No, “workforce development” is not a substitute for raising the minimum wage

Ever since the federal minimum wage was established during the Great Depression, business and business-friendly politicians have contended that it costs jobs, raises prices, and hurts small business.

Those contentions are anything but settled, especially with respect to modest wage increases, where a preponderance of economists have determined the benefits of raising the wage outweigh any harm.

They certainly are familiar arguments, though, and they were included in a statement issued by Gov. Brian Sandoval's office last week after Democrats in the state Senate introduced legislation to raise Nevada's minimum wage.

But the governor’s office offered a somewhat less familiar argument, too: "The Governor believes a better strategy to raise wages is an investment in workforce development and education programs which have proven success and also increase household prosperity.”

The connection between education and a good job was recognized by policymakers long before the term "workforce development" emerged in the 1990s.

But to assert that it is a "better strategy to raise wages" – that "workforce development" is a viable or adequate substitute for raising the minimum wage – is to assume nearly an entire Nevada workforce happily pursuing lucrative careers befitting their advanced training while few if any working adults are stuck in low-pay, low-quality jobs.

There's a problem with that.

The most common jobs in Nevada

The Democratic bill, SB106, would raise Nevada’s minimum wage from the current rate of $7.25 if employers offer health insurance and $8.25 if they don't, to $11 and $12 respectively, by 75-cent increments over five years.

A separate Assembly measure introduced Monday, AB175, would raise the wage by $1.25 a year for five years, topping out at $14 for workers with health insurance and $15 for those without.

The industry employing the most Nevadans is, by far, what state and federal agencies categorize as "Accommodation and Food Services.” At 319,000 employees in 2016, the sector accounted for one of every four jobs in the state. "Retail Trade" was a distant second with 144,000 workers. Together, the two sectors accounted for over a third of Nevada's 1.3 million workers as of the end of 2016, according to the Department of Employment, Training and Rehabilitation’s Research Analysis Bureau.

The responsibilities, quality – and pay – of jobs in those industries can vary widely. Some people, and not just (or for that matter, always) management, are paid well, especially if they’re among those who earn substantial income from tips.

But those industries also account for some of the lowest-paying jobs in the state. For instance, more than half the Nevadans employed in the Accommodation and Food Services sector, 160,000 people, work in “food preparation and serving related occupations.” In Retail Trade, the largest occupation is of course “sales and related occupations,” with 86,000 workers.

Those are the two most common jobs in Nevada – food prep/serving and retail sales.

In both, the median wage – the wage at which half the workforce makes less and half makes more – is less than $11. In both jobs, one of every four workers is paid less than $9 an hour.

The most common jobs in Nevada

Source: DETR wage and employment data nevadaworforce.com

Put another way, in those two occupations alone, there are more people who are paid less than $9 an hour than there are Nevadans (total) employed in manufacturing, one of the industries most often hyped by those who stress the importance of Nevada workforce development.

Growth in the tech sector, or as it is called in state job data – "Computer Science Applications" – is also frequently invoked when underscoring the urgent importance of workforce development. In 2016, the number of people making less than $9 an hour in either retail sales or food prep/serving was nearly four times the number of people in computer science occupations.

State projections indicate that the occupations that will grow the most – not in percentage terms, but in raw numbers – are the very same occupations that are most common now, which include not only food prep/serving and retail sales but other low-pay positions such as janitors, security guards and home health aides.

Diversification and workforce development notwithstanding, a substantial portion of Nevada's workforce will still be filling low-paying jobs, because there will be so many of those jobs to fill, for the foreseeable future.

So if we don't raise the minimum wage, then what do we do for the people who will be working in those jobs?

But ... the New Nevada

"I simply do not agree with your characterization of Nevada's workforce," said Mari St. Martin, the governor's spokesperson.

"The Bureau of Labor Statistics used to put Nevada at the top of the list for states with a majority of jobs that require no college degree," St. Martin said in an email exchange. "However, we're seeing those trends change largely due to economic diversification."

