Rep. Dean Phillips' subcommittee debates minimum-wage hike

WASHINGTON – With Minnesotans taking the lead, a House Small Business subcommittee chaired by Rep. Dean Phillips on Wednesday waded into the debate over a federally mandated $15-an-hour minimum wage.

The Democrat led the two-hour hearing that featured John Puckett, the owner of St. Paul-based Punch Pizza and a founder of Caribou Coffee, who said the average pay at Punch already is $15, and stories about other Minnesota businesses.

Also serving on the panel, Democratic Rep. Angie Craig and Republican Rep. Jim Hagedorn discussed one of the most controversial pieces of the $1.9 trillion COVID-19 relief bill supported by President Joe Biden and making its way through Congress. They heard similar arguments to the ones heard in Minneapolis and St. Paul over the past few years.

Phillips summed up the dilemma facing federal lawmakers by citing a study by the nonpartisan Congressional Budget Office (CBO). It showed that a $15-an-hour minimum wage would raise pay for 27 million Americans and lift 1 million of them out of poverty.

But the study also showed that the wage increase could cost 1.4 million jobs and the loss of some small businesses.

Minneapolis and St. Paul eventually voted in favor of the $15 minimum wage, which will be fully phased in by July 2024 in Minneapolis and by 2027 in St. Paul.

The current federal minimum wage is $7.25 an hour. It has not changed since 2007.

Supporters of the relief bill's phased-in minimum wage increase to $15 per hour by 2025, including Craig, said the raise would lift people out of poverty as an economic stimulus should.

Opponents, including Hagedorn and many small-business owners, argue that forcing the hike on businesses recovering from the pandemic-driven economic downturn will lead to layoffs, price increases and possible closures.

Phillips said he believed in "a standard of living under which no American should fall." He said a person making $15,080 a year under the current federal minimum wage "cannot make the rent or pay for food."

"We need to use our time to mitigate the negative policy effects," Phillips told the Oversight, Investigations and Regulations Subcommittee he now chairs.

Puckett, of Punch Pizza, said that while the restaurant's average wage is $15 an hour, its starting wage is $13 an hour. He said he tries to build careers by promoting proven workers within the ranks. It's possible, he said, for a talented employee to rise to management without graduating from high school.

At the same time, Phillips noted that one of his constituents, Ken Savik, owner of the Original Pancake House in Wayzata, told him that paying $15 an hour would force him to cut jobs in order to stay open.

Hagedorn called the minimum-wage increase a one-size-fits-all solution. If it were applied to his rural congressional district in southern Minnesota, he predicted that businesses would close as they absorbed not only increased payroll but added expenses for support services whose personnel would also have to make $15 an hour. The congressman urged that the new administration continue with pro-growth economic policies promoted by former President Donald Trump.

Craig said that while the data clearly support a minimum-wage increase, the raise must be gradual to be sustainable. She touted a $25 billion restaurant support bill that would specifically help eateries that have lost sales due to COVID-19 shutdowns.

The committee heard from dueling experts who often offered different takes on the same research.

Rachel Greszler, an economic research fellow at the conservative Heritage Foundation, predicted increases in the cost of child care for low-income workers whose child-care providers would also receive pay raises. Greszler also predicted a 38% increase in the cost of fast food as burger joints had to up pay.

Mandating pay raises on pandemic-battered businesses "is not throwing them a lifeline," she said. "It is throwing them a load of bricks."

Heidi Shierholz, a senior economist at the Economic Policy Institute, countered that multiple academic studies of state and local minimum wage mandates show few job losses. Without pay raises, Shierholz added, low-income Americans continue to fall further and further behind as income inequality grows.

Federal minimum-wage workers now make 30% less in inflation-adjusted pay than federal minimum wage workers did 53 years ago, Shierholz said.

This represents the challenge of the economic stimulus package for those who must decide on it, said Phillips.

"I believe in higher wages, more jobs and more businesses," he said. "I don't believe they are mutually exclusive."

Jim Spencer • 202-662-7432