings that a severe recession could easily wipe out the fund, lawmakers side with the employers and pass special legislation for the coming year to override the rate schedule that would have gone into effect.

And thus a tradition is born. From 1997 to 2013, with only one exception, lawmakers intervene every year to override the rate schedule, ensuring a lower rate than the schedule would have provided. And when recessions arrive in 2001 and 2008 and unemployment rises, the fund is considerably less solvent than it would otherwise be, requiring the state to borrow to cover the shortfalls.

For Massachusetts employers, the prescription for UI funding has been — heads I win, tails you lose.

Progressive Unemployment Insurance Reform (One in a Series)

Update: February 6, 2014. Today the State Senate passed an Unemployment Insurance (UI) Reform bill. One important element in that bill is the increase in the amount of employees’ wages on which employers pay the UI tax, which funds the unemployment insurance system. The amount is going from the first $14,000 in wages to the first $21,000 in wages. More specifics of how that works and why it is a very good idea are in the post below. The Senate also changed the table that sets employer UI taxes so as to require employers whose employees use the UI system frequently to pay at a higher rate than employers whose employees file few claims. The Senate also commendably declined (with one limited exception) to make any cuts in UI benefits or eligibility, which was a priority of employer groups (including the Mass. High Tech Council, as in the post below).
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Original Post: December 2, 2013

Following the passage by the State Senate of legislation increasing the minimum wage, business groups have been rushing to endorse House Speaker Robert DeLeo’s idea that any minimum wage increase should be paired with changes to the state’s unemployment insurance (UI) system. The latest organization to boost this plan is the Massachusetts High Technology Council, which polled itself last week on the issue and arrived at the not-at-all-surprising results that its members oppose a minimum wage increase, but that their opposition softens considerably if “sweeping reforms” to the state’s unemployment insurance system are undertaken at the same time.

Atop the list of UI changes that these business groups endorse are two that would come at the expense of unemployed workers: one proposal would make more laid-off workers ineligible for any UI benefits, and another would shorten the period of time that those laid-off workers who did still qualify could collect benefits. This business agenda, essentially, is a zero-sum game between employers and employees.

But that’s not the only UI reform agenda. A progressive UI agenda would certainly agree that our state’s UI system is in need of reform, but would propose a different solution. This alternative has been filed in legislation in the House by former Rep and current Boston Mayor-elect Marty Walsh, and in the Senate by minimum wage champion and Senate Chairman of the Committee on Labor and Workforce Development Dan Wolf. Instead of pitting employees against employers, this approach would reallocate the amount of UI taxes paid by employers. That amount is now heavily weighted against low-wage employers, who pay a disproportionately high percentage of their wages to satisfy their UI obligations.

Here’s how the Walsh/Wolf proposal works.

UI funds should be designed to be countercyclical — to be built up before recessions, drawn on during recessions, and then rebuilt during recoveries, so that the UI program can serve its purpose of stabilizing economic activity during downturns. To achieve this result, the formula for determining the annual rate that employers pay into the fund should take into account, among other factors, the wages that the employees of that employer receive, because UI benefits are calculated on that basis (the weekly UI benefit in Massachusetts is half the worker’s average wage, up to a maximum of $674).

For the past ten years, employers have paid UI taxes on only the first $14,000 of their employees’ wages. Because this is an artificially low amount and also because it has not been increased in ten years, the fund is susceptible to becoming overdrawn, particularly during severe recessions like this one. The low $14,000 amount also treats employers whose employees earn more than that more generously, and the higher the employee salary the greater the relative benefit to employers.

The bills filed by Mayor-elect Walsh and Senator Wolf adjust one factor in the formula for calculating employer contributions in order to reflect current wages and would index that factor to keep pace with future wage growth. (Policy wonks: see Section 2 of each bill.) This legislation would more fairly allocate responsibility for UI to businesses whose employees receive higher wages while working (and therefore higher UI benefits if laid off). It would also protect laid-off workers from unnecessary benefits cuts and protect the state’s economy during downturns by ensuring that families of laid-off workers still had purchasing power.

What’s not to like?

SIDEBAR: A little background on the Massachusetts High Technology Council. It’s a trade association of 100 or so members, including high technology companies and also law firms, banks, accounting firms and universities, whose mission is to make Massachusetts the world’s most attractive place “in which to create, operate and grow high technology businesses.” Its strategies for reaching that goal include keeping business taxes low while at the same time ensuring that Massachusetts always gets a healthy share of federal defense spending.