Legislative does the minimum

DAVE KRECHEVSKY, REPUBLICAN-AMERICAN

As of Jan. 1, the state’s minimum wage in­creased 35 cents to $8 an hour.

For those without a calculator, that’s a 4.6 percent increase. Since 1999, when the rate was $5.65 per hour, the minimum wage has risen 41.6 percent.

And it’s not done going up. On Jan. 1, 2010, the rate is scheduled to increase another 25 cents, or 3.1 percent, to $8.25 per hour.

That will make the total increase 46 percent in 11 years, or about a 4 percent annual increase.

By comparison, when the feder­al minimum wage increases to $7.25 per hour on July 24, it will have risen about 41 percent since 1999, though in fewer, and larger, steps.

For the approximately 65,000 people who make the minimum wage in Connecticut, the extra money is certainly welcome — es­pecially for the roughly 25 per­cent, or 16,250 people, who are the primary wage earners for their families.

For the thousands of businesses that pay the minimum wage, the increases are less welcome. With the economy in the tank, busi­nesses are looking for a variety of ways to cut costs, which may well include laying workers off to avoid having to give them a raise.

State Sen. Sam S.F. Caligiuri, R­16th District, doesn’t think that will happen. He was one of just two senators from his party — Sen. Anthony Guglielmo, R­Stafford, was the other — to vote with Democrats last June to over­ride Gov. M. Jodi Rell’s veto of the minimum wage increase.

Caligiuri said he did his own re­search, and remains convinced that raising the minimum wage has little positive or negative ef­fect on jobs. Instead, he said, there are other issues businesses in the state should be concerned with.

“Raising the minimum wage is not going to kill businesses in Connecticut,” he said. “What’s go­ing to kill businesses in Connecti­cut is overspending what we can afford to support. There is a structural deficit in our state budget. That’s what’s going to kill businesses here.”

According to the latest estimate by Comptroller Nancy Wyman, the state will end the 2008-09 fis­cal year with a $343 million deficit. That, Caligiuri said, is far more important than a 35-cent bump in the minimum wage.

“The magnitude of that prob­lem is so great, I don’t think the majority in the legislature have the courage to balance the budget with cuts, which will mean tax in­creases,” he said. “For people to point to the minimum wage in­crease as being something that’s going to hurt business, they are missing the huge train wreck that was the last budget adopted in Connecticut.

“That’s where the battle for business is going to be won or lost,” he added, “in how we budg­et as a state.”

He has a point. Connecticut is hardly considered business­friendly, and that reputation will only get worse if the legislature decides to tax its way out of this problem on the back of the busi­ness community. The general consensus among economists is raising taxes in a recession is bad economic policy.

Which may be why the legisla­ture doesn’t have a problem with raising the minimum wage so of­ten. It may raise the cost of doing business, but it’s not a “tax.”

“The minimum wage is off­budget,” said William Alpert, an associate professor of economics at the University of Connecticut’s Stamford branch.

Alpert, and Fred Carstensen, a professor of economics and direc­tor of UConn’s Connecticut Center for Economic Analysis, both support creating a state Earned Income Tax Credit, similar to the federal EITC.

The federal credit is for low­to moderate-income work­ers. It offsets the burden of Social Security taxes and provides an incentive to work. Twenty-four states now offer their own EITC in addition to the federal cred­it.

As far as Alpert and Carstensen are concerned, the EITC is far better for helping low- and moderate­income workers than the minimum wage.

“It’s a lousy anti-poverty program,” Alpert said of the minimum wage. “It’s an in­efficient way of helping the poor.”

Carstensen goes further, calling the minimum wage a “selective tax” on business­es who employ low-skilled workers.

“The irony is the increase in the minimum wage actu­ally costs more in terms of the economic burden than it would have cost to fund the EITC,” he said. “If you think you’re going to pay a tax anyway, why not have a very small tax on everybody to fund the EITC?

Instead, we get the mini­mum wage, which does not help a lot of low-income households and puts a bur­den on a very select group of businesses.

“As a policy,” he added, “it would have been far bet­ter to adopt the EITC, be­cause it would have cost less and achieved more.”

Unfortunately, while the minimum wage increase for January 2010 is approved, the state Earned Income Tax Credit has failed to get support, particularly from Rell, who opposes it.

Her opposition didn’t stop the legislature from approv­ing the minimum wage in­crease, but given the budget gap it may be too much to expect the General Assem­bly to push through the EITC anytime soon.