The Sioux Falls Area Chamber of Commerce does a fair job of summarizing the reasons for and against Referred Law 20, Senator David Novstrup’s youth sub-minimum wage. Let’s compare their efforts to divine what proponents and opponents think:
Proponents feel that failure to establish a youth minimum wage minimizes the number of entry-level jobs that employers can provide and when this occurs, it restricts the opportunities that could be provided for more young workers. They also believe that without a youth minimum wage fewer jobs would be available for workers who need them the most, due to the economic constraints that a universal minimum wage would impose upon businesses, leading to a constriction of the job supply in South Dakota [Sioux Falls Area Chamber of Commerce, issue brief, approved 2016.07.27].
Now for the words the Chamber puts in opponents’ mouths:
Opponents believe a youth minimum wage takes advantage of a minor by paying them less for doing equivalent work as an adult—that people should be paid on merit, not on arbitrary distinctions based on age. In addition, they believe legislators have ignored the will of the people when IM 18 was passed by a 55 percent to 45 percent margin, and where the legislature abdicated the legal effect of IM 18 through the passage of SB 177 just a few months later in March 2015 [SF Chamber, 2016.07.27].
Note that these arguments require far less evidence and are far harder to refute than the proponent arguments. The youth minimum wage makes it possible to pay a seventeen-year-old less for the same work as the nineteen-year-old next to her is performing. The age distinction is arbitrary: we can find able, diligent sixteen-year-olds and bumbling, laggardly twenty-year-olds and fifty-year-olds. The voters did pass Initiated Measure 18, the minimum wage increase, by a 55–45 vote, and the votes of the Novstrups and other Republicans did abrogate (I think that’s the word the Chamber wanted) the legal effect of IM 18. Each one of those statements is plainly true, requiring only reference to the 2014 election results, the text of each law, and our own experiences with workers of different ages.
The Chamber emphasizes in its own words, not just the words it ascribes to opponents, that Referred Law 20 “was passed into law in an attempt by the legislature to override the legal effect of IM 18.” The legal effect of IM 18 was the will of the voters. The Legislature passed Referred Law 20 to override the will of the voters. Even the Sioux Falls Chamber gets that fact.
This is no lie—Senator David Novstrup has helped me recruit good campaign help and turn at least one Republican into a Democrat. Writing up Referred Law 20, Novstrup’s plan to cut the minimum wage for workers under 18, AP’s James Nord speaks with young former Republican activist Briggs Tople from Aberdeen. Former:
Tople worked at a children’s theater program over the summer for minimum wage and said he wants to do the same next year.
“I go out of my way to volunteer, so when I actually have the chance to get paid, it’s very nice for me,” Tople said. “We just work our butts off to be in the positions we are, and when we get a job, we take that job seriously.”
Tople contacted lawmakers and spoke against the bill without luck. Now, he’s campaigning for Democratic state Senate candidate Cory Heidelberger, who helped lead the push to send the youth minimum wage to the ballot [James Nord, “Youth Wages Law up to Voters; OK’d Minimum-Wage Hike in ’14,” AP via Washington Times, 2016.09.05].
Tople isn’t speaking up against Novstrup’s youth minimum wage because he’s working for my District 3 Senate campaign. He’s working for my Senate campaign because he believes Novstrup’s youth minimum wage is wrong. Thanks, David!
Nord heads up Highway 81 to get Jason Parker, owner of Arlington’s 1481 Grille, to say he’ll chisel the kids working for him if voters give him the chance:
Parker plans to vote for the youth minimum wage and take advantage of the option if it becomes available, because it means he could hire more high school students, who can be expensive and time-consuming to train and who may not last long.
“That dollar does mean a lot because then it would allow us to be able to hire more high school students so they get that opportunity to make money, to get an education, to gain experience in the workforce,” he said [Nord, 2016.09.05].
Dang—I do like 1481’s burgers. But I have to wonder: why doesn’t Parker just use the federal training wage?
Senator David Novstrup (R-3/Aberdeen) shared a pleasant lunch with 29 of our neighbors and Secretary of State Shantel Krebs, who came to town to Aberdeen this noon to speak to the Chamber of Commerce Governmental Affairs Committee about voter registration, ballot questions, and other electoral matters. After the show (a good, informative show—stay tuned for video and commentary), Senator Novstrup came up to me, the Democratic candidate running against his dad for his Senate seat, for our first face-to-face conversation. Funny how often that happens: I run into someone I’ve interacted with frequently on the blog, but we realize it’s the first time we’ve actually spoken in the flesh.
Senator Novstrup wanted to talk primarily about Referred Law 20, his youth sub-minimum wage. Senator Novstrup may not like my use of the personal pronoun his; he said he wishes I would spend less time making personal attacks and more time just talking about policy issues.
