Business Leaders Sound Off On Minimum Wage

May 4, 2019 GMT

WILKES-BARRE — Hotel owner Gus Genetti called Gov. Tom Wolf’s proposal to raise the minimum wage for all tipped and non-tipped workers in Pennsylvania to $12 an hour this summer “nuts.”

Genetti, who owns hotels in Wilkes-Barre and Williamsport and employs about 200 people, said if he hires an employee who is just graduating or not graduating from high school at $7.25 an hour, he would be paid about $15,000 a year. If the governor’s approval is approved, the employee’s salary would immediately jump to $25,000 for a full-time job in July, he said.

“Are you kidding me?” Genetti asked. “Who came up with these numbers: $25,000 for a kid who never had a job?”

Genetti was about two dozen business leaders who attended a presentation by Brenda Warburton, deputy director of the state Independent Fiscal Office, Friday at the Westmoreland Club about the pros and cons of raising the minimum wage. The Pennsylvania Economy League hosted the event.

According to the data Warburton presented, raising the minimum wage to $12 an hour would put Pennsylvania at the same starting rate as California as well as Washington and Massachusetts.

“It doesn’t make sense to me to compare us to California,” Genetti said. “Last I checked, California ain’t doing so good.”

Genetti estimated the proposal would cost him about $500,000. He said it might be fine for businesses making huge profit margins to give up about 20%, but it’s more difficult “if you’re marginal to start with.”

“Restaurants are the most precarious businesses. If you’re a restaurant owner, you know what I’m talking about,” he said. “You’re telling them they have to pay tipped employees, who are going to be taking home cash, $25,000 a year?”

Wolf has proposed that after initially raising the hourly minimum wage in Pennsylvania to $12 an hour in July, he would continue to raise it by 50 cents an hour every year through 2025 when it would reach $15. His proposal also would increase the minimum wage for tipped workers from $2.83 an hour to $12 an hour.

Genetti said paying tipped employees $12 an hour would have a “tremendous impact on the industry.”

“It would probably put them above a professional engineer who’s building bridges,” he said. “You could make a lot of money being a waiter or a waitress and now they would get $12 an hour plus?”

Genetti said he believes the minimum wage should go up, but he doesn’t believe it’s realistic to immediately increase it to $12 an hour. If he raises wages for some workers, he said he would also have to increase them for other employees.

Warburton said the benefits of raising the minimum wage would be higher incomes for low wage earners, higher tax revenues and a reduction in state spending on social programs because more people would get jobs that pay higher wages. Some businesses will benefit from reduced employee turnover and higher productivity, she said.

Drawbacks would be fewer job opportunities, especially for young and inexperienced employees, and it would be more difficult for them to enter the labor market, Warburton said. Employers might not immediately lay off employees but she said they might not fill vacancies. Smaller, rural firms would be impacted more by the proposal, she said.

Additionally, she said raising the minimum wage would lead to higher prices for all consumers, less spending in other sectors of the economy and reduced business profits.

“Nearly all policy decisions have trade-offs,” she said. “There are people who are going to benefit and there are people who are not going to benefit.”

Nearby states New York, Maryland, New Jersey, Delaware, West Virginia and Ohio all pay a higher minimum wage than Pennsylvania, which is one of 21 states where the rate is the federal minimum of $7.25 an hour, according to data Warburton presented.

She said the data shows that very few people in Pennsylvania are actually paid $7.25 an hour, but the average worker is earning $9.73 an hour and raising the minimum wage from that amount would mark a 23.3% increase.

Bernie Banks, president of American Asphalt Paving Co. in Shavertown and chairman of the Northeast Pennsylvania Committee for the Pennsylvania Economy League, told Warburton and attendees that he encounters difficulties hiring workers because they can make more than $12 an hour collecting unemployment benefits.

A rule to continue to collect unemployment benefits is to show the government that you’re trying to get a job, Banks said.

“We’ll get dozens of people applying. We go over their resumes and spend money doing all this,” he said. “Then we call them and about 20 percent of them will pick up the phone because they met their qualification trying but they really don’t want a job.”

While more than 6 million people are working in Pennsylvania, Banks said, “Look at how many are able to work but are not working.”

“That’s a very vital part of the problem we have,” he said. “I think the study has to include how do we manage that problem and what is the cost of that problem.”

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