Michael Saltsman: Rhode Island’s minimum wage mistake
Author: Michael Saltsman
Publication Date: May 2017
Newspaper: Providence Journal
Topics: Minimum Wage
How many minimum wage hikes is too many? The Rhode Island legislature seems determined to find out.
The state’s minimum wage has been increased in four of the last five years, rising by 30 percent over this time period — roughly 10 times more than the rate of inflation in the Northeast. Two recently-introduced pieces of legislation would raise the wage floor further, to as high as $15 an hour.
In an interview with the Wall Street Journal, Pugh captured her dilemma: “I want people to earn better wages … but I also want my city to survive.”
Rhode Island legislators should take her words to heart. The state has yet to experience the economic revival enjoyed by its northern neighbor, Massachusetts. A recent report published by the New England Economic Partnership projected that Rhode Island will continue its pattern of slow economic growth through at least 2020 — while the state’s population stagnates.
The rising minimum wage isn’t to blame for all the state’s economic woes, but it does play a part in reducing job opportunities. The data suggest the state can’t afford to be careless with the food service industry.
From 2010 to 2013, Rhode Island enjoyed modest (1-2 percent) but still positive year-over-year growth in the number of food industry businesses. But in the following years, as the required base wage rose higher, that growth slowed to a crawl; by 2015, the state added just 12 new food service businesses on net. The preliminary data for 2016 suggests Rhode Island may have ended the year with zero net growth for restaurants and other eateries.
This negative impact of a rising minimum wage on employment opportunities has been well-documented in academic reviews published by the nonpartisan Congressional Budget Office, the Federal Reserve Bank of San Francisco, and others.
Beyond the jobs impact of a rising minimum wage — and a $15 minimum wage in particular — legislators should consider the impact on employee morale. According to the Bureau of Labor Statistics, $15 an hour is the same as median hourly wage in Rhode Island for more-skilled employees such as pharmacy technicians and nursing assistants. What kind of message does it send to these employees when a cashier at a quick-service restaurant with no job experience is earning the same wage?
It’s a step in the right direction. But if the General Assembly continues to measure success by the frequency and level of minimum wage increases — not to mention the layering on of other policies such as paid sick leave — the predictions of slow growth may soon become a reality.