Madison

NOTICE IS HEREBY FURTHER GIVEN that pursuant to the Americans with Disabilities Act, reasonable accommodations, including the provision of information material in an alternative format, will be provided for qualified individuals with disabilities upon request. Please call Robert Park at (608) 266-1054 with specific information on your request at least 10 days before the date of the scheduled hearing.

The proposed rule and fiscal estimate may be reviewed and comments electronically submitted at the following Internet site: adminrules.wisconsin.gov. Written comments on the proposed rule may be submitted via U.S. mail to Mr. Eric Mosher, Bureau of Air Management, P.O. Box 7921, Madison, WI 53707. Comments may be submitted until July 1, 2005. Written comments whether submitted electronically or by U.S. mail will have the same weight and effect as oral statements presented at the public hearings. A personal copy of the proposed rule and fiscal estimate may be obtained from Mr. Mosher.

NOTICE IS HEREBY GIVEN that pursuant to Sections 104.04 and 227.11, Stats., the Department of Workforce Development will hold a public hearing to consider emergency and proposed permanent rules relating to increasing Wisconsin's minimum wages.

Tuesday, June 14, 2005 @ 10:00 a.m.

Madison

G.E.F. 1 Building, Room H305

201 E. Washington Avenue

Interested persons are invited to appear at the hearings and will be afforded the opportunity to make an oral presentation of their positions. Persons making oral presentations are requested to submit their facts, views, and suggested rewording in writing.

Visitors to the GEF 1 building are requested to enter through the left East Washington Avenue door and register with the customer service desk. The entrance is wheelchair accessible via a ramp from the corner of Webster Street and East Washington Avenue. If you have special needs or circumstances regarding communication or accessibility at the hearing, please call (608) 267-9403 at least 10 days prior to the hearing date. Accommodations such as ASL interpreters, English translators, or materials in audiotape format will be made available on request to the fullest extent possible.

Statutory authority: Sections 104.04 and 227.11, Stats.

Statutes interpreted: Chapter 104, Stats.

Wisconsin needs a minimum wage increase

Creating good paying jobs and a “high end" economy is a top priority for Governor Jim Doyle's administration. A key focus of the Governor's Grow Wisconsin economic development plan is investing in people and helping families climb the economic ladder. One of the most important initiatives in the Governor's plan is raising the state minimum wage. Such an increase ensures that Wisconsin's lowest wage workers will share in the benefits of economic growth as Wisconsin's economy moves forward.

This is a critical time for Wisconsin to support low-wage workers by increasing the minimum wage. It has been nearly 8 years since the federal minimum wage has been increased, and in 2005 it will fall to its lowest inflation-adjusted value of all time. The buying power of the federal minimum wage in 1970 equaled about $8.00 in 2004 dollars. Given the declining value of the minimum wage and the lack of federal action to increase it, 16 other states have already enacted minimum wages above the federal level.

When wages are so low that workers and their families can't afford their most basic needs, the costs that society, particularly taxpayers, must bear related to poverty are so insidious that anything that helps divert those expenses back to the consumers of the services provided by those low-wage workers is worthwhile. Educational failure, workforce failure, citizenship failure can very often be traced back to families forced to live in poverty. An adequate minimum wage supports workers, helps strengthen families and communities, and promotes the state's overall economic and fiscal health. Family-supporting wages reduce dependence on the state and increase tax revenue from these families, decreasing the burden on Wisconsin's taxpayers.

It is estimated that 200,000 workers will be affected by Wisconsin's minimum wage increase. Many of these workers are adults and a larger than proportionate share are minorities. Putting more money in the hand of these low-wage workers will result in $175 million in consumer expenditures in Wisconsin's economy. Low-wage workers spend nearly their entire income in the local economy on basics. This spending stimulates the local economy and benefits local businesses because spending is concentrated locally on food, clothing, shelter, and transportation. Most studies considering a potential negative effect on employment opportunities available to low-wage workers as a result of a moderate minimum wage increase show little to no effect, although both advocates and opponents are able to produce studies supporting their side of the issue.

