, Newburyport, MA

January 31, 2014

A balanced approach to higher wages

Jon B. Hurst

---- — It’s an election year, and that means the special interests that fund legislative campaigns are pressing Beacon Hill for action on their issues. Perhaps the most powerful collection of those groups in Massachusetts, the big unions that represent government, health care and higher education workers, are going for broke.

They are demanding that Beacon Hill pass the highest state minimum wage in the country at $11 an hour, while refusing to touch the state’s costly, abused and loophole-ridden state unemployment insurance eligibility rules.

None of this is surprising to the Massachusetts employer community. Fortunately, we have some Beacon Hill leaders who understand the importance of maintaining some balance in order to grow jobs and to remain competitive with those states over the border and across the country.

House Speaker Robert DeLeo and Gov. Deval Patrick have both made it clear that they support raising the minimum wage, but they also support a long overdue reform to our unemployment system that drives up the cost of doing business and is abused by certain employers and employees alike.

It is sound policy, especially during tough economic times, for the state to look for ways to alleviate costs for employers if they are going to be increasing costs through wage mandates. And unemployment insurance reform is long overdue.

Massachusetts is an outlier among the states for not having a real minimum time worked eligibility standard, only a minimum earnings test. That loophole means that certain employers and their employees regularly and legally abuse the system by establishing a rotating pattern of only a few weeks of work followed by unemployment benefits, followed by work, and so on.

The Massachusetts Senate has passed a bill that would raise the state’s minimum wage by $3. That would put our state level, already one of the highest in the nation, $2 higher than any other state in our region and $1 higher than the closest state, California. Regrettably, no unemployment insurance reforms or other measures to offset the cost to employers were included in the bill.

In an age when consumers can buy goods and services anywhere, right from their smartphones, it bad policy for the commonwealth to impose significantly higher employment costs on their businesses than other states.

If the Senate version becomes law, our Main Street retail stores will be particularly harmed. It is a little known fact, but retail businesses in Massachusetts are required to pay time and a half pay on Sundays. (Massachusetts is one of only two states in the nation with this requirement — Rhode Island is the other.) That means that the retailer minimum wage on Sundays will actually be $16.50, if the minimum wage is $11, while it remains $7.25 in New Hampshire.

Not only is this requirement expensive and outdated, but it is a major driver for why Massachusetts teen employment has plummeted from 53 percent in 1999, to 26.8 percent in 2012. Retailers just can’t afford to hire unskilled teenage workers.

Unintended consequences can occur when you make it too costly for employers to operate their businesses. Job reductions are certain to happen when you raise employers’ costs without them also seeing a similar percentage increase in sales. People lose track of the fact that government employers, health care facilities and universities can all raise payroll by forcing higher costs on entrapped taxpayers, health insurance consumers and college students. But private employers don’t have that luxury since their customers are not trapped and generally have unlimited purchasing options.

Although few would argue against some increase in the minimum wage, balance is needed if our businesses are going to stay competitive and healthy in a very soft economy.

Balance should take the form of repealing the retail Sunday premium pay requirement; creating a “teen wage” below the minimum so our youth can have some hope for getting that first job; reducing size of the increase to an affordable level; and reforming the abused unemployment insurance system.

The employer community is hoping that common sense and good public policy will carry the day in this election year, rather than the political pressure from powerful union special interests.


Jon B. Hurst is president of the Retailers Association of Massachusetts