Senator Novstrup provided some useful exigesis of 2015 Senate Bill 177, the bill he sponsored to reduce the minimum wage for under-18 workers to $7.50 and repeal the annual cost-of-living adjustment to that youth sub-minimum wage. Senator Novstrup said the youth sub-minimum wage was one of three changes discussed at the beginning of the 2015 Session to change the minimum wage increase approved by voters in 2014.
Senator Novstrup said he heard some legislators and lobbyists talking about lowering the new minimum wage for tipped workers. Senator Novstrup said he’s not in the restaurant business (remember, he runs Thunder Road amusement park here in Aberdeen, with no tipped workers), so he didn’t want to bring a bill on that topic.
Senator Novstrup then turned to the youth sub-minimum wage. He found examples of lower minimum wages for young workers in Minnesota and in federal law (the 90-day training wage!). He floated the youth sub-minimum wage idea with Republican and Democratic legislators, and he says none of them initially responded by saying that cutting the minimum wage for young workers would constitute “an affront to voters.” When he turned the idea into SB 177 and moved it through the Legislature, he still didn’t hear legislators complaining that his proposal undermined the will of the voters expressed in Initiated Measure 16. Right up until their votes, Senator Novstrup said, other legislators, even Democrats, were saying they were still weighing the proposal. If SB 177 really were an affront to voters, wouldn’t legislators and others have reacted to it that way sooner? Senator Novstrup thus appears to conclude that his youth sub-minimum wage is not an affront to voters.
I noted that when I circulated petitions to refer SB 177 to a public vote, I met many people whose initial reaction was, “Well, I’ll sign the petition, but what good will it do? The Legislature will just change what we say anyway.” I thought that sounded like a pretty immediate recognition from voters that SB 177 had affronted their expressed will. Senator Novstrup said those reactions could also have been informed by a lot of the media spin.
Senator Novstrup did say that he’s not wedded to the $7.50 set by SB 177/now Referred Law 20. He said he had to have some number. He was pretty sure the training wage of $4.25 an hour was too low: in the current competitive job market, plenty of employers will offer more than that, and employers trying to pay $4.25 would lose staff fast. Senator Novstrup wanted to keep his youth sub-minimum wage above the federal minimum of $7.25. Alluding to the need to compose bills that can win enough votes to pass, Senator Novstrup said he thus settled on $7.50.
So there’s a little perspective on the legislative sausage-making that brought us the final form of the Republican Legislature’s affront to the voters’ will on the minimum wage.
As our conversation progressed, Senator Novstrup argued that I cannot truthfully say that Referred Law 20 is an affront to voters. People might vote Yes on Referred Law 20, to cut the minimum wage for young workers, for many reasons. Supporters of RL 20 might think $8.50 an hour is simply too much for kids. They might think the cost-of-living adjustment is inappropriate for young workers. They might have any number of reasons other than an evil desire to undermine the will of the voters.
I agree. When we take up Referred Law 20, Yes voters will not be committing an affront to voters. Voters cannot affront themselves. We cannot by the exercise of our will undermine our will.
I explained to Senator Novstrup that I do not view the votes we voters are about to cast on Referred Law 20 as affronts to voters. I explained that Senator Novstrup’s sponsorship of and vote for Senate Bill 177 in February 2015 were affronts to voters. In November 2014, voters said, all workers should get at least $8.50 an hour, plus an annual cost-of-living increase. In February 2015, Senator Novstrup said, Not all workers should get at least $8.50 an hour and a cost-of-living increase. Senator Novstrup’s vote and the passage of SB 177 negated a portion of the voter’s will. That negation is an affront, an action that causes outrage or offense, to voters.
Faced with that logic, Senator Novstrup said that’s just my opinion, said he doesn’t care what I think, and called me a “liar.”
Having reached the end of our constructive conversation, I responded that there is a difference between lying and being wrong. I said to Senator Novstrup that I will not call him a liar. I will say that he is very, very wrong about the words, intent, and impact of the law he passed… a law I hope to overturn to protect the ability of voters to express their will by initiative.
A Walmart executive told CNNMoney that customer service scores have improved since the raises went into effect. Workers are more enthusiastic — and the pool of applicants for new jobs is strong, in part because of the higher wages [Paul R. La Monica, “Americans Are Shopping… at Walmart,” CNNMoney, 2016.08.18].
Retail consultants told Time that Walmart likely has about 400,000 fewer workers in the U.S. today than a decade ago. In giant stores that can range up to five acres, that translates into one worker for every 524 square feet of retail space — a 19 percent decrease in workers per square foot from 10 years ago. The greeters at the entrances are gone, many cashiers have been replaced with automated checkout scanners, and there are simply fewer eyeballs monitoring everything than before.