Minimum wage increases

Chapter 104, Stats., and Chapter DWD 272 provide that Wisconsin's minimum wage should be sufficient to enable the employee receiving it to maintain himself or herself under conditions consistent with his or her reasonable comfort, physical well-being, decency, and moral well-being. Section 104.04, Stats., directs the Department of Workforce Development to determine the state's minimum wage taking into consideration the effect of the wage on the economy of the state, including employment opportunities for low-wage workers and regional economic conditions within the state.

In January 2004, Governor Doyle and the Department of Workforce Development convened a Minimum Wage Advisory Council to assist with determining whether there should be an increase in Wisconsin's minimum wage. The Council included leaders from the business community, labor organizations, community organizations, and both houses of the legislature. The Department's Office of Economic Advisors provided the Advisory Council with data from the U.S. Census; Current Population Survey; and the U.S. Department of Labor, Bureau of Labor Statistics, Occupational Employment Statistics. The council issued its recommendations in March 2004.

Taking into consideration the Council's recommendations, the Department orders and proposes the following increases:

•$5.70/hour effective 6/1/05 (currently $5.15/hour)

•$6.50/hour effective 6/1/06

• $5.30/hour effective 6/1/05 (currently same as adult rate $5.15/hour)

• $5.90/hour effective 6/1/06

• $5.30/hour effective 6/1/05 (currently $4.25/hour)

• $5.90/hour effective 6/1/06

$5.15/hour effective 6/1/05 (currently $4.05/hour)

$4.25/hour effective 6/1/05 (currently $3.70/hour)

If no room or board provided (currently $140/week)

$215/week effective 6/1/05, $270/week effective 6/1/06, and $315/week effective 6/1/07

If board provided (currently $110/week)

$164/week effective 6/1/05, $217/week effective 6/1/06, and $240/week effective 6/1/07

If room and board provided (currently $91/week)

$129/week effective 6/1/05, $171/week effective 6/1/06, and $189/week effective 6/1/07

If no room or board provided (currently $123/week)

$175/week effective 6/1/05, $225/week effective 6/1/06, and $275 effective 6/1/07

If board provided (currently $92/week)

$133/week effective 6/1/05, $171/week effective 6/1/06, and $209 effective 6/1/07

If room and board provided (currently $74/week)

$105/week effective 6/1/05, $135/week effective 6/1/06, and $165 effective 6/1/07

$10.50 for 18 holes effective 6/1/05 (currently $5.95)

$5.90 for 9 holes effective 6/1/05 (currently $3.35)

Effect of minimum wage increases on Wisconsin's economy

The Department of Workforce Development estimates that 200,000 workers will be affected by the minimum wage increases.

First increase – June 1, 2005. The first increase in the minimum wage from $5.15 to $5.70 per hour is estimated to directly affect the wages of 50,000 hourly paid workers currently earning at or below $5.15 per hour, plus an additional 75,000 hourly paid workers currently earning between $5.16 and $5.69 per hour. Thus, the total number of workers directly affected by this first wage increase is estimated to be 125,000 hourly paid workers.

This first increase to $5.70 per hour will also result in wage compression among those who had previously earned slightly higher hourly wages than the new minimum wage. It is estimated that approximately 50,000 workers who earn between $5.70 and $6.50 per hour could be indirectly affected and receive wage increases as a result of this first minimum wage increase.

Second increase – June 1, 2006. The second increase in the minimum wage from $5.70 to $6.50 will directly affect the hourly wages of an estimated 150,000 workers who would at that time be earning at or below $6.50 per hour. The Department estimates that another 50,000 workers earning at or higher than $6.50 to a cap of about $7.00 per hour will also see their hourly wages indirectly rise due to resultant wage compression.

Industries and occupations. The majority of workers affected by the wage increase are in food preparation and serving related occupations and in personal care and services occupations. The vast majority of these workers are employed in the broad leisure and hospitality sector, which includes the food and accommodation industry. Retail trade employment also shows moderately higher than average number of minimum wage workers.

