Bill aims to curb wage hikes

Measure would strip minimum wage law of inflation adjustment

Posted: Friday, May 02, 2003

Not a year after lawmakers raised the state minimum wage from $5.65 to $7.15, making it the highest minimum in the country, a bill would strip the law of a provision that increases the wage each year to adjust for inflation.

The law was passed last session, and no inflation-adjustment increase has taken place. The adjustment is required to equal either the rate of inflation reflected in the consumer price index or $1 more than the federal wage, whichever is higher. The law requires the adjustment to take place by Sept. 30 of each year.

The federal minimum wage, which is also the state minimum wage for 29 states, is $5.15. The lowest wage is $2 in Oklahoma for businesses with fewer than 10 full-time employees and annual gross sales under $100,000.

Benjamin Brown, a lawyer representing the Alaska State Chamber of Commerce, testified Thursday before the House Finance Committee in support of the bill. He cited 18th-century Scottish economist Adam Smith's "invisible hand" theory, which says that self-interest guides the most efficient use of resources in an economy and fosters the public good.

"Every once in a while, the invisible hand becomes visible - that happened when the Legislature passed a law to raise the wage," Brown said. He said the automatic increase interferes with the natural flux of the economy.

"You lock yourself into a cycle of guaranteed inflation," he said.

But Chip Wagoner of the Alaska Catholic Conference said the state's minimum wage is not a "living wage."

He argued a one-income minimum wage family of two would be below the poverty level. Alaska's poverty level as determined by the U.S. Department of Health and Human Services is $11,210 for one person, $15,140 for two people.

Wagoner also said about 14,000 Alaskans earn minimum wage, a total that "is not going to cause an inflationary spiral that's going to hurt the state of Alaska."

Don Etheridge, a lobbyist for the state AFL-CIO, said the Legislature should not withdraw the inflation adjustment provision until the wage has undergone the adjustment. If the minimum wage were adjusted now, it probably would be about a 14-cent increase, he said.

"If that's going to put (employers) out of business, then they're too close to even keep going right now."

Jay Sutherland, an Anchorage restaurant owner, testified that last year's $1.50 increase forced him to lay people off.

"We're also taking a look at changing our technology and to replacing labor, as labor is going to continue to go up with the (consumer price index)," Sutherland said.

He added he would not be able to afford to hire kids who want to work at his seven restaurants this summer.

The committee did not take action on the bill, but held it for more discussion Monday.

• Masha Herbst can be reached at

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