The waiting is almost done for Connecticut’s minimum wage, after a year of hot politicking. On Oct. 1, it rises to $11 an hour from $10.10, the first step on the march to $15 an hour by mid-2023.
What will it mean? That debate rages on.
For Tatisha Banks, a preschool teacher’s aide in Bridgeport, it’s a boost from $10.30 an hour — about $25 more a week, or $1,300 a year. As it stands now, at 27, the single mother of two young boys earns above the minimum for the first time in her life.
It’s the next step in what she hopes will be a climb into the middle class as a teacher. “That’s my calling,” she said, after many jobs before this one.
And it’s an economic status she never saw as a child growing up in Norwalk. “I feel good, excited,” she said, adding that she hopes to buy a car so she doesn’t have to walk or take the bus everyplace.
Maybe she’ll pay off student loans for a private hairdressing school she attended but never graduated — because the place was shut down due to violations. “We can take a vacation,” she said, “like go to Disneyworld one day.”
As that dream — or for many, simply a more humane subsistence — dances in the minds of people set to receive a raise such as Banks, a shroud of worry settles on small business owners such as Mark Curtis, founder and CEO of Splash Car Wash.
Splash, with 15 locations in Connecticut, including Bridgeport and New Haven, and about 300 full-time and part-time workers, has about 100 people at the minimum, Curtis said. The Greenwich-based company, which he founded in 1981 with one location, has another large group just a buck or two above.
That means he’ll pay out 9 percent raises to many of his workers overnight in less than two weeks. It’s not just the ones at $10.10, either. A guy making, say, $11.25 an hour now, or even $13 an hour, will not stand idly by as a less experienced car wash employee jumps to $11.
That, Curtis said, means a price increase almost immediately: 50 cents a car in the basic, exterior washes and perhaps $1 a car at the upscale hand-washes that include interior cleaning. It comes out to about 4 percent, since labor is nearly half his cost.
That’s just from the direct pay hikes, not all the higher prices Curtis might see across the economy. And this is just the first round of increases; they keep coming, $1 more every ten months to a year until June 1, 2023.
“I want to pay my guys above market,” Curtis said. “An entry-level guy might come in at minimum wage but if he’s worth anything we’re going to move him up. And because we’ve grown, we provide a lot of opportunities.”
His worry: Fewer jobs and hours. “At some point if the price increase that we pass on to our customers lowers demand, the very people we’re trying to help, are we going to hurt by doing less cars because we’ve had to increase the price?”
Curtis added, “The alternative for us is to use more automation in our cleaning and less personnel.”
He shakes his head as he says that. “I like people.”
Opportunity vs. cost. It’s the basic balancing act of economics, and now Connecticut faces it head-on in a politically divided policy — there were no Republican votes for the raise — that pits one hazy view of what will happen against another.
Small business owners and business groups more strident than Curtis say slow-growth Connecticut, already losing people faster than almost any other state, can ill afford the twin Democratic policies of the minimum wage hike and the 2021 start of paid family and medical leave, with its tax on all workers.
Advocates for low-wage workers, and the workers themselves, say it’s a small measure of justice — and a boost to the economy due to more spending by workers — after a generation that’s seen erosion at the bottom of the pay scale.
Monette Ferguson, executive director of the social services agency that pays Banks and runs the Head Start programs in eight Fairfield County towns, will have to find the extra money. But of course, as an anti-poverty agency, Action for Bridgeport Community Development, or ABCD, is fully behind the increase.
“Sacrifices will have to be made, it’s the right thing to do,” Ferguson said. “It’s good news for community members, it’s good news for the economy.”
No economic change, of course, is good news for everyone. Business-backed, conservative think tanks such as the Heritage Foundation crank out reports saying the $15-an-hour minimum will lead to massive job losses and inflation. Even most upbeat studies show some job loss, such as a widely cited one calculating a 1 percent loss for groups that receive a 10 percent hike in the floor wage.
