Out-of-State Donors Max Out for Minimum Wage

While the success of minimum wage ballot measures this election cycle might suggest a renaissance in state grassroots passion, a closer look at the financing of the associated ballot committees reveals an out-of-state funding apparatus.

Arizona, Maine, and Colorado saw an ocean-sized inflow of out-of-state cash to fund their pro-hike committees through the election. Given those vast sums, it’s safe to say that much of the sweep was due to donors who have no connection to or understanding of the local economies in these states.

Arizonans for Fair Wages and Healthy Families lead the successful fight for $12 per hour by 2020 in Arizona. The Arizonans committee raised nearly $4.2 million, at least $2 million of which came from out-of-state sources. Among contributions from within the state, Living United for Change in Arizona, Inc. (LUCHA) has provided 43 percent of the PAC’s funding–nearly two million dollars. LUCHA, a spinoff of the disgraced and now-defunct ACORN, has risen to prominence this cycle with a large war chest and a lack of disclosure (think: dark money) on who’s providing such large sums to a small Arizona advocacy group.

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On the other side of the country, Mainers for Fair Wages pushed for $12 by 2020 in Maine, and can thank out-of-state donors for at least 65 percent of its funding. (This figure could be much higher when transfers from the organization’s associated ballot question committee are factored in.) The last disclosure before Election Day indicates that the Mainers PAC raised $971,000, of which $631,000 came from out-of-state sources.

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The big winner of the least-aptly named PAC contest, however, goes to Colorado Families for Fair Wages, which received 93 percent of its funding from sources outside of Colorado.  Of the nearly $5 million raised by the committee, $4.5 million came from out-of-state sources.

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These east- and west-coast based advocacy organizations might have the well-being of their donors or certain political candidates in mind, but they surely don’t care about the state’s small businesses. The disclosures don’t lie: There’s big money to be had in minimum wage astroturfing.

Source: State campaign finance data.

http://tracer.sos.colorado.gov/PublicSite/homepage.aspx
http://mainecampaignfinance.com/
http://apps.azsos.gov/apps/election/cfs/search/CandidateSearch.aspx

“Mainers for Fair Wages” Funded by Out-of-State Cash

In the pantheon of PAC names, “Mainers for Fair Wages” must rank among the least offensive in American electoral history. However, their benign name hides that which their campaign finance disclosure forms reveal: “Mainers for Fair Wages” is fueled by out-of-state money.

EPI analyzed data from the Maine Ethics Commission and found that the PAC has received at least 75 percent of its monetary contributions from out-of-state donors. Accounting for a transfer of funds from the Ballot Question Committee that the PAC shares a name with, it’s possible that Mainers for Fair Wages received as much as 95 percent of its support from outside of Maine.

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Such out-of-state contributors to the PAC and Ballot Question Committee include:

  • The Fairness Project, a Stanford, California-based political advocacy group conceived by a controversial west-coast labor boss.
  • Stephen Silberstein, a California-based member of the secretive left-wing funding group Democracy Alliance.
  • Restaurant Opportunities Center, a New York-based advocacy group that’s been sued in the past by its own members for failure to pay minimum wage.

Mainers for Fair Wages is advocating for a 60 percent increase in the state’s minimum wage to $12 an hour, and a 220 percent increase in the minimum wage for tipped employees. Earlier this year, EPI released an analysis by Drs. David Macpherson of Trinity University and William Even of Miami University which found that roughly 3,800 jobs would be lost in the state at $12, the majority of which would come from small businesses. See the full report on the Mainers PAC here.

*This analysis was subsequently confirmed by the Bangor Daily News, one of Maine’s major newspapers.

New Ad: $12 Minimum Wage Chops Rungs Off Career Ladder

Over Labor Day weekend, calls for an increase in the minimum wage reached a fever pitch. Labor Secretary Thomas Perez joined with labor groups in an attempt to shame politicians that do not support a federal wage hike.