That all proved beneficial for Walmart’s bottom line, as sales per employee grew 23 percent over that same time period. But just like some Walmart detractors accuse the company of relying on government aid programs to subsidize its workers, critics say Walmart is skimping on security and implicitly farming the cost out to publicly-financed police forces [Jeff Spross, “Why Criminals Flock to Walmart,” The Week, 2016.08.23].
Giant corporations like Walmart should hire enough people to tackle the problems they bring to their communities. But at least Walmart is recognizing that paying better wages results in better workers.
The South Dakota Democratic Party gave South Dakotans the opportunity to vote on raising South Dakota’s minimum wage in 2014. Voters responded by approving a 17% increase in that basic labor protection. Thanks to the yearly cost-of-living increase included in that 2014 initiative, South Dakota’s minimum wage is now $8.55 an hour.
Senator David Novstrup’s (R-3/Aberdeen) is pushing Referred Law 20 to cut the minimum wage for workers under 18 back to $7.50. Novstrup’s bill could take over $500 away from a teenager who works full-time through the summer. The South Dakota Democratic Party is countering Novstrup’s RL 20 as an attack on voters and on workers:
The Dems rightly identify the political motivations behind RL 20. Novstrup, who gets nervous when voters decide things, is pushing his youth sub-minimum wage to attack the 2014 initiative and discourage South Dakotans from using their initiative and referendum power.
Dems also rightly fly the other big d-word, discrimination. Labor protections like the minimum wage are for everyone in the workplace, regardless of age. If we can justify paying 16-year-olds sub-minimum due to perceptions that they aren’t as smart or ambitious as adult workers, we can justify paying 63-year-olds sub-minimum due to their declining physical stamina. We can justify paying pregnant moms less than minimum since they can’t walk as fast or lift as much.
Minnesota’s minimum wage rises to $9.50 an hour today, capping a three-phase increase from $6.15 an hour prior to 2014. Small employers—firms with annual revenues under $500K—get a break, paying $7.75 an hour.
Some question whether the recent minimum wage increases have hurt job growth in the state. Recent studies indicate the answer is no, according to Ann Markusen, who directs the Humphrey School of Public Policy’s Project on Regional and Industrial Economics. For starters, she said raising the pay of lower wage workers helps stimulate the local economy.
“Because you are putting more money into the lowest paid workers’ pockets, they are going to spend it and they are apt to spend it in their own communities,” Markusen said [Heather J. Carlson, “Minnesota’s Minimum Wage Jumps to $9.50,” Rochester Post-Bulletin, 2016.08.01].
But employers are going to lay people off, and there will be fewer job opportunities, right?
Again, research says no:
In addition, she said most of the jobs that pay minimum wage are in retail, personal services or the food industry and are selling to people locally. When the minimum wage goes up, all the competitors in the community are impacted so no business has a competitive advantage of over another. Markusen said research has shown that instead of laying off employees when the minimum wage goes up, employers are apt to boost training to try to increase the productivity of their workers. They will also absorb a loss in profits and sometimes will increase costs of products slightly [Carlson, 2016.08.01].
As in South Dakota, the economy in Minnesota will likely cruise along without any harm from the higher minimum wage. Remember that when you vote NO on Referred Law 20 this November and protect the minimum wage for South Dakota’s young workers.
SDPB broadcasts opposing views on Referred Law 20, the youth minimum wage cut we get to vote down in November. SDPB’s new Rapid City correspondent Lee Strubinger gives wage-cut sponsor Senator David Novstrup a chance to repeat his paradoxical insistence that we give kids more opportunity by paying them less money:
“Some people will say that this is about businesses,” Novstrup says. “I would argue that it’s more for the young person getting that job or for the business—it’s not about the business saving money. It’s about giving that young person that first job and getting that opportunity” [Lee Strubinger, “RL20 Puts Youth Minimum Wage to a Vote,” SDPB Radio, 2016.07.26].
Strubinger doesn’t use my great quotes on the economic, political, and moral ills of Senator Novstrup’s effort to take money away from young workers. Instead, Strubinger segues to my summary of the impact of our successful referral of the youth minimum wage cut and my hopes for November:
“That’s why kids all over the state, who are working hard right now, last summer and this summer, they’re minimum wage is $8.50 an hour right now,” Heidelberger says. “They kept $8.50 last year. They got the nickel increase just like every other worker, and they’re getting that thanks to our petition effort. Now we just have to power through to November and get the people of South Dakota to say ‘That’s what we really meant, let’s set that minimum wage for everybody. Let’s not cut it for the kids’” [Strubinger, 2016.07.26].
