Effect of state’s new $15 an hour minimum wage uncertain
As Sen. Eric Berthel told it Thursday on the state Senate floor, he stopped off at a Starbucks he frequents during a trip to Hartford that morning, where workers make the state minimum wage of $10.10 that was the focus of debate this week.
Three employees familiar with the senator came around the counter to implore him not to vote for the increase, Berthel, R-Waterbury, told his Senate colleagues, which he said caught him by surprise.
“Each one of these three employees understood — beyond any reasonable doubt, by looking at what has happened to Starbucks stores in other states in the country where the minimum wage has already gone up — they know ... that they can be replaced by a machine,” Berthel said.
The state Senate voted
21-14 to pass a bill that would increase the minimum wage for most employers to $15 an hour. The vote came despite warnings by some business owners and trade groups that they cannot absorb higher payroll costs and maintain their current workforce employment.
Gov. Ned Lamont has signaled his intent to sign the legislation into law.
From $10.10 today, Connecticut would lift the minimum wage in increments over four years to $15 in June
2023, beginning this October when it would rise to $11. The bill includes a circuitbreaker of sorts giving the state the option of revisiting the law if Connecticut absorbs two straight quarters of declining economic output once the increases take effect.
Under current Connecticut law, wages are set below the $10.10 minimum for staff at restaurants, hotels and bars who receive tips in addition to their regular pay. The bill awaiting enactment would require the state Department of Labor to study the impact of increasing minimum wages on that sector, with minimum wages remaining frozen for the time being at $6.38 an hour for restaurant and hotel workers, and bartenders getting at least $8.23.
In any instances in which tips do not make up the difference with the escalating general minimum wage, then individual employers would be required to increase what they pay to cover the gap.
In a study two years ago of the effects of a similar hike in Seattle, Harvard University researchers determined that minimum wage increases had perhaps the biggest impact on lowerrated restaurants that were already near the tipping point of unprofitability or going out of business.
The study estimated that a dollar increase in the minimum wage increased the likelihood by 14 percent for restaurants to close that were given ratings by Yelp users near the median. The Harvard researchers found no impact of an increase on top-rated restaurants in Seattle.
Yet an analyst from a Washington, D.C., think tank, speaking during a March hearing of the state legislature’s labor committee co-chaired by Sen. Julie Kushner, D-Danbury, cited studies that suggest most businesses adapt to increases in minimum wages as they do any other costs.
“Rather than simply cutting staff or hours, businesses are typically able to adjust through a variety of channels such as reduced turnover, higher productivity (and) increased consumer demand resulting from the wage increase,” said David Cooper, a senior analyst with the Economic Policy Institute, in his March testimony. “Low wage workers are consumers — and when they have more in their paychecks they go out and spend it right away.”
A Manchester restaurant owner named Keith Beaulieu disagreed, calculating that had a $15 minimum wage been in effect last year, it would have swung his bottom line to an $80,000 loss on the year.
And a restaurant industry lobbyist noted that in prior minimum wage hikes, increases never topped 50 cents an hour in any given year, giving all small businesses time to make adjustments to what they charge customers and budget for expenses.
State Sen. John Kissel, R-Enfield, revisited that issue during the marathon Senate session on Thursday that preceded the vote.
“Better to have a wage that’s going up less dramatically over a longer period of time and have a job, than this dramatic, fast-paced increase and lose a job,” Kissel said. “Even if that were the case, I don’t think our state at this point in time can afford this. Right now these businesses are talking to me saying, ‘We’re barely making it.’”
But lawmakers heard both sides of the issue in March, including from Calixto Cornejo, who relayed his own experiences in coming to Stamford several years ago, initially scraping by with a janitorial job with UBS paying the $10.10 minimum before hooking onto a union job in the city that pays him $15.50 an hour.
“I cannot say strongly enough how much of a difference this difference in a basic wage has meant for me,” Cornejo said through a translator. “At that time, my wife had trouble finding work — all we could afford was a single room apartment where the three of us slept. I had to take the bus everywhere.
“Now I am able to afford a simple but reliable car,” Cornejo continued. “We were able to move into a slightly better apartment so my (son), now at age 13, can have his own room. It has made a tremendous difference in the dignity of my family life.”
A waiter collects an order in March 2017 at Pizzaco in Stratford. Under Connecticut’s new minimum wage law that escalates the hourly rate to $15 an hour, a lower rate for waiters and other workers who make tips will be frozen, but with employers having to cover the difference if those tips do not push total compensation above the general minimum wage.