State Rep. Frank LaGrotta – 1/19/05

This page was last updated on February 17, 2005.

LaGrotta: it’s time to raise minimum wage in Pennsylvania; State Rep. Frank LaGrotta (D-10); January 19, 2005.

Below is an e-mail trail on this topic. When I asked the second time for the sources for the claims made, I received no reply.

From: Robin Cox

Sent: Friday, January 28, 2005 10:54 AM

To: Vince Biancucci (E-mail)

Cc: 'LaGrotta, Frank'

Subject: LaGrotta: it’s time to raise minimum wage in Pennsylvania

Dear Mr. Biancucci,

Regarding Mr. LaGrotta's news release entitled "LaGrotta: it's time to raise minimum wage in Pennsylvania," can you provide me with the economic justification for such a move?

Unless I'm missing something, increasing wages above the market value of the job performed increases the cost of the product or service beyond the market value of the product or service. This increases the price making the product or service less price competitive with businesses not subject to the PA minimum wage.

By having a minimum wage -- either federal or state -- are we not "chasing our tail?" Here's what I mean. When we raise the wage, we raise the price of products and services and therefore the cost of living. It's also necessary to understand that when you increase the minimum wage, this places upward pressure on all wages. For example, if your job is worth $1/hour more than today's minimum wage, won't you push for a raise if the minimum wage increases? Otherwise, you're accepting less than your economic worth relative to the minimum wage worker. Indeed, some labor union contracts are indexed to the minimum wage. As soon as the cost of living increases, you will want another minimum wage increase, starting the cycle all over again. The built-in "modest cost-of-living adjustments" proposed by the legislation merely speed up the tail chasing.

Another response by business is to take the wage increase out of benefits so as not to increase the product or service cost. For example, an increase of $1 in wages can result in a $1.0765 increase in the amount an employee pays for company-sponsored healthcare insurance or life insurance or a decrease of matching 401(k) contributions. Why $1.0765? $0.0765 is the Socialist Security and Medicare taxes paid by the employer on behalf of the worker on the $1 wage increase.

Another response of businesses to uneconomic wages is to eliminate jobs. Automated check-out machines in supermarkets is only one example.

Elected Democrats AND Republicans constantly say they want to attract business to Pennsylvania, then you go and propose to dump another burden on our economy making it more difficult for businesses to compete. Keeping pace with nearby states like Delaware, New Jersey, and New York on the issue of minimum wage -- and compulsory unionism, lawsuit abuse, regulation, taxes, et cetera -- is not a strategy for success. While touting how some adjoining states already had a higher minimum than PA or were planning to do so, it's interesting to note Mr. LaGrotta's news release failed to mention Ohio's minimum wage is below the federal and PA level. The southern states "eating PA's lunch" either have no minimum wage laws at all (AL, FL, LA, MS, SC, TN) or set their minimum wage to the federal level.

As of 1/1/05, of the 50 states plus DC, 37 currently are at or below the fed minimum wage. A fed minimum wage is bad enough. I see no logical reason to add PA to the list of states economically "shooting themselves in the foot."

On a side note, who in their right mind believes the minimum wage was ever intended to support a family?

Minimum wage laws make neither economic nor moral sense. I've shown above these laws make no economic sense. They make no moral sense because they promise something they can't and don't deliver.

Clamoring for an increased minimum wage makes a nice news release, but I believe it makes for very poor economic policy.

Please explain what I am missing and provide supporting data from a credible source for your response.

Yours truly,

Robert (Robin) Cox

Center Township, Beaver County

I received no response from Mr. Biancucci but did receive a response – shown below – from someone on behalf of Mr. LaGrotta.

January 31, 2005

Dear Robin:

Thank you for contacting me and sharing your views regarding a proposal to increase the minimum wage in Pennsylvania. As your state representative, I appreciate learning about the issues that are important to the residents of the 10th Legislative District.

As you know, I support an initiative designed to gradually increase the minimum wage in Pennsylvania from $5.15 an hour to $7.15 an hour over the duration of the next two years. This measure is in response to the continuous rise in inflation coupled with poverty guidelines, and is an effort to help reverse the trend of declining wages for our state’s low-wage workers, working families and disadvantaged workers. Furthermore, this legislation will stimulate demand by boosting the purchasing power of workers and leveling the playing field among businesses by creating a wage floor that would limit unfair competition.

Please know that I recognize your concerns regarding the potential affect an increase in the minimum wage has on businesses in our Commonwealth. However, studies conducted in fourteen other states and the District of Columbia following minimum wage increases beyond the federally-set $5.15 an hour and data compiled after the 1990-1991 and 1996-1997 minimum wage increases indicates that significant job loss is not associated with an increase. Rather, the low-wage labor market often performs better than previously and experiences lower unemployment rates, increased average hourly wages, increased family income and decreased poverty rates. Moreover, employers often absorb the costs of the increase through higher productivity, lower recruiting and training costs, decreased absenteeism, and increased worker morale.

Again, thank you for contacting me and sharing your views regarding this important issue. If you additional thoughts or concerns regarding this or any other state-related matter please fee free to contact me at your earliest convenience. As always, your thoughts will be remembered and respected.

Sincerely,

FRANK LaGROTTA, MEMBER

House of Representatives

Note that the response did not “provide supporting data from a credible source” I requested.

From: Robin Cox

Sent: Tuesday, February 01, 2005 9:46 AM

To: 'Barnett, Carole' [Ms. Barnett replied on behalf of Mr. LaGrotta]

Subject: RE: Minimum Wage Increase 1-31-051

Dear Ms. Barnett,

Thank you for replying to the questions I directed to Mr. Biancucci. Mr. Biancucci is my representative, not Mr. LaGrotta. I copied Mr. LaGrotta only out of courtesy because his office issued the news release.

I don't claim to be an economics expert, but the reply contradicts everything I learned from life and in my economics classes from high school through graduate school. In short, the claims appear to defy logic and well-understood and demonstrated economic principles. That's why I feel providing the sources for the claims is important. I need to be able to read the studies the reply mentioned to learn how the authors came to their conclusions. Though the reply noted only studies supporting minimum wage laws, I assume there were studies showing minimum wage laws are counterproductive. Please let me know if that is an incorrect assumption.

Here is what I would like. First, please provide citations for the studies referenced in the reply. Second, I'm sure someone on the Democrat Caucus performed an analysis of studies on both sides of the issue before Democrats decided to support a minimum wage. I would like a copy of that analysis so I can understand why more credence was given to studies allegedly showing minimum wage laws are beneficial.

I'm sure you folks mean well, but I believe you have been misled by people whose intentions are not so honorable.

Yours truly,

Robin Cox

As of this writing (February 17, 2005), I have not received the citations I requested, or any response at all. Draw your own conclusions as to why someone would not gladly provide a list of credible sources to support his position.