As for prices, that’s even harder to study. The labor-backed Economic Policy Institute cites a San Jose study that showed restaurant meal prices rising by just over one-half of 1 percent after a 25 percent price hike in San Jose, Calif. in 2013. And a look at restaurants near that city showed a so-called “border effect” that was less than doomsayers feared.
David Cooper, a senior analyst at EPI, said productivity increases, less turnover and other benefits from the minimum wage mean many business owners don’t have to raise prices as much as they fear after the wage jumps up.
“This has never caused the sky to fall,” said Cooper, who testified in March before the Connecticut General Assembly in favor of the hike.
Even with some displacement and loss of hours, he added, “As a whole, low-wage workers are better off as a result of the rising minimum wage.”
As with most policy debates, the politics are black and white but the actual effects are gray. It won’t be as bad as feared by Republicans and business groups or as helpful to the economy as promised by Democrats, including Gov. Ned Lamont, a strong supporter of the hikes.
Along those same lines, the coming series of increases won’t affect everyone equally. If Banks keeps her job, she’s better off even with the higher prices across the board that a consistently rising minimum wage might bring. Restaurants unable to raise prices will see lower profits.
Some solace: The hikes do not leave Connecticut as an outlier. Massachusetts, New York City and perhaps the state, New Jersey, California and Washington are all on track to raise the lowest wage to $15 an hour by 2022 or 2023.
In all, Connecticut had an estimated 115,000 people making the minimum wage in 2018, according to Department of Labor estimates based on Census sampling — but it’s a rough estimate based on a small sample size. The best guess is that 320,000 low-wage earners, or about 20 percent of the state’s workforce, will see a raise, either mandated of through the ripple effect.
The movement, and make no mistake, it is a political movement, is the inevitable result of years in which profits, and income gains, have gone to the top. Calling that a free-market effect is only a half-truth, as many distortions such as boardroom cronyism lead to overpayment of top managers.
The national rate, in effect in 21 states, has been stuck at $7.25 an hour for a decade — and that highlights the stark contrast between the backward states and the civilized ones.
Most important, let’s face a tough reality here: While advocates say the hikes will help the economy, Connecticut in 2019 is not just any state. We’re on the knife-edge of recovery with arguably the nation’s weakest growth since the Great Recession. This policy, morally right as it may be, presents a genuine risk with results no study can predict.
Curtis’s feared price increases are common everywhere a business pays the minimum. In Eastern Connecticut, Brian Jessurun and his brother, Barry, own and operate four restaurants, from the over-the-counter Vanilla Bean in Pomfret to the upscale 85 Main in Putnam, and two in Mansfield.
“Retail is in real trouble everywhere,” Brian Jessurun said, and the wage hike only makes matters that much harder for Connecticut’s 8,000 eateries employing 160,000 people — a whopping 10 percent of the state’s workforce, according to the Connecticut Restaurant Association.
It’s true, the legislature and Lamont left the so-called tipped wage for servers unchanged. But most restaurant employees aren’t tipped, Jessurun said.
The result: He expects price increases of 3 percent to 5 percent almost right away because restaurant profit margins are famously thin.
Making matters worse, restaurants will have to charge customers an extra 1 percent as the meals tax rises from 6.35 percent to 7.35 percent. And the excise tax on liquor rises by 10 percent — all on Oct. 1.
“You have to have an incentive go into business and you have to have an incentive to stay in business,” Jessurun says. “What is the incentive to do that? Maybe none.”
In Bridgeport, Tatisha Banks has already saved almost enough for a car. The raise will make it a reality, along with buying things for her “spoiled” children. “I’ll be smiling every day even more,” she said.
And in Greenwich, Curtis take the middle ground. He’s confident he can deliver enough excellent service that his customers, even in poor cities, will pay small increases. But, I ask, how about the full measure of increases over the next four years?
He hesitates. “Time will tell.”