Our latest ad, which ran on Thursday in the St. Louis Post Dispatch, illustrates the folly of this argument.MN AdIn a November 2015 analysis, Drs. William E. Even and David Macpherson, economists from Miami University and Trinity University, used a methodology developed by the Congressional Budget Office and estimated that 770,000 jobs would be lost if federal legislation mandating a $12 minimum wage were enacted. On a state-by-state level, they found that over 20,000 of those jobs lost would come from Missouri.

“Everybody” Did Not Benefit From Connecticut’s Paid Sick Leave Law

A new study released by the Employment Policies Institute, authored by Dr. Thomas Ahn of the University of Kentucky, finds that Connecticut’s paid sick leave law hasn’t delivered on its proponents’ promise that “everybody benefits.” Instead, the evidence from Connecticut suggests that the mandate actually reduced work hours for young adults and correspondingly slashed their take-home pay.

Dr. Ahn found that employees in Connecticut aged 20-34 saw a 24-hour reduction in annual hours worked. For a part-time employee in the service industry, that’s roughly one lost week of work per year. In real dollars and cents, part-time entry level workers lost $850 per year in annual income (3.5 fewer pre-tax paychecks).

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These results are unfortunate, but not unexpected. Back when the mandate first went into effect in 2012, an Employment Policies Institute survey found that roughly one-third of the 86 surveyed businesses had reduced other employee benefits to account for the law’s costs, one-fifth had raised prices, and a similar number had reduced hours or staffing levels to accommodate the increased costs of paid sick leave.

Higher Minimum Wages, More Crime?

The Democratic Party Platform calls for a $15 federal minimum wage, and many attendees at last week’s Democratic National Convention extolled its benefits.  In endorsing presidential nominee Hillary Clinton, Senator Bernie Sanders praised her for “understand[ing] that we must raise the minimum wage to a living wage.”

But none mentioned its consequences.  One consequences that is particularly relevant to convention-goers is the link between minimum wage increases and crime.  In Philadelphia, where the convention was held, homicides were up 10% at the start of July (relative to 2015).  The problem is by no means isolated: Homicide rates are up 15% in 51 large US cities so far this year.

The Employment Policies Institute recently highlighted this connection in a  Wall Street Journal op-ed.

“In the heart of North Philadelphia—represented by ZIP Codes 19121, 19122, 19132 and 19133—the unemployment rate for teenagers averages 42%, according to 2014 data (the most recent available) from the Census Bureau’s American Community Survey. … The city’s north side faces these crisis-level rates of youth joblessness with a starting wage—$7.25 an hour—that’s consistent with the historical inflation-adjusted average minimum wage in the U.S. of $7.40. If anything, the current minimum wage is too high, given the large numbers of unemployed youths who can’t find a job. The consequences of more than doubling it to $15 an hour would be disastrous.

 

By significantly reducing the available stock of job opportunities at the bottom end of the career ladder, a higher minimum wage increases the likelihood that unemployed teens will seek income elsewhere.”

A 2013 study by Boston College economists found that “low-skilled workers affected by minimum-wage hikes were more likely to lose their jobs, become idle, and commit crime.”  The authors of the study emphasized the “dangers both to the individual and to society from policies that restrict that already limited employment options of this group.”

This study serves as a scary reminder that the consequences of raising the minimum wage extend far beyond employment statistics.

$15 Hits California Businesses Hard

California is in the process of ratcheting up its minimum wage from $10 an hour to $15 by 2022, and the hikes are making it tough for small businesses to stay afloat. Just last week, the 25-year-old Roseville brick-and-mortar The Almost Perfect Bookstore was forced to close up shop and resort to online-only sales, citing California’s new wage hikes as a “major factor.” The bookstore was even profiled last year as one of the few to survive the rise of the Kindle, Amazon, and digital books.

Free two-day shipping couldn’t close Almost Perfect, but California’s march to $15 forced the store to close in less than a year.

The Almost Perfect Bookstore is not the only shattered small business left in the $15 minimum wage’s wake. In just the last week, we’ve identified stories of four more California businesses that have had to cut hours or close entirely because of the wage hike.