Thanks to the governor's efforts, "we will meet or exceed the goal that 60 percent of Nevadans between the ages of 25 and 34 will have earned some form of postsecondary degree or credential by 2025. This means that the lower wage jobs will be available for entry-level applicants, not household providers," St. Martin said.

The future, as envisioned in the governor's office, is a hopeful one.

But is it accurate?

“Postsecondary degree or credential” could mean an advanced degree in a scientific or technical field. It could also mean a certificate in cosmetology or heating and air conditioning maintenance and repair. In either case, a postsecondary credential does not automatically mean a good-paying job in the field; for instance, there is no shortage of research indicating that many – even most, in some studies – graduates with degrees in so-called STEM (science, technology, engineering and math) degrees are unable to find STEM jobs.

There is also no shortage of people with degrees, even advanced degrees, bussing tables or selling pants, i.e., filling Nevada's most common jobs. Similarly, a growing number of older people with degrees or training, not to mention work and life experience, are taking low-skill jobs, especially in retail, as other doors close on them.

Even landing a job in a field in which a worker has obtained postsecondary training and credentials doesn't necessarily mean a living wage. Home health aides, for instance, are often paid less than $10 an hour.

And of course the demographics of who – and who isn't – filling minimum wage or near-minimum wage jobs bears little resemblance to the old conventional assumption that it’s just teenagers. The vast majority of minimum wage workers are older than 20. More than a third of them are over 40.  They're working full-time, they have children, they provide half their household’s income, and they've been stuck in the jobs in some instances for years. The myth of minimum wage jobs being filled overwhelmingly by very young entry-level workers is just that – myth.

And all that is part and parcel of an economy where, according to recent research by economist Thomas Piketty et al, “the bottom half of the income distribution in the United States has been completely shut off from economic growth since the 1970s.”

None of these realities are specific to Nevada. Rather, all of them reflect a national and even global economy that has been undergoing a series of dramatic, and traumatic, transformations. A skilled workforce is a practical and necessary precaution to provide Nevada with a chance to cope with those transformations.

The governor, per his spokesperson, believes that thanks to his workforce development agenda, "lower wage jobs will be available for entry-level applicants, not household providers,” – in which case raising the minimum wage isn’t just bad policy, but unnecessary.

It is, in a way, an optimistic vision.

It’s also one that not only fails to acknowledge the true nature of Nevada’s real economy, but blithely ignores the destructive economic forces that have been relentlessly hammering working and middle class Nevadans for the last 40 years.

It's not an either/or

“I don’t see the two policies, raising the minimum wage and more investment in workforce development, as mutually exclusive, but mutually reinforcing,” said Jeff Waddoups, chair of the Department of Economics in the Lee Business School at UNLV.

Waddoups was one of more than 600 economists nationwide who signed a letter in 2014 calling on the President and Congress to raise the federal minimum wage to $10.10 by 2016. (Under SB106, it would be three years before the Nevada minimum wage topped $10 for workers without health insurance, four years for insured workers.)

“If the fear is that raising the minimum wage will reduce employment and thereby reduce opportunities for low-skill workers, it is unfounded – the evidence simply doesn’t support it,” Waddoups said. “The evidence does suggest, however, that if firms have to pay a little more for their workers, they will make efforts to keep them around longer and perhaps make them more productive, which means that firms will have more of an incentive to invest in training and development with a higher minimum wage.”

UNR Economics Professor and Associate Dean Elliott Parker (a member of The NV Indy Outlook team) also signed that 2014 letter. “Nevada definitely needs to fund and promote workforce development and education,” Parker said, adding that successful workforce development programs will mean that fewer workers will need a higher minimum wage.  But workforce development and education “is not a substitute for increasing the minimum wage to at least keep up with past price inflation.”

“It’s not an either/or,” Parker said.

Magnificent obsession

In 2015 Sandoval and the Legislature enacted a long-overdue tax on Nevada businesses, largely based on the argument that a better-educated workforce is a prerequisite for a more diversified and stable economy. That argument, by the way, is correct.

