Pennsylvania’s small businesses employ over 2.5 million people throughout the Commonwealth. But if Governor Shapiro has his way, thousands of these jobs could soon be under threat.
Earlier this year, the state legislature attempted to raise the minimum wage to $15 per hour and the wage for tipped employees to $9 per hour. Now, Gov. Josh Shapiro and state legislators are reigniting the conversation, pushing for an unprecedented 107 percent minimum wage hike.
The vast majority of economic studies find that a higher minimum wage leads to job losses for the least-skilled workers. It’s not because employers are hard-hearted; rather, they’re forced to scale back when faced with higher labor costs that can’t be passed off on cost conscious customers.
Economists from Miami and Trinity Universities looked at the impact of the Governor’s proposal for Pennsylvania. The bill proposed earlier this year would put as many as 86,000 Pennsylvania jobs at risk. About 70 percent of these employees would be under the age of 25 – meaning young workers could have their careers cut short just as they’re getting started.
Since House Democrats’ proposal included a hike on the tipped minimum wage, more than a third of job losses would fall on tipped restaurant employees–eliminating valuable jobs that provide up to $60 per hour in take-home pay with tips.
Pennsylvania’s small businesses would be hit especially hard. Eighty-one percent of economists believe a $15 minimum wage is simply too high for these small employers to absorb. Now, consider that more than 99% of Pennsylvania’s economy is made up of small businesses. These mom-and-pop shops account for almost half of the state’s workforce. That translates into thousands of Pennsylvanians whose jobs would be at risk amid a rising minimum wage.
Even for those employees who avoid layoffs and business closures, their employers may be forced to reduce scheduled hours. A Harvard Business Review study found that for every $1 increase in the minimum wage, the average number of hours worked per week decreased by roughly 21 percent. This means fewer shift opportunities and more short-staffed work environments.
Fewer hours also means potentially reduced overall earnings, despite a higher hourly wage. An analysis by University of Washington researchers found a wave of minimum wage hikes up to $15 per hour in Seattle caused total employer payrolls to decrease due to reduced employee schedules.
These consequences will affect employees’ access to other benefits. The same Harvard study revealed steep minimum wage hikes decreased the number of employees working more than 30 hours per week, rendering them ineligible for healthcare benefits. Another University of Chicago study found that every $1 wage hike in California caused a one-percentage-point decrease in employer-sponsored health insurance for employees.
Businesses in nonurban areas will suffer more than their urban counterparts. A study by the Heritage Foundation found that instituting a $15 minimum wage in more rural parts of the country would be like enacting a $35.74 minimum wage in the nation’s capital. While businesses may be able to more-easily pass off the cost of a wage mandate in Pittsburgh or Philadelphia, businesses in small towns don’t have that same ability.
Previous attempts to raise the state minimum wage have stalled – and for good reason. At least some state lawmakers recognize a $15 minimum wage would spell disaster for the Pennsylvania economy. Apparently, Governor Shapiro hasn’t gotten the memo. Instead of pushing for harmful wage hikes, he should focus on policies that help the state’s small businesses – and their employees – thrive.
