States Approach Minimum Wage and Paid Leave Policies With Caution and “Off Ramps”

A pair of Stateline articles suggest states are approaching changes in minimum wage and paid leave with more caution this time around. Some of the nuance appears to be designed to mitigate opposition, but it also gives policymakers more latitude should the changes be more problematic than proponents contend.

The story, New State Minimum Wage Hikes Come with “Off Ramps,” points out,

In the past, states and cities tended to enact minimum wage increases over one or two years. Now, many are incrementally raising workers’ pay over as many as six years. Many also are setting different pay rates for small and large businesses, or regions delineated based on their cost of living. Some of the increases include so-called off ramps, which allow states to delay scheduled hikes if there is an economic or budgetary crunch.

Seattle’s minimum wage hike was phased-in, with different rates for small and large businesses. Oregon has adopted an unusual tiered system tied to geography

Stateline points out one reason for the caution.

…memories of anemic tax revenues and slashed budgets still haunt state lawmakers, and fears about the next downturn are growing as the country’s economic expansion enters the traditional danger zone.

And cites California’s recent $15 minimum wage legislation.

The bill the Democratic governor signed in April represents a more cautious approach. For employers with 26 or more employees the wage will reach $15 an hour by 2022. For employers with 25 or fewer employees it will reach $15 by 2023. After the minimum wage reaches $15 for everyone it will be indexed annually to inflation.

The law also allows the governor to pause the scheduled increases if the state’s budget tightens or the broader economy falters.

Paid family leave policies are also receiving renewed interest. Stateline writes,

…though many states are exploring the idea, only three states besides New York have enacted paid leave laws: California (2002), New Jersey (2008) and Rhode Island (2013).

The Washington law is mentioned.

For example, legislators in Washington passed a law in 2007 that granted parents with a new child a weekly stipend of $250 for up to five weeks. Then the recession hit, and state revenue plummeted. In the years since, the state has twice delayed implementing the law, citing funding and administration issues.

“You need to create computer systems, you need a way to make payroll deductions and calculate benefits for employees,” [Vicki] Shabo [vice president of the National Partnership for Women & Families] said. This can cost states “tens of millions.”  

Business remains critical of the leave laws under consideration in many states.

But business groups typically oppose paid leave laws. They say the laws place undue burdens on employers, even if they don’t have to chip in to pay for the leave…

Furthermore, small businesses such as hair salons and automotive shops can’t afford to go for weeks with a worker out on leave. They will incur extra costs if they have to hire temporary workers to pick up the slack, said Frank Cania, president and managing partner of DRIVEN HR, a Fairport, New York-based human resource consulting firm.

In our foundation report, we noted the proliferation of municipal labor regulations, like paid leave and minimum wage hikes, both in Washington and nationally. And we wrote,

…many employment policies enacted by state and local governments, including the minimum wage and paid leave requirements, represent workplace regulations that exceed federal standards and add to employers’ competitiveness concerns.

There’s been a lot written about the effects of increasing the minimum wage and creating new leave policies. We recommend several reports by the Washington Research Council: By Mandating A Specific Compensation Mix, Labor Policies Take Flexibility Out of the EquationMandating Paid Sick Leave in Washington, and The Long-Lasting, Negative Consequences of the Minimum Wage.

The new caution with which states are approaching these policies makes sense. And, of course, policymakers have less need of an “off ramp” if they avoid taking the wrong road in the first place.