This week, the Massachusetts’ legislature’s Joint Committee on Labor and Workforce Development held a hearing on several bills that would be devastating for the Commonwealth’s small businesses and their employees.
The Committee heard public testimony on S.1200 and H.1925 that would raise the state minimum wage from $15 to $20 per hour by 2027 and raise the tipped minimum wage up to $12 per hour in the same timeframe. Legislators also heard testimony on bills S.1188 and H.1872 to completely eliminate the state’s tip credit, representing a potential 200 percent increase in the cash wage required for tipped restaurant employees. This comes as activists gather signatures to place a potential measure to eliminate the state tip credit on the ballot in 2024.
The slew of wage hike legislation would create a perfect storm for employment and earnings losses in Massachusetts, with acute pressure on the restaurant industry.
Economists from Miami and Trinity Universities estimate a $17 regular minimum wage hike paired with tip credit elimination could cost Massachusetts nearly 10,000 jobs and over $29 million in employees’ lost earnings. Labor economists across the nation agree: three-fourths indicated in a survey about minimum wage policy that mandates higher than $15 per hour would certainly slash jobs, especially for entry-level employees and small businesses.
Reducing or fully eliminating the state’s tip credit also poses a uniquely harmful threat to the state’s tipped restaurant employees. Economists from the University of California-Irvine find from minimum and tipped wage hikes across the country, every $1 increase in the tipped minimum wage causes 6.1% job loss and 5.6% earnings loss for affected tipped employees. In fact, Massachusetts’ rising tipped minimum wage has already caused harm: the rate of employment growth in the full-service restaurant industry measured by the Bureau of Labor Statistics Quarterly Census of Employment and Wages has completely stagnated, and even seen net job losses even in years prior to the pandemic.
In the hearing, legislators and proponents of the legislation argued $20 per hour was necessary to combat rising inflation. Yet like the $15 per hour that came before it, a $20 minimum wage has no economic precedent. In fact, Massachusetts’ statutory minimum wage hikes have already far surpassed inflation in the Northeast region.
If the minimum wage rate enacted in the 2018 “grand bargain” had been indexed to inflation, Massachusetts’ current minimum wage would only be about $13.09 per hour today. Yet lawmakers and activists are saying the current statutory amount of $15 per hour isn’t enough, and the state needs to push higher.
Since the last minimum wage legislation was enacted back in 2018, Massachusetts’ minimum wage has grown 36%, roughly double the rate of inflation over the same period.
Now lawmakers want to tack on another wage hike equivalent to another 33% increase.
Given the harmful consequences of such steep wage hikes paired with potential tip credit elimination, and the state’s minimum wage already outpacing inflation, lawmakers should tread carefully on any future increases.