Chairwoman Williams and Members of the Committee,
Thank you for holding a hearing on House Bill 7575, legislation that would repeal the law preventing municipalities from establishing their own minimum wage thresholds.
My name is Samantha Fillmore, and I am a State Government Relations Manager at The Heartland Institute. The Heartland Institute is a 38-year-old independent, national, nonprofit think tank and our mission is to discover, develop, and promote free-market solutions to social and economic problems. Heartland focuses on providing elected officials on all levels reliable and timely research on important policy issues such as minimum wage hikes.
Minimum wage laws attempt to create a minimum standard of living to protect employees’ health and well-being by mandating a base level of pay from employers to certain covered employees.
Allowing Rhode Island municipalities to establish their own minimum wage requirements allow those at the local level who best know their communities to make informed decisions for their local economy. Furthermore, this will inject autonomy into smaller levels of government when it comes to the minimum wage, allowing heightened levels of transparency for citizens of the Ocean State.
Minimum wage hikes impose a myriad of unintended consequences to all businesses, especially small businesses—the essence of the American economy. With HB 7575 municipality official can assess the state of their small business economy before implementing any sweeping changes that may have occurred at the state level. After all, what is best for those in a large urban area such as Providence is not the same for those in rural cities and counties such as West Greenwich or New Shoreham.
Minimum wage increases can force businesses to reallocate their costs to cover the increase in employees’ wages, ultimately forcing them to alter spending elsewhere to offset their newly increased labor costs. More times than not, this results in less hiring, a reduction in work hours, and increasing prices for consumers. For many small businesses, a minimum wage hike will lead to bankruptcy, as they are no longer able to remain profitable due to substantially increased labor costs.
A recent study by the Congressional Budget Office, titled “The Effects on Employment and Family Income of Increasing the Federal Minimum Wage,” examines how increasing the federal minimum wage to $10, $12, or $15 per hour by 2025 would adversely affect employment and family outcomes. According to the study, the minimum wage hikes do, in fact, boost the wages of some workers. However, this is at the cost of pushing millions of workers out of a job, hitting small businesses the hardest.
This study based on a theoretical federal minimum wage hike showcases the harmful effects of sweeping increases further showing the effectiveness local governance can have as a healthy alternative.
Every state experienced some degree of state and federally imposed lockdowns and shelter-in-place orders due to the sudden onset of the coronavirus pandemic, which sent shockwaves throughout the small business ecosystem that are still being felt. Therefore, flippant and sweeping minimum wage hikes could not be more ill-timed. In an analysis based on self-recorded closures in their database, Yelp estimates that 60 percent of U.S. businesses that have closed since the start of the COVID-19 pandemic have shut down permanently.
It is paramount for Rhode Island lawmakers to reflect on the small businesses in the Ocean State while considering legislation that would allow governments closer to aforementioned small businesses to decide their respective minimum wage requirements.
Although attempts to bolster a minimum standard of living and protecting workers in a pandemic-world are commendable, the overall economic effects of sweeping and unilateral minimum wage hikes accomplish neither of those worthy goals. State-wide minimum wage hikes can be out of sync with the laws of supply and demand and would do little to lift Ocean Staters from poverty while destroying jobs in the state. As such, legislators in Rhode Island should consider all of the socioeconomic effects associated with House Bill 7575.
Thank you for your time today.
Nothing in this testimony is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this and other topics, The Heartland Institute’s website provides a great link to many policy resources.
The Heartland Institute can send an expert to your state to testify or brief your caucus; host an event in your state, or send you further information on a topic. Please don’t hesitate to contact us if we can be of assistance! If you have any questions or comments, contact Heartland’s government relations department, at [email protected] or 312/377-4000.