State pondering minimum wage hikes; hourly rate would more than double

22 August 2019 - Bailey Loosemore and Ben Tobin (Louisville Courier Journal)

Ian Pollock spends most of his days in a restaurant kitchen, calling out orders to a line of cooks.

The job requires good communication and organization, skills Pollock has learned over a decade in the business. It pays $12 an hour, well above Kentucky's minimum wage of $7.25.

For a single adult, that wage is probably enough to earn a living. But Pollock splits custody of his 10-year-old son, which means it's barely enough to scrape by.

For all the talk of raising the minimum wage, the fact is that low unemployment and a competitive labor market have already accomplished the task for the vast majority of Kentucky's workforce.

Less than 3% of Kentucky workers earn the state and federal minimum of $7.25 an hour, according to federal data.

But for tens of thousands of low-paid employees, the extra few dollars they make per hour above the minimum still isn't enough to meet their daily expenses, a Courier Journal analysis has found.

A single adult living in Kentucky would need to earn at least $10.82 an hour to afford the state's cost of living, according to a Massachusetts Institute of Technology living-wage calculator.

The living wage jumps to $22.68 an hour for a single parent with one child, MIT's calculator says.

Lawmakers are trying to address those struggling workers with bills that would more than double the minimum wage.

In Kentucky, Sen. Reginald Thomas, D-Lexington, and Rep. Kathy Hinkle, D-Louisa, prefiled a bill Tuesday that would raise the state's minimum wage to $15 by 2027.

Opponents -- including Senate Majority Leader Mitch McConnell, who stands to impede a federal increase -- say such legislation would do more harm than good, forcing businesses to lay off workers to meet higher wages.

Kentucky workers struggling

Pollock understands the struggles of workers trying to get by.

He can't afford to buy a car. He splits rent with a roommate.

And he waits until Fridays to buy groceries so he has something to feed his son.

"I get him two dinners, lunch and breakfast," said Pollock, whose son stays with him on Fridays and Saturdays. "What's left over I snack on during the week."

Food service, retail and maintenance jobs are notoriously low paying in Kentucky.

And while competition to attract entry-level workers has pushed businesses to increase wages, many employees still aren't making enough to meet their cost of living.

Opponents of raising the minimum wage argue that most people working the lowest-paid jobs are younger and generally don't have as many financial obligations.

However, data from the U.S. Bureau of Labor Statistics shows that workers 25 years and older made up 53% of employees nationwide who earned minimum wage in 2018.

No matter a person's age, the gap between the minimum wage and a living wage can push them below poverty thresholds.

In 2017, approximately 9% -- or 194,000 -- of Kentucky workers lived in poverty, meaning they earned less than $34 a day for food, shelter and other necessities, according to estimates from the U.S. Census Bureau.

Workers who live in poverty often qualify for governmental assistance, putting a strain on taxpayers.

For example, more than 35% of people who received food benefits in Kentucky in 2017 came from working families, according to the Center on Budget and Policy Priorities, a Washington, D.C.-based nonpartisan research and policy institute.

Betty Fox of the Louisville Urban League said when workers' wages are low, it comes at a cost to the community.

Amazon is raising the minimum wage for U.S. workersto $15 per hour

"Failure in school, failure with health, failure (to thrive) in general," said Fox, director of the league's center for workforce development.

"These are the people that serve us daily. They're taking care of the elderly, taking care of babies in day care. They're the ones that are going home and they struggle."

Health and labor economist Paul Leigh echoed Fox's sentiments, saying there's a strong correlation between raising the minimum wage and improving various health outcomes.

Last fall, Leigh reviewed several studies for a policy brief in the Health Affairs Journal. Overall, Leigh wrote, the studies concluded that an increase in wages could reduce smoking, improve birth weights and lessen absences from work for illness.

"We can say already that it will be good for worker health and the family and the children of those workers," Leigh said of raising the minimum wage. "It just makes such common sense."

Would an increase help or hurt?

States raising their minimum wage is not a radical idea, said Dustin Pugel, a policy analyst at the left-leaning Kentucky Center for Economic Policy.

Today, 29 states plus Washington, D.C., Guam and the Virgin Islands all have minimum wages greater than the federal floor -- including West Virginia, Ohio and Missouri.