But education and training, like legislation to fund vouchers for private schools, transfer public schools with low-income students to private charter operators, or force a local school district to reorganize itself, can also be high-profile attention soaks. To hear the governor and influential policymakers tell it, why, there is nothing wrong with Nevada that education can’t fix.

So allow me to reiterate a point I’ve made on multiple occasions in the past: If we could snap our fingers and magically ensure every working age Nevadan had an advanced degree in a STEM field tomorrow, one-fourth of the workforce, at the very least, would still be working in low-paying, low-quality jobs with little or no benefits, little or no stability, and little opportunity for advancement. Because those are, in large part, the jobs we’ve got. They will also be, in large part, the jobs we’ll have in the future. We need them to be filled, and finding that many teenagers may be a tall order.

Yes, low pay is not just a Nevada problem. But while Nevada can’t fix the plight of all working Americans, it is within the state’s power to improve wages (and for that matter, conditions) for the hundreds of thousands of Nevadans who could really, really use a raise.

Educating and training young Nevadans for better jobs is a grand idea. Full speed ahead.

But workforce development is not a substitute for raising the minimum wage. And it shouldn’t be a distraction from the very real need to do so.

Feature photo by David Calvert.

Democrats introduce bill raising minimum wage by $4 over five-year period

By Riley Snyder and Megan Messerly

Senate Democrats have introduced a bill to raise the minimum wage in Nevada to $12 over a five-year period.

The bill, which was introduced on Monday as SB106, would incrementally raise the state’s minimum wage by 75 cents a year for five years until it reaches $12 an hour for employers who don’t offer their employees health insurance or $11 an hour if they do.

The state’s current minimum wage is a tiered system of $7.25 an hour or $8.25 an hour based on whether or not the employer offers health insurance. That current wage was set in place via a constitutional amendment passed in 2006.

Senate Majority Leader Aaron Ford promised in a floor speech on Monday that Democrats would raise the minimum wage in 2017.

Senator Aaron Ford on Feb. 6, 2017, the first day of the Legislature. Photo by David Calvert.

“Back then, I was a teenager working to buy a pair of Jordans,” he said, referring to a past job at a Dallas Burger King. “Now, too many minimum wage workers are trying to raise teenagers named Jordan.”

Speaker Jason Frierson also touted the importance of establishing a “living wage” in a speech to the Assembly Monday morning, along with a host of other programs to create economic security.

“We have to create that economic security for families by addressing the need for a living wage, paid family leave and a continuation of the efforts to diversify our economic opportunities with new high tech and clean energy jobs,” Frierson said.

Gov. Brian Sandoval's spokesman Mari St. Martin said in a statement Tuesday afternoon that the governor would not comment on specific legislation until it undergoes legislative review but that he has "historically opposed" legislative attempts to increase the minimum wage.

“Due to the predicted loss of jobs and harm to small businesses, the potential to block young people and individuals with less work experience from open positions, and an increase in consumer prices, the Governor has historically opposed a legislative mandate to increase the minimum wage," she said in the statement. "The Governor believes a better strategy to raise wages is an investment in workforce development and education programs which have proven success and also increase household prosperity."

12:00 p.m. This story has been updated to correct the Burger King that Sen. Aaron Ford previously worked at. It was in Dallas, not Houston.

4:52 p.m. This story has been updated to include a statement from Gov. Brian Sandoval's office.

Indy Primer: Long road for minimum wage increase in Nevada

Democrats control both houses of the Nevada Legislature, but progressives hoping to see a large minimum wage increase pass during the upcoming session might not want to get their hopes up.

Despite a consensus among Nevada Democrats to try to raise current minimum wage — a tiered system of $7.25 or $8.25 an hour based on employer-offered health care  — lawmakers have yet to agree on how high to raise the wage as well as any specific legislative path forward.