Workers affected by the wage increases include food service workers, retail clerks, cleaning and housekeeping laborers, personal care attendants, child care workers, telemarketers, laundry and dry cleaning workers, veterinary assistants, home health care aides, office workers, gaming change and booth cashiers, building and grounds maintenance laborers, and many other occupations in virtually all industries in the state.

Demographics of affected workers. It is estimated that nearly 80% of these low-wage workers are over 18 years of age, 65% are female, and over one-third are heads of their household. These workers are African-American, Hispanic, and Asian in numbers larger than their proportion in the population. Over two-thirds of these low-wage workers work more than half-time:

30% work 1-19 hours per week

35% work 20-34 hours per week

35% work 35+ hours per week

Effect on business. The effect of the wage increase on business will be $175 million in increased payroll costs. Low-wage workers will circulate this money back into the economy immediately, representing a 0.1 percent increase in the gross state product. The increased spending by affected workers may be a revenue growth for some businesses. The effects may be slightly greater in northern, rural regions of the state where minimum wage jobs make up a greater percentage of the workforce. Higher wages also have a positive impact on both workers and their employers by reducing turnover, increasing work experience, and saving on training and recruitment costs for both workers and employers. Any increase in the cost of doing business will likely be passed on to consumers as part of the price of the product or service being purchased.

Effect on small businesses. The proposed rule will have an effect on small businesses, which s. 227.114 (1), Stats., defines as 25 or fewer employees or less than $5 million in gross annual sales. The primary businesses affected by the proposed rule will be those related to food preparation and serving, personal care and services, and retail trade. The Department has considered the methods listed in s. 227.114 (2), Stats., for reducing the impact of the rule on small businesses. There are no reporting, bookkeeping, or professional skills required for compliance with the proposed rule. The rule requires businesses to pay affected employees at least the specified minimum wage.

The exemption of small businesses from the requirements of the rule would be contrary to the statutory objectives which are the basis for the proposed rule. Pursuant to Chapter 104, Stats., the primary purpose of the minimum wage is to require that every wage paid by any employer to any employee is sufficient to enable the employee receiving it to maintain himself or herself under conditions of reasonable comfort, reasonable physical well-being, decency, and moral well-being. The Department estimates that a very high percentage of workers affected by this minimum wage increase work for employers with 25 or fewer employees or less than $5 million in gross annual sales. If the rule exempted these employers from minimum wage coverage, it would render the minimum wage nearly meaningless.

Fiscal effect on state and local government

It is estimated that 35% of the additional $175 million in consumer expenditures will be on items subject to the sales tax. This translates to increased revenue of approximately $3 million for the state and some increased revenue for counties with a local sales tax.

There may be increased state revenue from the income tax on higher incomes for workers. The Department of Revenue estimates that the additional individual income tax revenue on the additional wages paid due to the minimum wage increase will be $4.725 million. This amount will be offset by the decline of business tax revenue estimated at $5.495 million. The net effect on income tax revenue is estimated to be a decline of $770,000.

It is estimated that 100-200 local governmental employees across the state who work as seasonal summer helpers may be affected by the increase. The increased cost is estimated at approximately $20,000 across all local governments in the state. The minimum wage increase is not expected to affect state employees.

Federal law and adjacent states

Section 227.14 (2)3. and 4., Stats., requires the Department to compare the proposed rule to any existing or proposed federal regulation and rules in adjacent states.

General rate:

Federal     $5.15

Iowa     $5.15

Michigan     $5.15

Minnesota     $5.15 for employers with annual gross sales of at least $500,000; effective 8/1/05, increasing to $6.15 for employers with annual gross sales of at least $625,000

$4.90 for employers with annual gross sales of less than $500,000; effective 8/1/05, increasing to $5.25 for employers with annual gross sales of less than $625,000

Illinois   $6.50

Minor rate:

Federal   None

Iowa   None

Michigan   None

Minnesota   None

Illinois   $6.00