KRC Reports in Small Bites: The Minimum Wage Report 2018: Post 5 of 6

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We write a lot and that makes it hard to find the time to catch up on our latest research. To make our work easier to digest in 2018 we are breaking reports up into smaller bite size pieces and posting them here. This post is the fifth in a series of six highlighting key findings from our latest report The Pennsylvania Minimum Wage in 2018. Netflix down? Can't read another grim news story? You can binge on the full report here. Or take it slow and read the first, second, third, and fourth post in this series.

Campaigns to raise the minimum wage are more complex than simply raising the minimum wage; policymakers must grapple with whether to allow subminimum wages and local premption and take steps to fight wage theft. 

Subminimum Wages

In Pennsylvania, employers of workers that customarily receive tips are required to pay their tipped workers a base wage of $2.83 per hour, provided employees’ weekly income from tips plus their base wage would bring their hourly rate to $7.25 – the current minimum wage. Tipped workers in states like Pennsylvania face higher rates of poverty and a greater reliance on public assistance than tipped workers in states that do not have a tipped subminimum wage. For this reason, we recommend streamlining Pennsylvania’s minimum wage law by phasing out the tipped minimum wage by 2025. The Economic Policy Institute estimates that raising the tipped minimum in Pennsylvania to $5.25 while boosting the minimum wage to $9.00 by next July would boost the wages of 161,688 tipped workers. Two other subminimum wages that policymakers sometimes propose include subminimum wages for younger workers or subminimum wages for workers in small business. These provisions generally do more harm than good by giving employers an incentive to discriminate in hiring by age or by subsidizing inefficient firms, and thus are not recommended. Our allies at the Restaurant Opportunity Center are a great resource for learning more about the need for One Fair Wage.

Local Preemption

As part of a compromise to raise the state minimum wage to $7.15 an hour in 2006, local governments in Pennsylvania were preempted from establishing a minimum wage higher than the state minimum wage. At the time, Pennsylvania was only one of ten states to preempt local minimum wage law. Since then, preemption has blossomed nationwide with 25 states preempting higher local minimum wages and a growing number of states using preemption to roll back local efforts to expand paid sick days and fair scheduling laws. We recommend an end to preemption to allow higher-wage, higher-cost-of-living regions in Pennsylvania to establish minimum wage levels more in line with local pay levels and the cost of living.

Wage Theft

Raising the minimum wage is not enough: for many workers in Pennsylvania, the state needs to do more to combat wage theft. Community Legal Services of Philadelphia reports over a hundred cases each year of clients whose employers simply did not pay them or paid them less than the legal minimum. The Economic Policy Institute, using data from the Current Population Survey, finds 107,000 Pennsylvania workers, or 10% of the minimum-wage-eligible workforce, were victims of wage theft. The EPI analysis finds that Pennsylvania employers that commit wage theft are stealing just over a third (34.6%) of the wages to which their victims are legally entitled – a bigger share than in any of the other 10 large states studied by EPI.

To combat wage theft in Pennsylvania, Community Legal Services of Philadelphia recommends boosting the penalties for wage theft violations, and streamlining and better funding enforcement of existing laws by the Pennsylvania Department of Labor and Industry. Our “Agenda to Raise Pennsylvania’s Pay” also recommends clamping down on wage theft through more effective, strategic, and industry-specific enforcement.

In our next and final post in this series we will discuss the importance of indexing the minimum wage.   

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