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Editorial: H.552 — House plan unravels state's pro-business efforts

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Posted on April 10, 2014 |
By Angelo S. Lynn



The primary reason to phase in the minimum wage hike in Vermont from $8.73 per hour to $10.10 per hour over three years—instead of rushing to that level by Jan. 1, 2015 as House bill H-552 mandates—is so Vermont businesses can gradually adjust to the 15 percent hike in labor expenses and are not put at a disadvantage with neighboring states.

That argument, and the big-picture narrative that goes along with it, seems lost on many members of the House.

In the rush to pass this legislation, a majority (88-57) in the House fell under the spell of an emotional narrative that portrays low-wage earners struggling to heat their homes, putting food on the table and raising a child or two—all on $8.73 an hour. It is, as most know, an incomplete narrative.

Of the 20,000 workers whose wages are under $10.10 an hour, very few live in housing as single wage earners. Rather, the housing is shared with roommates, if not a spousal partner, who split the rent. Similarly, rental assistance, heating assistance, childcare assistance and food assistance programs are generous in Vermont to avoid the very circumstances supporters of the bill project. Vermont, far more than other states, strives to take care of those in need. And, ironically, of those 20,000 affected, about a quarter would lose state benefits if their wages shot up to $10.10 in a single year, being worse off than with lower wages.

But put aside this emotionally charged narrative and answer a hard-nosed question from this liberal editor: Does Vermont’s future lay in job growth or giving more assistance to low-wage earners?

Politically, it must be both, but how the answer is weighed will determine the approach the legislature takes when confronted with these issues.

The argument with H.552 is not whether low-income workers deserve a raise, but how much pressure businesses can stand before they opt to move elsewhere or simply decide it’s not worth it and close their doors, or lay off workers. That’s not to mention the businesses that may have considered locating here, but might now opt to locate in another state because this bill reinforces the larger narrative of Vermont being anti-business.

Is that the image House representatives want to project?

If not, proponents of the bill might consider what the business world likely sees through the lens of this debate. It’s a clear portrait: The House not only wants to exceed the federal wage standards and best its regional neighbors, but also wants to do it in eight months — without regard to the business community. Such disregard was seen in the dismissive responses of those rejecting the governor’s three-year phase in.

“I do not support slowing down,” said Rep. Chris Pearson, P-Burlington. “Why should taxpayers continue to subsidize low-wage employers?”

If you’re a small business owner trying to make ends meet, how’s that for a stick in the eye?

And if you’re a business leader from Texas, Michigan, Florida, New Jersey or almost anywhere in the country, you’re seeing the House slap down the most liberal governor in the nation for not being progressive enough and for not being tougher on businesses. Without a doubt, if H.552 is passed without changes to the timeline, many business leaders across the nation will think we’ve lost all balance.

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The governor’s suggestion to phase in the rate hike over three years is a superior plan. He notes that neighboring states also would be advancing their minimum wages as part of a regional effort that allows Vermont to buffer its business community, achieve higher wages and do it without singling itself out as a state hostile to business. It is a critical difference if the state wants to attract new business and grow jobs.

Take that premise a step further.

If the Legislature wants to project a business-friendly image, then it needs to seek solutions to a basic question each time it considers legislation affecting business: How will this proposal affect the business community and, if possible, how can we make it benefit them too? (Note: Many state programs help businesses grow and thrive, but it doesn’t help when one negative message taints all others.)

In this instance, supporters suggested the increase in the minimum wage would pump $30 million into the economy, but Rep. Paul Ralston, D-Middlebury, rightfully countered that it is not new money. The $30 million pumped into those wages are taken out of the pockets of small, local businesses. It’s robbing Peter to pay Paul. The net affect is next to nil.

It’s worth noting that legislative economists Tom Kavet and Deb Brighton wrote a quick report for the legislature on the matter, suggesting that rushing the pay hike to $10.10 this year would likely cost 250 jobs. Not enough to worry about, said supporters, the benefits outweigh the losses. But that’s a study based on a single factor. Add legislation proposed earlier this session that would increase sick pay for part- and full-time employees (postponed, but which is sure to come up again next year); add taxes for the governor’s health care plan; add a high income and property tax rate; add the costs of Act 250 when expanding, the sales tax, and on and on.

It’s not that raising the minimum wage to $10.10—or any other regulations or laws that increase the costs of doing business in Vermont—are bad on their own, but the cumulative affect may create a greater burden than House members concede. Because small businesses make up 95 percent of the state’s employers, it makes sense to tread with care.

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As the bill now goes to the Senate, whose leaders have said they favor the governor’s approach, that legislative body has the opportunity to restate and emphasize an important message: While Vermont agrees with a higher minimum wage and values all workers, it also values its business community and wants to ensure that Vermont is a good place to have a business, to grow it and to prosper.

That’s also a strategy that will provide more good paying jobs for more Vermonters in the long run.

Angelo S. Lynn

 

 

 

 

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