  • Oakland’s Stag’s Luncheonette will be closing its doors at the end of this month, with the owner citing higher minimum wage and rising food cost.
  • The iconic Pann’s of Los Angeles will be cutting its dinner service to offset the cost of the state’s rising minimum wage.
  • Cafe Flora, another iconic eatery in the Castro District in San Francisco, is now for sale, with the owner also citing the rising minimum wage and cost of doing business in the city.
  • Match Analysis, an Emeryville business which collects data on soccer matches, had to shed 13 jobs due to that city’s near-$15 minimum wage.

Such minimum wage hikes are happening throughout the country, and the consequences can be seen at The Faces of $15. Sadly, new stories are being added nearly every week.

15 Errors in the Fight for $15: It’s Not Fiscally Responsible

No summer is complete without a summer reading list, and SEIU boss David Rolf’s “Fight for $15” is at the top of ours.

Alas, while the book has plenty of entertaining rhetorical flourishes, its commitment to factual accuracy on the issue of wage mandates is lacking. In honor of the campaign that Rolf started, today EPI begins a recurring series that we’re calling “Fifteen Errors in the ‘Fight for $15.’”

The first claim we’ll tackle in Rolf’s book is this: A $15 minimum wage will “substantially reduce dependence on government welfare programs” among poorer Americans.

Specifically, Rolf argues that an increased minimum wage would make poor employees richer, thus moving them off of government assistance. It sounds good in theory, but it simply does not survive in practice.

The nonpartisan Congressional Budget Office estimated in 2014 that a higher minimum would have little net impact (positive or negative) on the federal budget.  Last year, San Diego State University economists examined 35 years of data and found that minimum wage increases cause no net reduction in social welfare spending or program participation. 

There is also powerful electoral incentive to maintain the current size of the benefits rolls, regardless of the wage floor.

After California passed its $15 minimum wage, Assemblyman Kevin McCarty (D., Sacramento) tried to increase the eligibility threshold for a state social welfare program: “Some people with the minimum wage increase, they’re not rich by any means, but they [now] make a little too much to become eligible for our state preschool program, so we adjust the eligibility for the first time in many years.”

In summary, the data don’t support Rolf’s argument, and–even if it did–his allies may be unwilling operate in good faith and allow employees to “lose” those benefits.

$15 Minimum Wage: Putting Jobs Out Of Reach

For many Americans, July marks the hottest part of the summer season. It’s the time of year for shorts, swimming pools, backyard barbecues and fireworks. However, employees and small business owners across the country will be feeling the heat this July 1st due to 15 separate minimum wage hikes go into effect at the state and local level.

The economic effects of such wage hikes are well documented, and hit less-skilled job-seekers the hardest. In Oakland, California, a wage hike to $12.25 last year played a role in the closure of 10 grocery stores and restaurants in the city’s Chinatown neighborhood, while childcare provider were forced to reduce hours and limit the number of children they could serve.

In nearby Berkeley, whose minimum wage is currently $12.53, the coffee shop Mokka closed this summer primarily because of the minimum wage increase. Across the Bay in San Francisco, whose minimum wage is rising to $15 an hour, numerous restaurants—including Abbot’s CellarSourceLuna Park, and Roosevelt Tamale Parlor—have closed citing the minimum wage increase as a factor. (Many other stories can be found on Facesof15.com.)

Who’s responsible for this? It starts with the SEIU and its $70 million+ campaign for a $15 minimum wage. In a full-page ad in the New York Times, we point out that SEIU boss Mary Kay Henry is chopping off the bottom rungs of the career ladder:

EPI Ladder Ad

A Fast Food Protest Built on Flimsy Facts

SEIU-supported protesters were bused to McDonald’s annual shareholders’ meeting in Oak Brook, Illinois today to agitate in favor of higher pay and greater benefits. Their demands were twofold and familiar: an increase in the minimum wage to $15 an hour and a union. Many market watchers see the rise in McDonald’s Q1 sales as a sign that the company is coming out of its several-year-long slump, and the potential for profit has spurred activist calls for McDonald’s to spread the wealth around.

