For the 11th consecutive year, North Carolina’s 38,000 minimum-wage workers will not receive even a penny raise when the new year arrives Wednesday.
They remain stuck at the federally mandated $7.25 an hour set in 2009 since the majority of Republican state legislators express little, if any, interest during the 2019 session in a wage hike for private-sector workers.
Meanwhile, the minimum wage in nine blue, six purple and six red states rises Wednesday by virtue of a state- or voter-mandated increases.
Altogether, 29 states — mostly outside the Southeast — have a minimum wage above the federal level.
A full-time N.C. minimum-wage worker earns $15,080 per year — $1,000 less than the federal poverty level for 2018 for a family of one adult and one child.
An additional 52,000 North Carolinians make less than $7.25 because they work in the restaurant sector, where their compensation is often based more on customer tips.
The lack of a minimum-wage raise for private-sector employees likely continues to sting considering the hourly pay for all full-time state government employees jumped to $15 an hour in July 2018, as approved by the Republican-controlled General Assembly.
About 8,000 state employees, or 12% of the state government workforce, received a raise, according to the office of Senate leader Phil Berger, R-Rockingham.
During the 2019 season, there were at least seven Democratic-sponsored minimum-wage bills introduced.
None of them — House Bill 46, House Bill 146, House Bill 366, House Bill 830, House Bill 832, Senate Bill 137 and Senate Bill 291 — were heard in committee even though they were introduced between February and April.
HB832 would have created a constitutional amendment allowing voters to determine whether to raise the state minimum wage to $12.
Zagros Madjd-Sadjadi, an economics professor at Winston-Salem State University, said that as other states increase their minimum wage, the issue could become a pivotal political factor in North Carolina’s 2020 legislative races.
Hope for change
Proponents of raising the North Carolina minimum wage said they have been encouraged by a unrelated socioeconomic development in Congress during 2019 — the inclusion in a federal spending bill of increasing the minimum age for buying tobacco products from age 18 to 21, likely going into effect by fall 2020.
Passing federal age-21 tobacco legislation seemed implausible, if not impossible, until about 15 months ago.
That’s when the Trump administration’s Food and Drug Administration appeared to be getting serious about pushing for age-21 restrictions, along with eliminating non-tobacco and menthol electronic-cigarette flavorings, in response to a national vaping illness crisis tied mostly to the use of liquids containing the marijuana compound THC.
“Policy decisions play a crucial role in shaping the future of wages in North Carolina, and North Carolina’s failed tax cutting experiment will only keep the state on its dark road of wage stagnation and inequality,” said Allen Freyer, director of the workers’ rights project for the left-leaning N.C. Justice Center.
“Since 2013, the General Assembly has enacted significant tax reductions for the highest income earners in the state, yet as we’ve seen, the annual paycheck for the median worker has shrunk by $200.”
Freyer said the federal corporate tax-rate cut has failed to boost paychecks for working people.
“Instead, these recipients spent almost all of their tax cut windfall on stock buybacks, executive compensation and investor income, none of which translated into better wages,” Freyer said.
“A few highly publicized examples of bonuses (in January 2018) turned out to be both very rare and very temporary, reinforcing the obvious reality that tax cuts are not an effective long-term tool to raise wage.”
GOP points to markets
Key Republican legislative leaders have said the free-market system should continue to dictate wages for private-sector employers.
They cite studies claiming the possibility of losing private-sector jobs, or disincentifying their creation, as a consequence of increasing hourly pay.
“Many companies are raising wages to attract the best talent,” said Sen. Joyce Krawiec, R-Forsyth.
Among companies with a Triad presence that raised their minimum wage in the past two years include Amazon, Cone Health, First Horizon National Corp., F.N.B. Corp., Hugh Chatham Hospital, Novant Health Inc., Truist Financial Corp., Wake Forest Baptist Medical Center and Wells Fargo & Co.
“This all adds credence to the fact that a minimum-wage increase is unnecessary,” Krawiec said.
The Winston-Salem City Council has announced plans to raise the minimum wage of city employees to $15 by 2021. The minimum wage was increased to $12.50 an hour in October 2018.
Council Member Dan Besse said in October 2018 that while the Council can’t bind future elected boards, the attention given to the push for a $15 minimum wage would be “very difficult to walk back from.”
Meanwhile, the Winston-Salem Chamber of Commerce included in its 2019 recommendations to the Forsyth delegation that it “supports current North Carolina law in establishing our state’s minimum wage based solely on the federal Fair Labor Standards Act, and prohibiting any county, municipal or other local minimum wage law or ordinance.”