Novstrup and I maintain the same positions we expressed last year when my friends and I stopped his youth minimum wage cut and put Referred Law 20 on the 2016 ballot. Novstrup thinks we do kids a favor by paying them less and voters a favor by undoing their will. I think we do kids a clearer favor by giving them equal treatment in the workplace. I think we do voters a favor by respecting their wishes and not overturning their ballot measures except in extreme situations where we have clear evidence that the voters’ decision has created a disaster that we must fix right away.
Since the implementation on January 1, 2015, of the voters’ will to raise South Dakota’s minimum wage to $8.50 an hour and adjust annually for cost of living, South Dakota’s unemployment rate has continued to decline.
As of April, South Dakota’s 2.5% unemployment rate was half the national rate and the lowest of any state.
Jobs increased by percentage and number, and they increased in the leisure and hospitality sector, where Novstrup had warned a higher minimum wage would reduce opportunities:
Nor did the minimum wage appear to have any impact on labor force participation:
BFM points out that “South Dakota’s participation rate has declined from a peak of over 73% in the early 2000’s” but settled around 69.5% in 2013. The 2015 minimum wage hike appears not to have budged that curve from its now fourth-year holding pattern.
The state’s overall economic output seems to have weathered the increased minimum wage just fine:
Despite low farm prices, South Dakota’s real GDP was higher every quarter last year than in the corresponding quarter in 2014.
In other words, we raised our minimum wage over 17% and South Dakota’s economy rolled on without a hiccup. David Novstrup’s effort to cut the minimum wage for young workers was absolutely unnecessary; we can kill his Referred Law 20 for good this November without any qualms about economic impacts.
Lusk pulls MIT’s calculations for Brown County and finds that it takes between 1.3% and 3.9% less income to scrape by in Brown County than it does in South Dakota in general. A single person in Brown County can scrape together the bare necessities on $9.12 an hour; statewide, singles need to make $9.48 an hour.
MIT calculates bare-minimum expenses in seven categories: food, child care, medical, housing, transportation, annual taxes, and other. MIT figures different expenses, lower than statewide averages, for Brown County residents in just two categories: housing and taxes. Having rented and purchased a home in Aberdeen during the last fifteen months, I feel comfortable calling that calculation into question. Maybe houses are cheap up in Westport and Hecla, but in Aberdeen, where over 70% of Brown County lives, the housing market is tight.
Housing: The living wage calculator estimated housing costs between $406 per month ($4,872 annually) for one adult and $763 per month ($9,516 annually) for a single parent with three children.
Jody Zueger, Aberdeen Housing Authority executive director, thinks estimates might be a little low, judging from her experience and what she sees in the industry. For example, the one-adult scenario is likely an efficiency apartment, and one that is likely older, she said.
The U.S. Department of Housing and Urban Development fair market rent standards in 2016 show housing in Brown County averaging between $416 for an efficiency and $504 for a one-bedroom apartment to $957 for a three-bedroom apartment. Each scenario is above the living wage estimate [Victoria Lusk, “Brown County’s Living Wage Equals $9.12 per Hour,” Aberdeen American News, 2016.04.13].
$9.12 or $9.48, even our voter-initiated above-federal minimum wage of $8.55 an hour is still not a living wage. Workers starting at minimum are already getting less than what it takes to get by; cutting young workers’ pay further with Referred Law 20 seems all the more punitive and unnecessary.
But it might be a good idea to expand Medicaid to bring those minimum wage earners closer to a living wage. Lusk reports that multiplying the Brown County living wage to an annual salary yields $18,970 for a single person to get by for one year. If Governor Daugaard finally cowboys up and expands Medicaid, he would make affordable health insurance available to single, childless workers making up to $16,105 a year.
Our results suggesting a long-run disemployment effect that is five times larger than the short-run effect is based on an economic model and is not directly measured in the data. However, the key mechanism behind the model is supported by empirical evidence. In particular, we find an increase in restaurant exit and entry within two years of minimum-wage hikes and suggestive evidence that the spike in entry occurs primarily from chain restaurants that are relatively more capital intensive than the rest of the fast food industry. Therefore, we believe that that much of the recent research suggesting that minimum-wage hikes barely reduce the number of jobs in the short run should be taken with caution. The longer-run disemployment effects are potentially large [Daniel Aaronson, Eric French, and Isaac Sorkin, “The Long-Run Employment Effects of the Minimum Wage: A Putty-Clay Perspective,” CEPR: Vox, 2016.03.19].
Aaronson, French, and Sorkin extrapolate a lot of hypothesis solely from restaurant industry exit and entry data and duly salt their article with a lot of caution and potentially. David will need more evidence than this model-based argument if he wants to take his Senate seat back in six years, but the article at least gives him a direction to look for economic impacts of higher minimum wages.