On June 26, Governor Deval Patrick signed into law a measure that increases the minimum wage to $11 an hour over the next three years. Massachusetts, which enacted the first minimum wage law in 1912, will now have the highest minimum wage in the nation. At the current minimum wage of $8 an hour, Massachusetts is one of 11 states that already exceed the federal minimum wage of $7.25 an hour.
The bill also includes a hike for workers who rely on tips, from the current $2.63 to $3.75 an hour.
“This is a step in the right direction,” Cape and islands state Senator Dan Wolf told The Times in a telephone conversation. “It’s important to all of us when the economy has gotten as out of balance as it has.”
The hike in the hourly wage will have less of an impact on the Cape and Islands than in other regions of the state, according to the Massachusetts Budget and Policy Center, which describes itself as a non-partisan research organization which analyzes budget issues that affect low and moderate income families. Because of a shortage of workers and other factors, many hourly workers in the region already earn more than the new minimum wage standard.
“We didn’t get that much push back on the full minimum wage,” said Sen. Wolf. “Fast food workers, big box stores, there are some people making $8 an hour. In this region, there are very few people who are making minimum wage.”
Island business people contacted by The Times said they did not expect the change to have much of an effect on the Vineyard.
Uta Kirchlechner, owner of the Island Art Gallery on Main Street in Tisbury, said the new minimum wage is a moot point. She once employed three people at $10 an hour, but since the downturn in the economy four years ago, she has not hired any employees, and covers all the store hours herself.
“If you get $9, you can’t live on that,” Ms. Kirchlechner said. “They need $12, but I can’t pay that because the economy is not good enough. I’m looking at it from both sides. I believe they should raise the minimum wage, it ought to be even higher.”
Petey Berndt, owner of the popular Coop de Ville restaurant on Oak Bluffs Harbor, said the increase in wages for tipped workers will not have a large impact on his business. “That shouldn’t be too big a problem,” he said. “The cost of living is so expensive, with housing, they should get a raise. It’s tough for the seasonal worker.”
At $3.75 an hour, a minimum wage tipped worker would earn $30 for an 8-hour day, but could earn 10 times that amount or more in tips in busy establishments, several people connected to the hospitality industry said.
Paychecks will increase
According to the MassBudget, about 605,000 workers in the Bay State will see an increase in their paychecks beginning January 1, 2015.
The law will increase the current minimum wage of $8 an hour to $9 in 2015, $10 in 2016, and $11 in 2017. The increase for tipped workers will also be implemented over three years.
The developments on Beacon Hill prompted a group that has already collected 80,000 signatures to get a minimum wage hike on the November ballot, to cancel its initiative.
“That’s a pretty good bill and a pretty good compromise,” Governor Patrick told the Statehouse News Service. “In fact, it gets to $11 faster than under the proposal that some of the ballot initiative activists have pressed, and I think it’s a good solution.”
According to MassBudget, which issued regional data on the effect of a minimum wage hike, about 7,000 workers will be directly or indirectly affected in a region that includes the western and eastern parts of Cape Cod, Martha’s Vineyard, and Nantucket. That represents 16 percent of wage earners in that region, among the lowest of the regions studied.
Opponents of the measure said a minimum wage hike will kill jobs.
“This is a one-sided piece of legislation that largely ignores the pleas of the small businesses for balance, and instead ensures that Massachusetts will continue be one of the most expensive and difficult places to operate a retail business in the nation,” wrote Jon Hurst, president of Retailers Association of Massachusetts, in a statement.
Sen. Wolf, owner of Cape Air, rejected that argument.
“Even if there were a very small impact on jobs, it will be way, way, way overbalanced by the positive stimulation of the economy on the low end, which we know is going to be spent immediately,” he said. “Many of the workers getting minimum wage are living paycheck to paycheck, and spending everything they have every week.”
The new minimum wage for tipped workers may have a significant impact in this region, because of the many tourism-related businesses, including restaurants, bars, and hotels.
The Senate version of the bill would have increased the minimum wage for tipped workers to $5.50 over three years, but the compromise that emerged from the House-Senate conference committee set the rate at $3.75. “We are a hospitality economy in a lot of ways,” Sen. Wolf said. “We heard from a lot of restaurant owners.”
The new law includes unemployment insurance reform, which may offset the wage hikes for many small businesses, according to the Greater Boston Chamber of Commerce.
“Under this bill, nearly all employers in the Commonwealth will see unemployment insurance cost savings in 2015, with the vast majority experiencing an average savings of more than 25 percent,” said Paul Guzzi, president and CEO of the chamber.
The new law will also establish a council to investigate labor and wage issues in the underground economy, including building trades, to make sure that businesses are complying with unemployment insurance, workers compensation, and tax laws. The council will have no enforcement authority, but can refer its investigation to the attorney general for prosecution.
“This is aimed at businesses that might be taking advantage of or exploiting employees, and employees who are not declaring what they are making,” Sen. Wolf said. “That not only has an impact on the Commonwealth on the revenue side, but it would also impact workers relative to workers compensation, social security, and other benefits.”