An overlooked element of the divisive House Bill 2 from 2016-17 — known mostly as the transgender restroom law — is that it prohibited local communities from requiring contractors to pay a set wage above the minimum wage in order to bid on projects.
HB2 supporters said that piece of legislation was included because companies could have been required to pay a higher wage to secure an urban contract than a rural marketplace would have required.
Even though many of the HB2 restrictions were rescinded in March 2017, the ban on requiring contractors to pay more than minimum wage stayed, but is scheduled to expire Dec. 1.
Rep. Donny Lambeth, R-Forsyth, said in January that the minimum wage remains a subject “of great debate in Raleigh,” in part out of concern for the ever-widening economic gap between urban and rural North Carolina.
Raising the minimum wage for state employees to $15 an hour “could very well signal to other employers it is time for them to reassess their salary for the low-wage earners and adjust accordingly,” Lambeth said.
“But the market should determine that, not government.”
Some economic studies have demonstrated little, if any, negative impact from minimum-wage hikes in 31 states.
John Dinan, a political science professor at Wake Forest University and a N.C. legislature expert, said in January 2019 that Democratic Gov. Roy Cooper and Democratic legislators “will be in a much stronger bargaining position than in the last several years” with the Republican supermajorities gone in both chambers.
“Certainly, Democrats will press for progress on their policy priorities, such as Medicaid expansion and a minimum-wage increase, along with various changes in tax and education policy,” Dinan said.
However, a minimum wage increase stayed on the back burner with Cooper and Democratic leaders as they focused on attempting to expand Medicaid coverage to between 450,000 to 650,000 North Carolinians, an 8.5% to 9.1% pay raise for public school teachers and additional education, environmental and infrastructure spending.
Cooper chose to veto the Republican budget compromise on June 28 because it did not include funding for expanding Medicaid and included just a 3.9% teacher pay raise.
Senate Republicans chose to postpone until at least Jan. 14 their attempt to override Cooper’s budget veto, which needs the support of at least one Senate Democrat at full attendance.
Mitch Kokai, policy analyst for Libertarian think tank John Locke Foundation, said that “it’s almost guaranteed that some Democrats will sponsor legislation to raise the state’s minimum wage” in 2020.
“It’s almost as certain that Republicans will have no interest in advancing that legislation.
“While Republicans who lead the General Assembly will have to make some compromises with their Democratic colleagues in order to advance high-priority legislation, it’s unlikely that the compromise will include the government-mandated minimum wage,” Kokai said.
Getting a raise
The minimum wage raises won’t be large in some states since the increase is tied to inflation or another economic measuring stick.
For example, the minimum wage is going up 30 cents in Alaska to $10.19. The largest is $1.50 an hour to $9 in New Mexico, which passed minimum-wage legislation in 2019.
States with a minimum wage above the federal level of $7.25 range from $8.56 in Florida to $13.50 in Washington state.
“Although a number of states in recent years have increased their minimum wage above the federal minimum, these states have — with the notable exception of Michigan — fallen into one of two categories,” Dinan said.
“State minimum-wage increases have been passed either by Democratic-controlled legislatures or through citizen-initiated ballot measures in states that allow the public to bypass legislative opposition and place measures directly on the ballot.”
Inflation has eroded the buying power of $7.25 an hour over the past 10 years, said John Quinterno, a principal with South by North Strategies, Ltd., a Chapel Hill research firm specializing in economic and social policy.
“An increase is more than overdue, both for inflation and to take the threshold to a more meaningful level closer to a living wage,” Quinterno said. “Most states, including most of the most populous ones, have higher minimums.
“Democrats have called for increases, but I am unsure how hard they are willing to push if the votes are not there. So, I do not expect an increase to advance.”
Mark Vitner, a senior economist with Wells Fargo Securities, said the higher minimum wage issue “is a bit more complicated in North Carolina” because of the widening urban and rural economic gap.
“Workers have been remaining in these low-paying positions for longer periods of time because there has been so little growth in mid-skilled positions, particularly outside the major metro areas,” Vitner said.
“One possible solution would be to have a multi-tier minimum wage, with a higher wage in major metropolitan areas and a lower minimum wage — not lower than the current minimum — for smaller metropolitan areas and rural areas.
“The same is true for full-time positions and part-time and seasonal positions.”