That leaves Kentucky and two of its neighbors, Indiana and Tennessee, in the minority.

"There's a lot of precedent for raising the minimum wage to help your folks," Pugel said, "and I think Kentucky is really missing out by not following along."

The national Economic Policy Institute estimated in July that 652,000 Kentuckians -- 35% of the workforce -- would benefit from raising the minimum wage to $15 per hour by 2025, as proposed in the federal Raise the Wage Act.

Pugel said such an increase would most benefit women and minorities statewide, as well as workers in Eastern Kentucky. The Economic Policy Institute estimates that about 40% of workers in that region would receive a salary increase.

Sen. Thomas called the current minimum wage "unconscionable" and that "being a poor state, we need to do all that we can to raise the wages of our fellow citizens."

At a $15 minimum, affected Kentucky workers would earn an average $4,300 more annually, according to the institute.

That's money that could be pumped back into the state's economy, Pugel said.

"Some people call it the 'Henry Ford principle,'" he said. "People will have more money in their pocket, and they can turn around and buy more goods and services, which obviously then cycles around the economy."

Opponents of raising the minimum wage predict the opposite, saying a boost could increase prices and unemployment.

"Research shows that hiking the minimum wage to $15 would kill jobs and depress the economy at a time when it's thriving for the American people," McConnell tweeted on July 18, the same day the Raise the Wage Act passed the House of Representatives.

"We are not going to be taking that up in the Senate."

A 2019 report from the Congressional Budget Office states that an increase to $15 per hour could result in the loss of 1.3 million jobs nationwide -- though 27 million workers would potentially see their wages rise.

The theory behind jobs loss is that raising the minimum wage would make it more expensive to employ workers, said professor Mike Clark, speaking as an economist with the Center for Business and Economic Research at the University of Kentucky.

Gay Dwyer, senior vice president of the Kentucky Retail Federation, added that any increase in expenses likely would be passed on to customers.

The retail federation was one of three organizations that previously sued the Louisville Metro Council after it increased the minimum to $9 per hour by 2017.

In October 2016, the Kentucky Supreme Court struck down Louisville's minimum wage law, stating that the city had exceeded its authority.

"A basic tenet among our membership is a belief in the free enterprise system," Dwyer said. "To that end, we think the market will set wage rates."

Jim Waters, president and CEO of the conservative free-market think tank Bluegrass Institute for Public Policy Solutions, similarly argued the government "doesn't know enough" about businesses to tell them how much they should pay their workers.

"Business owners should determine wages that they pay their people," Waters said. "And when there's a competitive job marketplace, employers will be forced to pay higher wages in order to fill those jobs."

Employees 'voting with their feet'

Workforce experts say that's already happening in the Louisville region, where Amazon employs 5,700 people, according to a database from Louisville Business First.

In November, the online retail giant increased its minimum wage to $15 per hour for U.S. workers, lifting the salaries of more than 250,000 year-round and 100,000 seasonal employees.

Other large companies have followed suit, said Michael Gritton, executive director of KentuckianaWorks, a workforce development board that oversees career centers in Jefferson and surrounding counties.

"A lot of companies, if they're not paying $15, they're either getting closer to $15 or are significantly aware that they're paying below the sort of market," Gritton said. "Those companies are experiencing a lot of turnover.

"What we're seeing is a lot of customers in the career centers are voting with their feet. They're pursuing jobs that pay more."

Scott Koloms, president and CEO of Facilities Management Services, said his janitorial company has reduced turnover by increasing wages and providing other benefits, such as financial literacy classes and access to adult learning programs.

Facilities Management employs about 900 people across Kentucky and Southern Indiana, and its average wage stands at $10.41 per hour, Koloms said.

The company would like to pay all employees a living wage, but it would have to convince customers to accept higher contracts.

"We're bidding against national companies that pay lower," Koloms said. "We have to remain competitive."

Lori Beck, co-owner of Holy Grale, said she's not proud of the entry-level wage she pays at the restaurant in Louisville. At $11 per hour, it's much higher than the minimum wage, but it's still not what she knows her employees are worth.

Beck said she agrees with raising the minimum wage because it would ultimately force businesses to move forward.

But she acknowledges that some smaller businesses are already paying more than they can afford to get workers.

"Every decision we're making, we're thinking about how to do better for our people," Beck said. "That's all you can do."