Fears, hopes loom as wages set to jump

  • By IAN FOLEY
  • Thursday, December 18, 2014 10:59pm
  • News

With the passage of Ballot Measure 3, Alaska is set to increase the minimum wage in the coming years. While the future impact of the increase remains to be seen, it is clear that some Alaskans are skeptical about the increase and others are optimistic it will only benefit the population.

Alaska’s minimum wage is currently $7.75 for hourly workers, but will increase to $8.75 on February 24, 2015. The change was intended to happen on January 1, 2015, but state law requires 90 to pass after Division of Elections certified the results on November 26, 2014.

That rate will increase again on January 1, 2016 to $9.75. Each subsequent year will stay $1 more than the federal minimum wage, or change based on inflation measured by the Anchorage Consumer Price Index, whichever is higher.

The last time an Alaska minimum wage increase went into effect was January 1, 2010, when minimum wage went from $7.25 to the current $7.75 an hour, according to the Alaska’s Division of Labor Standards and Safety

According to the group Alaskans for a Fair Minimum Wage, Alaska used to have the highest minimum wage in the United States, but is now 19th despite having the fourth highest cost of living in the country.

Ed Flanagan, cofounder of the group and a former Alaska Labor Commissioner, credited the current discrepancy to the Alaska legislature’s repeal of the Cost of Living Adjustment in 2003, which had been attached to some previous minimum wage bills. If the Cost of Living Adjustment had not been repealed, minimum wage in Alaska would be $9.53 per hour today, according to information released by the group.

“The whole purpose (of the measure) was to get (wages) back on track,” Flanagan said.

He said that every time the minimum wage has been increased in the past, many people have been afraid that the costs of goods and services would go up significantly, but that hasn’t been the case. Flanagan said that on January 1, 2003 the minimum wage was raised between 26-27 percent, and yet the employment rate still went up.

“The predicted doom and gloom didn’t happen,” Flanagan said.

Kyle Hampton, Director of UAA’s Center for Economic Education, is opposed to the minimum wage increase. He said that while some people will be helped, a substantial portion will suffer from the increase.

“Somebody is going to have to pay for those higher wages,” he said. “It’s often difficult for people to wrap their heads around it.”

While he disagrees with the measure, he said that people have good intentions when it comes to raising wage.

“People genuinely care about other people,” he said.

However, by raising the minimum wage, Hampton said that the people the increase is trying to help would be hurt because the costs will eventually be passed on to them.

“The economy is like an ecosystem and changes can cause unforeseen and unintentional consequences,” he said.

Instead, Hampton argues that wage subsidies for either employers or the employees would be a better alternative than a minimum wage increase. This, he said, would raise taxes, but help guarantee that the rich would help pay the cost accrued by society more fairly, because wealthy people pay more taxes than minimum wage workers.

Hampton said the problem of people not making enough money is real, but there are better ways to alleviate the problem than minimum wage increases.

“You don’t have to be a heartless Republican to argue against the minimum wage increase,” Hampton said.

Jess McBride, a proponent of the increase, said that talk of increased prices is overblown.

“That’s what we’re suppose to be afraid of,” McBride said. “That’s commonly the knee-jerk reaction from people who are going to have to pay their employees more money now. It’s kind of a fear tactic. I don’t think it’s valid. The cost of goods and services are what they are, but you have to pay people a livable wage.”

The fact that many Alaskans support the law shouldn’t come as a surprise, as the measure passed with more than two-thirds of the vote in last November’s general election.

Edward Underwood, an Anchorage resident, believes the minimum wage increase will be beneficial to Alaska residents.

“Honestly, in Alaska I think (it’s a good idea), because things are so expensive here,” Underwood said.

Underwood said he understands the potential for negative outcomes of the law, but ultimately, wages need to increase.

“$7.75 – that’s nothing. Not in our state,” he said. “There’s always a negative aspect (to raising the minimum wage) in that if it goes too high, people will take advantage of it.”

Sonny Leavitt, who used to make minimum wage, said that experience made him want to be more ambitious in life.

“I’ve been down that road before,” Leavitt said. “It wasn’t fun. It really made me consider my future.”

Despite now earning more than minimum wage working for ASRC Energy Services, he still believes that the increase can benefit a lot of people.

“I think it’s a good thing. It will help people support their families, so they can buy food,” he said.

Many people believe that the wage increase will help average citizens, and others also trust that it will help businesses find and retain good employees.

Doug Jung, manager of Safeway in Kenai, said that finding and retaining good employees is often difficult. Jung said the new law could have a positive impact when it comes to hiring workers.

“It will make it easier to find people to work,” Jung said. “And anytime people can make more money, more power to them.”

Diana Spann, the Peninsula Regional Manager for the State of Alaska Department of Labor and Workforce Development said that many businesses in Alaska choose to pay their employees more than required just to be competitive in the labor market.

She said there is a wide range of jobs offered through the Peninsula Job Center. Most of them pay more than minimum wage.

According to the Bureau of Labor Statistics, Alaska is among five states with the lowest percentage of workers making at or below the minimum wage level. Less than two percent of Alaskans working hourly-paid jobs make wages at or below the minimum wage level.

Spann said she was unsure if the new law would also cause non-minimum wages to also rise.

“Each employer is probably going to handle it differently, but if I was an employer, I would make sure the ones that were above minimum wage were made whole,” Spann said. “Almost all of our employers in this area are good employers and they care about their employees.”

 

Reach Ian Foley at Ian.foley@peninsulaclarion.com

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