Is a minimum wage raise good for S.C.?

Is a minimum wage raise good for S.C.?

GSA Business Report
July 11, 2016

By Matthew Clark

The New Jersey State Assembly is in the midst of a debate to raise that state’s minimum wage to $15 per hour by 2021. That state is already one of 29 states plus the District of Columbia to have a higher minimum wage than the federally mandated rate of $7.25 per hour.

New York and California have recently enacted measures to set their minimum wages at $15 per hour within specific timeframes, while 11 states tie their minimum wage with the cost of living adjustments.

South Carolina, on the other hand, will not be one of those states anytime soon.

A bill introduced by state Sen. Marlon Kimpson, D-Charleston, would have raised the state’s minimum wage to $15 per hour by 2020 and put the state’s wage on an index after Jan. 1, 2021. That bill failed in a Senate subcommittee, essentially killing the legislation for this year.

“The Republicans control the agenda, and they have chosen to pick these items to discuss,” Kimpson said. “We did come back and pass a meaningful roads bill, but because of all this other time, other bills, not just mine, had hearings in subcommittee.”

Kimpson’s bill had support from, of all places, the S.C. Small Business Chamber of Commerce. Frank Knapp, its president and CEO, said polls conducted in the last year suggest a majority of S.C. voters are in favor of a minimum wage increase.

Public Policy Polling, a polling group based in Raleigh released a poll in September that said 71% of voters supported a raise in the minimum wage. In the poll, 38% said they were in favor of increasing the wage to $10 per hour, while 19% said they supported increasing the wage to $15 per hour. The poll also found that 66% of voters in the state either somewhat or strongly supported a minimum wage hike in South Carolina.

Winthrop University conducted a similar poll in March 2015 that found 68% of S.C. voters want lawmakers to raise the state’s minimum wage over the federal wage. Knapp said 80% of members in the American Chambers of Commerce Association said they supported a wage increase, while 8% did not.

“When you give workers more money, they are going to spend it, and that means it flows into the local economy,” Knapp said.

He countered the argument that raising the minimum wage would hurt small businesses in South Carolina by suggesting most small businesses already pay more than the minimum wage because of competition. State Sen. Thomas Alexander — a Republican from Walhalla and chairman of the Senate Labor, Commerce and Industry Committee, the governing committee of the subcommittee that rejected Kimpson’s bill — said that was exactly why government should stay out of determining a minimum wage.

“I think the market can take care of itself,” Alexander said. “If you have good employees, you will want to keep them. I think it is more appropriate for folks to deal with it from a competitive standpoint to make sure they have the trained employees they need.”

But, Kimpson’s frustration wasn’t over getting an unfavorable ruling in a Senate subcommittee. It was more that the Senate chose to spend more time on what he called “issues that have zero to do with the quality of live in South Carolina.” Items like a filibuster held on a preliminary roads funding bill, discussions on abortion, and track and trace legislation for refugees in the state.

“We pass multimillion-dollar incentive packages for Volvo, Mercedes and BMW, but when it comes to the worker, passing legislation to help them, the Republicans are not interested,” Kimpson said. “There are metrics that show the state is making more and more each year, and while the rich get richer, the working class see no benefit.”

While there is agreement that many small businesses in South Carolina are already paying above minimum wage for workers, there are some industries that would be affected if the state were to pass a higher minimum wage.

“We are primarily talking about the service sector, so I think the impact to the cost of goods would be minimal,” Knapp said. “If your hamburger goes up a nickel, are you going to walk away? Probably not, because it is such a minute change. Look at gasoline … if the price goes up, do you decide not to get gas? Of course not.”

Kimpson added that businesses already factor in the cost of doing business to the bottom line and his bill would scale the minimum wage increase from $7.25 per hour to $8.75 in 2017, $10.50 in 2018 and $13.25 in 2019, before lifting it to $15 per hour in 2020. He said a reason for his legislation was so that cities wouldn’t take the matter into their own hands to negotiate wages with businesses.

“When a state has not acted, cities will act,” Kimpson said. “There has been legislation filed, and I have blocked, that would not allow a city like Charleston or Columbia to negotiate with a business the rate of pay those workers would make.”

Scott Baier, professor of economics and the director of the BB&T Center for Public Policy and Economic Education at Clemson University, said there can be some negative side effects for businesses, if the state increased the minimum wage.

“At a wage of $15 an hour, it might be the case that many fast food restaurants use computers or kiosks instead of minimum wage workers, reducing the amount of minimum wage workers,” Baier said. “Even if firms decide not to reduce employment in the short run, the long-run impact would likely be fewer minimum wage jobs.”

He added that if those establishments choose not to change their prices and have to hire workers at a higher wage, profit margins will decrease and those industries would look less attractive to entrepreneurs.

“If firms should decide to raise their prices and employ the same number of workers, the higher prices would reduce the amount consumer would want to buy and this would also have the effect of reducing the number of minimum wage jobs in the long run,” Baier said.

But, Knapp contends a higher minimum wage translates to a better economy overall and what he called “a level playing field” where every business, in the service industry specifically, plays by the same set of rules.

“Competition will still exist,” “There will be nobody not going out to eat and nobody not staying in hotels. Increasing the minimum wage will increase the consumer demand, and consumer demand is the one thing that small businesses care about the most.”

And, although Kimpson’s bill is dead for this year, he said he will keep bringing up the issue. He said the state only benefits from “a healthy workforce that can earn a livable wage” and that the federal minimum wage “is just not enough to live on without government subsidies.

“At the end of the day, the state will bear the brunt of those costs, and if we can give Volvo millions of dollars to build a road, which I do support, we need to be fair,” Kimpson said. “We will go back next year. I am not the least bit deterred because I was sent to the Senate by working class people in Charleston, where insurance and earning a higher wage is a priority.”

Alexander said he has no issue with giving any such legislation a hearing.

“I am a firm believer in the committee process, and he has every right to reintroduce the bill,” Alexander said. “Going through the subcommittee and not having the support demonstrates the feelings that are there. I think that speaks to the uphill battle that legislation like this will have.”