The notion that McDonald’s profit is easily translatable into a substantial increase in its starting wages is best captured by one of the Fight for Fifteen’s architects, David Rolf.  In a 2016 book that shares the name of the campaign he helped launch, the Seattle SEIU Local 775 president mentions McDonald’s by name as an example of a company that can afford to pay more. Specifically, Rolf states that McDonald’s made a profit of over $18,200 per employee per year in 2013. Surely, the company could afford to give its employees a raise, right?

Unfortunately, Rolf overestimated McDonald’s per employee profit by almost a factor of three.

To get to the incorrect value cited in his book, Rolf began by using McDonald’s operating income instead of using the company’s actual profit after taxes and other expenses are paid. This caused the first distortion, as McDonald’s annual report places operating income at about $3 billion more than its net profit.

Rolf then made his error worse by focusing solely on the labor costs of McDonald’s 440,000 corporate employees. Using this method, Rolf claimed that only 17% of McDonald’s revenue went to labor costs. However, close to 90% of McDonald’s locations are run by franchisees, and the average franchisee pays 26% of its revenue to cover labor costs, an omission that earned another pro-wage hike analysis a Huffington Post retraction.

The actual profit per employee at McDonald’s with 23 employees is roughly $6,700. A pay boost to $15 for a part-time employee currently earning the federal minimum wage would wipe out that entire profit and then some.

The protests at McDonald’s annual shareholder meeting are fueled more by perception than reality. The perception is that, with renewed profitability, McDonald’s can afford to raise their minimum wage to $15 an hour. The reality, as expressed by retired McDonald’s CEO Ed Rensi on Tuesday, is that there is a point when it becomes cheaper to automate some jobs than to increase wages. If activists succeed in their fight for $15, entry-level employees will become even less affordable.

A Golden State Payout for Big Labor

California’s impending $15 minimum wage will take full effect by 2022-23. Evidence suggests that organized labor’s $1.6 million investment in the venture is already set to pay off.

Typically, unions support a higher minimum wage to achieve an indirect pay benefit . An analysis of union collective bargaining agreements available from the Department of Labor’s Office of Labor-Management Standards illustrates that many pin baseline wages to the federal minimum wage. For example, one SEIU local agreement states that, “[t]he minimum hourly wage rates shall exceed any statutory applicable minimum wage rate by fifty cents.”

California’s unprecedented $15 minimum wage promises a more direct benefit for unions. For example, Bureau of Labor Statistics data show that the median weekly wage for a unionized food-prep employee come out to just under $13 an hour full-time. (Other unionized occupations face a similar pay structure.)

Using Census Bureau data, the Employment Policies Institute estimates that roughly 223,000 union members in California will receive a direct pay bump by the time the law is fully implemented in 2022. (These estimates are based on data from Outgoing Rotation Groups of Current Population Survey between January 2013 and December 2015 and assume annual wage growth of 2.9 percent and 2.2 percent inflation annually.)

A majority of the affected employees are concentrated in four industries: Retail, health care, education and public administration (i.e. government.) Roughly 100,000 of the union employees work in the public sector, and 123,000 work in the private sector.

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Graph 1. Total Increase in Annual Earnings, 2022

According to our analysis, union members earning less than $15 an hour will receive an estimated bump in annual earnings of $883 million when the law is fully phased in.

Importantly, the cost borne by the state will differ from the public sector estimate above. Gov. Jerry Brown, in a May revision to his budget projection, estimated the combined cost of the $15 minimum wage to the state general fund at $3.4 billion, which includes an increase in the cost of in-home care reimbursements (among other cost increases).

For many union members, the higher earnings translate to higher dues payments.

A review of federal filings of California-based SEIU locals confirms that many set their dues payments as a percentage of employees’ wages, typically 1% to 2%. One percent of $883 million in additional annual wages for California union members would yield roughly $9 million per year in new dues dollars.

Raising the minimum wage may be all gain and no pain for union bosses, but that is not the case for California’s taxpayers and employees in the private sectors whose jobs are now at risk.