Minimum Wage/UI Compromise

Last night, the Senate approved a compromise bill raising the minimum wage and stabilizing unemployment insurance rates in Massachusetts. The bill was the product of lengthy negotiations between House and Senate conferees.

Here are the minimum wage highlights:

  • The minimum wage rises in stages from its current level of $8 to $11.00 in 2017.
  • In 2017, it is expected that the minimum wage will sit just below the 1968 minimum wage in inflation-adjusted dollars and at roughly the poverty line for a family of 3.
  • The package does not index the minimum wage to inflation.
  • The tipped minimum wage will increase proportionately a little more than the general minimum wage, but remains substantially lower, rising to $3.75 in 2017. (See this thread for discussion on the tipped minimum.

For employers, the minimum wage is a cost increase and the basic trade is that they get lower and more stable unemployment rates.

  • The package does not reduce benefits.
  • The package effectively reduces and freezes employer contributions to the unemployment insurance fund — money in the fund just sits in Washington and does not circulate in our local economy.
  • The package alters the computation of contribution rates to raise rates modestly for employers who tend to put a lot of people on the UI rolls.

Most of us feel it to be a very solid compromise. Many of us had favored a package including indexing of the minimum wage, and we didn’t get that, but the increase is substantial and should help a lot. We can seek a further adjustment in a few years, depending on how the economy goes.

The elephant in the room is non-compliance on both minimum wage and UI. There is a lot of under-the-table compensation in our economy. The legislation creates a council on the underground economy.

Senator Dan Wolf led the conference process on behalf of the Senate. Please click here to view the more detailed explanation and analysis which Dan prepared for his colleagues..

Published by Will Brownsberger

Will Brownsberger is State Senator from the Second Suffolk and Middlesex District.

6 replies on “Minimum Wage/UI Compromise”

  1. Overall, it’s a big step in the right direction. I think the changes to UI make sense.

    The tipped minimum really should be no less than 50% of the standard minimum. That’s where it stood until 1996, when the two were unhitched. The Massachusetts rate of $2.63 does not even cover taxes. $3.75 will not address this problem. Nor will it remedy other problems: the use of tipped staff to do unrelated work, such as cleaning windows, rather than pay other, higher paid staff to do it. Another is overstaffing: put lots of people on, owners have no reason not to when they pay so little.

    Talk to anyone in these jobs, and they will tell you that laws requiring four hour shift minimums are ignored and the difference between the tipped and standard wage are often not covered. Another issue is wage theft, where all or part of tips disappear into some else’s pocket.

    I can assure you that these issues are not the exclusive province of small businesses, plenty of big ones exploit their staff as well.

    I really do not see why it would be a bad thing if tipped staff were suddenly making more than non-tipped people. We don’t need to use the lowest common denominator as a standard.

  2. It is going to make employing illegal immigrants (who don’t pay taxes) more attractive. That what you want?

    And since when should a minimum wage earner support a family of 3? He should be single and working his way up. Of course, 2 or 3 people is more votes is it not?

    If $11 is good, why not $15? How about $25? It’s all to gain Democrats more votes.

  3. So even $11 an hour is a $22,000 annual wage before taxes. That may be enough for students and guys living in their parent’s basement, but minimum wage jobs are not “intended” for single or “retired” people. It is often the only kind of work a head of household can get. So sure, why not $15, unless you are pleased to pay low prices that are subsidized by poor people? I don’t think fast-food and Walmart workers are striking and organizing because they feel entitled. They are sick of being exploited and having to depend on government assistance to make ends meet. We all pay more taxes to support them, money that corporations don’t have to pay that goes into the pockets of investors. Does what’s good for business have to be bad for workers?

  4. Thanks, all, for weighing in. This particular issue is set for this year and perhaps for a couple of years, but it is right at the center of the conversation about high inequality and our economic future. The arguments made on this thread and the previous thread on this issue — pro, con, up and down — speak to the difficult choices that we face. This conversation will remain of central concern to me.

  5. According to a very recent editorial MA lawmakers failed to look at the devastating effect this plan will have on small business. The studies cited also suggested that other concomitant measures were not considered…including reducing very generous benefits. And tying the increase to the CPI insures that our elected officials have less to think about and evaluate…which is supposedly why we elected them.

  6. Didn’t see the editorial, but if it says we didn’t look at the effect on small business, that is false — there absolutely was a lot of discussion about the impact on small business. As a result, we ended up with a moderate increase — many advocated for a higher increase and there was a full discussion. The increase brings the minimum wage to a point below where it was 40 years ago in inflation-adjusted terms.

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