Breaking ranks with the governor and her own party, Arkansas State Rep. Robin Lundstrum (R-Elm Springs) will move forward with two bills that would exempt teenagers and employees of nonprofit organizations and small businesses from the voter-approved ballot initiative to raise the state's minimum wage.
The legislation was advanced in the House Public Health, Welfare and Labor Committee on March 12, and comes a few months after Arkansas voters approved incremental increases in the state's minimum wage. The wage increased from $8.50 to $9.25 an hour on Jan. 1 of this year, and will go to $10 an hour next year and $11 an hour in 2021.
The first of the two bills, HB 1752, exempts any employer with 25 or fewer employees from paying the increased wage. It also exempts employees of nonprofit developmental service providers that are funded primarily by the federal or state government, as well as any nonprofit organization with an operating budget that is less than $1 million.
On the other hand, HB 1753 exempts anyone 18 or younger. It also calls for eliminating a provision that requires that full-time high school students (ages 16, 17 and 18) of accredited institutions -- who are working either 20 hours per week while school is in session or 40 hours per week while school is out of session -- be paid at least 85 percent or more of the increased wage.
Lundstrum said the reason the bill eliminates this is because the program entails an excessive amount of paperwork and regulation, while also having the end result of paying the student less. Her proposals would pay students $9.25.
The bills were met with mixed reactions from media outlets and government officials and concerns that they're an attempt to bypass the will of voters were expressed on both sides of the aisle. The Arkansas Republican Party released a statement that said that ballot initiatives approved by voters should only be altered when "circumstances so demand," according to a March 14 report from the Northwest Arkansas Democrat-Gazette.
Gov. Asa Hutchinson weighed in on the issue when asked about it during a luncheon at the Political Animals Club in Little Rock on March 13, according to the report. Hutchinson said that he shares many of the concerns as Lundstrum, adding that the act should not be altered through legislation because it was the will of voters.
Despite this, Lundstrum said on Friday that she plans to move forward with the bills and that they will be addressed again on the House floor sometime next week. Passing the two bills would require a two-thirds approval from the 100-member House and 35-member Senate. An amendment was also recently added to both bills which ensures that those who are exempted will receive $9.25.
Lundstrum explained her position on each bill and her reasoning for filing them, beginning with the one that provides exemptions for teens. When a wage increase is imposed upon a free-market, whether by the will of the people or the government, it inhibits the ability of young people to get hired at entry-level, hourly-wage positions, Lundstrum said.
Employers are going to seek the candidates with the most experience, particularly if they have to pay a higher wage. Due to this, teenagers will struggle to compete with people that may be older with more work experience, Lundstrum said.
The purpose of the other bill, Lundstrum said, is to protect small businesses and nonprofits who are currently struggling to keep up with the wage increase, or could begin struggling to do so in the future.
"I'm taking this political risk, obviously, but I'm also hearing a lot of positive feedback from people at home and business owners," Lundstrum said. "They're saying yes we want to hire these kids, this is important to us. I heard from a gentleman that hires 62 kids every summer, and they've already had to raise their prices to cover the minimum wage and he's saying 'Hallelujah, somebody is listening down there.'
"Sometimes you've got to step out and listen to the people in your district. ... People all over the state are not as vocal as people in Little Rock, but when my small businesses and others are hurting, my job is to listen. That's why (the legislation is) very tightly structured, it doesn't impact a huge number of people. ... It might not be popular with the governor or Republican or Democratic leadership, but my job is to listen to real people in my district and all over the state, why would I just sit here when I'm concerned?"
Local response
Reactions to Lundstrum's proposals among local residents have varied widely. Mittie Green, the Assistant Director of Friendship Pediatrics in Siloam Springs, said she is not against the wage increase, but that her organization will struggle to pay them. As a nonprofit offering the services they do, Green said the majority of the organization's funding comes from state and federal medicaid reimbursements, and the amount of these reimbursements has remained stagnant since 2009.
That said, it won't be feasible to raise wages if their funding source isn't increased at the same time, Green said. In response, Lundstrum said the issue of medicaid reimbursements to nonprofits like Green's is a separate and complex issue that is currently being addressed, but noted that this is an example of one of the unintended consequences she mentioned previously.
Other Siloam Springs nonprofits have expressed concerns as well, such as the Boys and Girls Club of Western Benton County. In a recent press release, the organization said they appreciate the efforts of lawmakers to protect nonprofits in the state. They also said they don't need to make any cuts to programs at this time, but added that "Over the next two years, we will need to make budget adjustments, but our mission will not change."
Matt Feyerabrend, who owns Pure Joy Ice Cream in downtown Siloam Springs, said that depending on the time of year, he employs between one and 10 people, which, would exempt him from paying the increases under Lundstrum's proposals. Feyerabrend said that he is opposed to both bills because they will adversely impact low-income communities and put more money into the hands of those who already have it, and that despite whether the proposals are passed, he will continue to honor the increased wages for his employees.
"I studied graphic design in college and we learned that the more restrictions put on us, the more we had to be creative with our solutions," Feyerabrend said. "I think increasing the minimum wage in Arkansas will, similarly, push small-business owners to be more creative with their solutions than simply paying their employees less. We need innovation and creativity, not lower wages."
Dr. Randall Waldron, a professor of economics and international business at John Brown University, provided some insight on the matter from an academic perspective. Despite how one may feel about the issue, Waldron emphasized that the discussion of increasing the minimum wage is rather inconsequential when it comes to determining how to reduce unemployment, poverty or inequality across the population.
On a grand-scale, most United States citizens aren't impacted by the minimum wage because the average wage offered among employers is higher, Waldron said. He also said he can understand why the idea tends to garner such widespread support from a political standpoint. As an economist, however, Waldron said he sees it differently.
"If we were to significantly raise the minimum wage, particularly abruptly, it would certainly put certain people at a disadvantage and others with little work experience," Waldron said. "A dramatic rise would hurt the people who it's most intended to help. So, Representative Lundstrum probably has a valid point. ... If we look back though, at our experience with the big recession in 2008 and 2009 and the aftermath that followed, it's pretty clear that unemployment among young people was especially high. Exacerbating that even further, labor force participation among that group was extremely low. So that has a really negative effect, because when young people don't get into the market and get work experience, they can fall years behind their peers.
"So as a general rule, most economists are not fond of wage controls in the labor market, and so I suspect most economists would not like to see minimum wage laws applied to entry-level labor, or teens or anyone else," Waldron said. ... "The minimum wage law, it's politically and socially very popular, and that makes sense because it's well-intentioned people wanting to help people who are struggling to get by. ... On the other hand, you can't legislate your way into prosperity and sometimes you run into unintended consequences, so I think that Rep. Lundstrum is trying to reverse that a little bit and allow the marketplace to do its job. I'm very supportive of that, but the danger is that she's pushing back against the popular political position. When you've had a popular referendum approved by a supermajority of the population, it's risky to try and circumvent that."
General News on 03/24/2019