A minimum wage increase could have a profound effect on Nevada’s economy and many low-wage workers, as more than a third of the state’s workforce makes less than oft-stated progressive goal wage of $15 an hour. Nearly 20 states saw their minimum wage go up at the start of 2017, and progressive lawmakers and groups plan to make a similar push during Nevada’s 120 day legislative session.

No bills have been submitted so far, but lobbyists and legislators on both sides of the issue predict that raising the wage will be one of several Democratic priorities with an uncertain path forward under Republican Gov. Brian Sandoval.

Wage basics

Nevada’s two-tiered minimum wage system places it somewhere in the middle of national rankings. It’s one of 29 states with a minimum wage higher than the federal minimum of $7.25.

But Nevada is unique in not having raised the wage since 2009, the last year the federal wage increased. A National Conference of State Legislatures tally found 19 states increased their minimum wage at the start of 2017, and neighboring states like California, Oregon and Arizona recently passed laws or ballot initiatives increasing their wages.

Voters passed a higher minimum wage into the state constitution in 2006, which also allows the state’s Labor Commissioner to adjust it based on changes to the federal wage or cost of living increases.

Even a small increase in the minimum wage would affect a significant chunk of Nevada’s workforce, which is significantly clustered around low-paying jobs and has a median wage of $16.20 an hour.

Roughly 44,000 people currently make between $7.25 and $8.25 an hour according to state labor statistics, or about 3.8 percent of Nevada workers. About nine percent of the workforce, or more than 104,000 people, have an hourly wage under $9 an hour, and more than a third of the state’s workforce earn less than $15 an hour.

David Cooper, an economist with the left-leaning Economic Policy Institute, estimated more than 535,000 Nevada workers currently make less than $15 an hour. Though the report is based on rough estimates from a national survey, Cooper said the ballpark estimate indicates what even a small increase in the wage would do.

“Even middle class folks realize that they would be making more if minimum wage went up,” he said.

Business groups and lobbyists caution that raising the wage could damage businesses that employ many low-wage workers, and that a higher minimum wage in Las Vegas might not work for businesses in rural Nevada.

“It’s one of those things that sounds good in practice and it certainly helps (legislators) get votes and they can stand on the stump and say they’re for working people, when in fact there’s not a lot of evidence (that it helps workers),” Reno Chamber lobbyist Tray Abney said.

One tool economists use to measure the impact of raising the wage through comparing the ratio of the minimum wage to workers in the middle of the income spectrum, with a higher ratio signifying a higher risk for job losses. The New York Times Upshot blog analyzed those ratios for several American cities under a hypothetical $15 an hour wage, and found that Las Vegas had one of the highest ratios.

This isn’t the first time that activists and lawmakers have pushed to raise the minimum wage — Democratic Sen. Tick Segerblom unsuccessfully pushed for a $15 an hour constitutional change during the 2015 legislative session, and a measure sponsored by Republican Sen. Patricia Farley revamping overtime rules and raising the wage to $9 an hour fell in the final hours of the session.

An organization of progressive groups quietly dropped a proposed ballot measure in early 2016 that sought to raise the wage to $13 an hour by 2024.

Hurdles

Democrats have two realistic paths to increase the minimum wage — either starting the constitutional amendment process or through trying to pass an increase into state law that could take effect much sooner.

Neither path is easy. A constitutional amendment requires approval in two subsequent sessions and then approval by voters in a general election, meaning any increase wouldn’t take effect until at least 2020, and advocates would likely need to wage a costly campaign to support the ballot measure.

But that process, which only requires a simple majority vote and no approval from Sandoval, might be easier to push through than a change in state law which could theoretically raise the wage much sooner.

Changing the wage floor through legislation has its own roadblocks. Democrats don’t hold a two-thirds majority necessary to override a possible gubernatorial veto, and Republican leadership is generally skeptical of any increase without some sort of concession or changes to existing labor laws.

