Metro

Rhode Island minimum wage increases 4.7 percent

Bill sponsor says the raise is an attempt to remain competitive with neighboring states

By
Senior Staff Writer
Thursday, January 24, 2013

Rhode Island's minimum wage, while higher than the federally mandated minimum, is lower than those of its neighbors.

Rhode Island’s minimum wage increased from $7.40 to $7.75 Jan. 1, the first time the state has enacted an increase since 2007. Among the 10 states that instituted similar hikes this year, Rhode Island saw the largest increase.

Rhode Island’s minimum wage increase was mandated by legislation passed in the General Assembly last June. In the other nine states that enacted increases, minimum wage is linked to a consumer index and rises automatically to adjust for inflation. The federal minimum wage — which sets the lowest legal rate — is $7.25, with Washington maintaining the highest minimum wage at $9.19. Rhode Island’s neighboring states, Connecticut and Massachusetts, have minimum wages of $8.25 and $8.00, respectively.

Rep. David Bennett, D-Warwick, the primary sponsor of the House bill, said he introduced the legislation to help improve the quality of life for state workers who earn the minimum wage and are negatively affected by rising prices.

“A large cheese pizza would cost you three hours of your work or two hours of your work depending on where you buy your pizza,” he said. “Imagine working three hours for a pizza.”

Bennett said he hopes to introduce similar legislation each year until the minimum wage reflects the cost of living and is comparable to the minimum wages in neighboring states. When he chose the $0.35 increase, he thought  it was the largest amount the General Assembly would be able to pass, Bennett said. He will introduce a bill this year in the House to raise the minimum wage to $8.25, which would amount to an additional $0.50 increase, he added.

“We’ve got to stay in competition with Connecticut and Massachusetts,” he added. “We don’t want all our young people going across the border to work over there because they can make $2.00 more an hour doing the same job.”

The bill’s opposition included business owners and corporations concerned about higher costs affecting their ability to maintain current employment levels, Bennett said. But a large percentage of entry-level positions in the state that pay minimum wage come from large national corporations that can absorb the increase, mitigating potential negative repercussions, he added.

“For a modest minimum wage increase, I would be very surprised if employment went down,” said Kenneth Chay, professor of economics. Though the neoclassical model supported by conservative economists associates increased wages with higher unemployment, studies in the 1990s and 2000s have shown that this model does not always hold and have found no connection between minimum wage increases and unemployment, he added.

Chay said it is important to consider context and conditions when talking about minimum wage. A $0.35 increase in the minimum wage should not hurt small businesses if Rhode Island is in the beginning of a financial recovery, he said.

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  • “…Though the neoclassical model supported by conservative economists associates increased wages with higher unemployment”

    Of course using this logic, if you reduced wages significantly – you would have a significant increase in business. This of course would not be the result.

    But after all, many or most conservative economists were worried about hyper-inflation a few years back. They were ready to fight inflation right after the bursting of one of the largest asset bubbles to hit this country.