May 6, 2014
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Councilman Tom Butt

Councilman Tom Butt

The submission below was first published in Councilman Tom Butt’s e-forum on Monday night.

By Councilman Tom Butt,

I am prepared to support the proposed Minimum Wage Ordinance [Tuesday] night with the inclusion of seven amendments designed to mitigate potential adverse impacts on jobs and employment in Richmond. At least one councilmember, Jim Rogers, agrees with me.

The proposed minimum wage ordinance can be modified to achieve benefits while avoiding significant job losses due to employers moving out of Richmond or new businesses refusing to move into Richmond.

The previous ordinance shall be revised as follows:

  • REVISION #1: If the Employer pays the Employee benefits, the Employer can reducethe minimum wage owed by the amount of the benefits.Benefits include money offered by the employer, e.g. medical or dental coverage,sick leave, paid holidays, annual vacation, etc. and do not include a) contingent payments, and b) payments in kind (free lunch, free transportation, room and board,etc.) EXPLANATION: The ordinance previously considered by the Council lets employers reduce $1.50 per hour if the Employer pays $1.50/hour or more for medical benefits.This ordinance applies that reductions to all voluntary, employer-paid benefits , as long as they are actual firm offers of benefits  to be paid by the employer.Employers should not be artificially penalized because they choose one kind of benefit payment over another.
  • REVISION #2 The Employer must pay an Intermediate Wage wage which is half way betweenthe requirements of this ordinance and the minimum wage required byFederal or State law if the  business  derives more than 50% of its  income from transactions where the point of sale is outside the City of Richmond. EXPLANATION: Businesses which do not sell mainly in Richmond may leave, or new businesses may not move to Richmond, if they can relocate to an equally attractive City without the added expense of a minimum wage law.Businesses selling in Richmond, e.g. McDonalds, Walmart, are less likely to move because customers are unlikely to go outside of Richmond to save a relatively small amount of money, even assuming that minimum wage increases are passed along to the consumer.Even if existing businesses which are relatively mobile do not leave because of the costs and hassles of leaving, new businesses which are significantly impacted would be very very unlikely to move to Richmond
  • REVISION #3:  Employees who are 18 years or younger would be exempt. EXPLANATION: Many economists, as noted in the City Manager’s Report believe that young employees are displaced by older employees when employers must pay minimum wages. If all else is equal and there is 28 year old job applicant and an 18 year old, employers often choose the more experienced 28 year old who has had the opportunity to develop a track record of success in previous jobs.Given the high youth unemployment and the well known bad or tragic results, we should try to avoid significant  job loss for our youth.
  • REVISION #4: Employees of non-profits who are operating pursuant to a written and current certification obtained under Internal Revenue Code 501 (c) (3) would  be exempt. EXPLANATION: Many non-profits are operating on the edge of solvency and cannot afford to pay as much as private sector companies. Further many operate job training or internship programs which have funding restrictions on how much the employees can be paid.
  • REVISION #5 The small business exemption would be based on the FTE hours paid, not based on whether there are 10 or more employees. EXPLANATION: Basing the small business exemption on the number of employees leads to the unfair result that a business with 11 1/4 time employees is covered, but a business with 9 full time employees is not.This change more accurately focuses the exemption on small businesses that do not have a large payroll.
  • REVISION #6 Tipped employees, who already receive extensive protection under the State Law, would be exempt. This means employees who receive meaningful income from being tipped, i.e. an employee who occasionally gets a dollar or two out of a tip jar would not be exempted. EXPLANATION: Although Federal Law adjusts the minimum wage to take into account tips, State Law does not. So tipped employees will already make $9 or $10 an hour PLUS their tips. So tipped employees can make $15 or $20 per hour in tips on top of their Minimum Wage. They can make 2 or 3 times as much as their untipped co-workers. This creates an incentive for restaurants to not be in Richmond or to make up for the lost money paid to the tipped employees by ratcheting down the wages of untipped employees who make over minimum wage.
  • REVISION #7 Employers who are primarily passing through State or Federal grants are exempt. EXPLANATION: Unlike  regular employer that has some latitude in developing a plan to pay the higher minimum wage, some employers are passing through Federal or State money (e.g in home health care services). If they cannot meet the Minimum Wage, they leave Richmond, hurting both the employee/caregivers and hurting the recipients of the service who will no longer be able to get assistance in Richmond. This is problematic for anyone, but especially so for those whose physical conditions limit their mobility.

These changes were proposed after many hours of meetings with the business community.While they may be attacked as weakening the protection of low wage workers, significant job loss is the worst thing for low wage workers. Further, if there are a few well publicized examples of large job losses, the City Council would quite likely repeal the Minimum Wage law.Finally, the Intermediate Wage, while not as aggressive as the previously regular minimum wage, is still a higher minimum wage than 90% of our neighboring cities.