Minimum wage laws and the law of unintended consequences

Recently, I attended the candidate forum hosted by the League of Women Voters in Charles Town. Although in all likelihood there are few, if any, new votes to be had there by the candidates, the forum has value in that it provides a venue for citizens to learn about issues. On more than one occasion that evening a spokesperson for the League  mentioned that the organization is “non-partisan.” That means that it has at least one thing in common with the local Tea Party group.

Delegate Stephen Skinner, although running unopposed in the primary, was permitted to make a brief statement. This is a departure from past procedures on the part of the League, and in my humble opinion it is a welcome change for the better. The League expressed the opinion that if one candidate doesn’t bother to show up, it gives the opposing candidate that made the effort to show up an “unfair advantage.” I can’t figure out that line of reasoning; showing up gives one an unfair advantage. Go figure.

In his brief statement, Delegate Skinner, from the 67th District declared that the most important legislation that passed in the last session was HB 4283 — the so-called Fair Labor Standards Act. It is also known as the Minimum Wage bill because it raised the minimum wage in West Virginia to $10.10 per hour, a whopping 39 increase increase.  Said Skinner, the law could give more than 100,000 workers in West Virginia a raise. It must feel good to be so generous with other people’s money. To be fair, there were only 5 no votes in the Legislature; it enjoyed broad bipartisan support.

I’m completely and utterly convinced that the legislation is well intended. Who wouldn’t want to ensure that those on the low end of the pay scale be given a raise?  However, as with any legislation there are consequences, unintended and otherwise.  According to Delegate Tiffany Lawrence, as quoted by WV MetroNews, “Consensus tells us a raise in the minimum wage will provide an economic boom, let me say that again, an economic boom to this state.” If that were true, then perhaps we should raise the minimum wage to $25.00 per hour, or $100.00. We would all be rich.

However, according to a study conducted by the nation’s largest privately held staffing firm, Express Employment Professionals, if Congress were to raise the national minimum wage to $10.10, 38 percent of those surveyed would lay off workers, 54 percent would reduce hiring and 65 percent would raise prices. Those don’t sound like good things.  According to the firm’s CEO Bob Funk, “As with any such policy change, there are upsides and downsides. But based on this survey, there’s no denying that raising the minimum wage will result in layoffs, reduced hiring, and higher prices at a large chunk of American companies.”

In February, the Congressional Budget Office published a report that revealed that raising the minimum wage would result in a reduction in the number of workers by 500,000 by the second half of 2016. And those are the working poor. By forcing the working poor to charge a minimum for their labor you are putting them at a disadvantage in the marketplace. For many, price is the only bargaining chip they have. Bear in mind that West Virginia already has the lowest work force participation rate in the nation.

Regarding the bad news on HB 4283, we’ve only just scratched the surface. After attending the League of Women Voters’ forum, the following day I attended the monthly meeting of the Eastern Panhandle Business Association. Guest speaker Brian Peterson, an attorney and partner in the Martinsburg office of law firm Bowles Rice, expressed his concerns regarding the bill.

According to Peterson, almost no one in the Legislature was aware of the consequences of an amendment to it that cancels most of the exemptions that many local governments depend upon. Additionally, Peterson is concerned about the ramifications of the new overtime pay provisions.

According to Peterson, the law “inadvertently strips away numerous federal overtime exemptions currently available to West Virginia employers.”

The new law changes the definition of the term “employer” and will now affect all employers with 6 or more employees. It cancels the so called “80 percent” rule and cancels the vast majority of federal exemptions. It affects many aspects of employment such as tip pooling but also will affect fluctuating workweek schedules and flex time.  For example, as is commonplace in hospitals and in law enforcement, if you currently work a 30-hour week and then a 50-hour week, you aren’t paid overtime, since you averaged a 40-hour week. Under the new law, there would be no such flexibility. The ramifications for employers in West Virginia cannot be overstated.

According to Peterson, since the new law takes effect June 6, hospitals that employ thousands of affected workers don’t even have the time to comply even if they were able to. I doubt they will be able to, but Peterson believes that the Legislature acted inadvertently and that from a drafting standpoint, there is an “easy fix” for the legislation —  simply restore the “80 percent exemption.”

Gov. Earl Ray Tomblin was apparently made aware of the problems with the bill and yet still signed it into law. I’ve been told that there are quite a few red-faced legislators out there eager to change it. As for me, I chalk it up to the law of “unintended consequences” that result from so many “well intended” government actions. Perhaps there should be an economic impact study conducted before a bill becomes law.

As Will Rogers once observed, “there are men running governments that shouldn’t be allowed to play with matches.” Women too. I’ll be looking forward to that economic boom that the rise in the minimum wage is going usher in, but I won’t be holding my breath.

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One Response to Minimum wage laws and the law of unintended consequences

  1. Pingback: Minimum wage laws and the law of unintended consequences | League of Women Voters of Jefferson County WV

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