“Not that I’m against a minimum wage, I just think arbitrarily setting it at some anecdotal number is just political posturing and nothing more,” Republican Assembly Leader Paul Anderson said. “There’s no economic reasoning for it.”

Republican Senate Minority Leader Michael Roberson said he would support similar legislation in the last session that raised the wage to $9 an hour but also modified how overtime is calculated. Democrats largely opposed the bill despite supporting the wage hike, citing concerns with rolling back how certain workers earn overtime to only those working over 40 hours a week.

Democratic state Sen. Tick Segerblom, who introduced a $15 an hour minimum wage amendment in 2015, said he thought Democratic legislators generally wouldn’t be interested in rolling back labor law to get a small increase in the wage.

“I don’t know how much (Republicans) are going to fight,” he said. “If it involves any kind of a trade-off, as far as overtime, or prevailing wage or anything like that, it’s just not going to happen. I think we might be content to just wait it out with a constitutional amendment or hopefully get a Democratic governor in 2018.”

Segerblom said it’s possible that Sandoval could sign on to a smaller increase to the wage, but many lobbyists and lawmakers interviewed by The Nevada Independent said it will likely become one of many bargaining points between the governor and Democratic leadership hammered out before the end of session.

Randi Thompson, a lobbyist for the National Federation of Small Businesses, said she wasn’t sure how Sandoval would view the minimum wage issue but wouldn’t be surprised to see it used as a bargaining chip for his other legislative goals.

“I don’t know if the governor would be willing to give up minimum wage if he could, say, get (Educational Savings Account) funding, she said. “And I wouldn’t blame him, he’s got his priorities.”

A spokeswoman for Sandoval said the governor does not comment on “hypothetical legislation.”

Democratic sources said legislative leadership plans to raise the wage in a “timely fashion,” but stressed that plans of action were in flux and no consensus on a higher wage has been reached, although leaders would want an incremental increase and are looking at nearby states that recently raised their wages as examples.

More details will likely be available when Democrats unveil their updated legislative playbook — The Nevada Blueprint — in early February.

Democratic lawmakers themselves aren’t monolithically supportive of hiking the wage to $15 an hour. Several lawmakers contacted by The Nevada Independent spoke in general terms about supporting a higher wage, without giving a specific figure that they would support. The 2016 Nevada Democratic Party platform calls for a “living wage” without any specifics given.

Warren Hardy, a former state senator and lobbyist for Nevada Restaurant Association, said he would categorize several incoming legislators as “pro-businesses” Democrats who might be willing to consider a smaller wage hike and other concessions to the business community. He said businesses and Republicans may not be reflexively opposed to a smaller wage hike if paired with other concessions.

“I don’t sense that the Republicans are opposed to a reasonable increase in the minimum wage, as long as it takes into account other factors which is what we’re going to be talking about, he said. “But the Democrats, I think it’s very high on their priority list.”

Lawmakers will also face pressure from progressive groups like PLAN, which called for a higher state minimum wage in their pre-session address. The group’s communications director, Laura Martin, noted that several incoming legislators attended “Fight for 15” rallies throughout the 2016 campaign and are now in a position to implement progressive policies.

“I think the minimum wage conversation is really going to expose people’s values for what they are,” Martin said. “We just spent how many special legislative sessions on projects that we still don’t know will ever be successful. But we can’t ask people to raise their wages for their employees 25 cents, a dollar, for fear that the Antichrist will come?”

But negotiations could quickly backfire. A restaurant association attorney sent a letter to legislators in the last session warning that legislative action increasing the wage could violate the state constitution and invite legal challenges, though the state’s Legislative Counsel Bureau said no constitutional conflict existed.

Segerblom said he hopes Sandoval, who is termed out of office in 2018, will be more willing to work with Democrats because he doesn’t have to worry about running for re-election.

“I think there’s a real chance that there’s a lot of progressive legislation he will sign, because it’s the national mood, it’s the right thing to do, and it’s not like he has to worry about running for re-election or what’s the Republican base going to think about or whatever,” he said.