Editorial: Minimum wage hike will increase prices and crime

Despite all the evidence that it will do more harm than good, a bill to raise the minimum wage in Nevada is still wending its way through the halls of the Legislature in Carson City.

Assembly Bill 456 would raise the minimum wage 75 cents per hour each year as it climbs from the current $7.25 per hour for those receiving company health insurance and $8.25 for those not insured until it reaches $11 or $12 per hour.

In his State of the State speech, Democratic Gov. Steve Sisolak called for raising the minimum wage and declared, “It’s impossible for an individual, let alone a family, to live on $7.25 an hour,” ignoring the fact almost no one “lives” on minimum wage. Fewer than 3 percent of workers are paid the minimum wage and most of them are under age 25 and working part-time. Most are supplementing family income rather than being self-supporting.

In fact, raising the minimum wage often results in jobs being cut and/or working hours reduced. One study found the average low-wage worker in Seattle lost $125 a month because the minimum wage was raised to $15 an hour.

Now, a recent study released by the National Bureau of Economic Research found that raising the minimum wage can harm even those who are not being paid the minimum wage.

Using national crime data from 1998 to 2016, the study found “robust evidence that minimum wage hikes increase property crime arrests among teenagers and young adults ages 16- to-24, a population for whom minimum wages are likely to bind.”

The study projects that raising the minimum wage to $12 an hour nationally would result in approximately 231,000 additional property crimes, costing the nation $1.3 billion. Raising the minimum wage to $15 an hour would generate over 410,000 additional property crimes and $2.4 billion per year in additional crime costs.

“We conclude that increasing the minimum wage will at best be ineffective at deterring crime and at worst will have unintended consequences that increase property crime among young adults,” the study authors concluded. They said that previous studies that projected a decrease in crime due to raising the minimum wage ignored the possibility of hours being cut and jobs being lost.

Don’t ignore the costs imposed on everyone when the minimum wage is hiked. A Cato Institute analysis in 2012 found that a “comprehensive review of more than 20 minimum wage studies looking at price effects found that a 10 percent increase in the U.S. minimum wage raises food prices by up to 4 percent and overall prices by up to 0.4 percent.”

The Congressional Budget Office in 2014 estimated that if the federal minimum wage were increased to $10.10 an hour — as proposed by President Obama and others — up to a million workers would lose their jobs.

According to the American Enterprise Institute, when the minimum wage rose 41 percent between 2007 and 2009, the jobless rate for 16- to 19-year-olds increased by 10 percentage points, from about 16 percent in 2007 to more than 26 percent in 2009 — even higher for minorities.

Without those entry level jobs younger Americans cannot build the skills needed to earn higher pay for a lifetime.

Still another Heritage study reported that every dollar increase in minimum wage really only raises take-home pay by 20 cents once welfare benefits are reduced and taxes are increased.

It’s the immutable law of unintended consequences. Lawmakers should abandon their support for this bill, which would cause more harm than good.

A version of this editorial appeared this week in some of the Battle Born Media newspapers — The Ely Times, the Mesquite Local News, the Mineral County Independent-News, the Eureka Sentinel,  Sparks Tribune and the Lincoln County Record.

Editorial: PERS reform needed to curb ever higher costs

The PERS cost creep continues.

Earlier this month the board of directors of the Nevada Public Employees’ Retirement System authorized an increase in the amount state and local public employees and their employers — read: taxpayers — must contribute to cover pension costs.

That means, starting next July 1, for regular PERS members — teachers and other government workers — the amount of each paycheck that must be paid into the pension account will increase from 28 percent to 29.25 percent. Half of that amount comes from the worker and half from the taxpayers. Since the average public employee salary should be almost $53,000 a year by then, each worker would need to kick in on average another $330 or so a year to be matched from tax funds. (November 2018-Board Book)

Police and firefighters, who tend to have shorter careers, are assessed a higher amount. Their contributions will increase from 40.5 percent to 42.5 percent. Since the average pay should be more than $79,000 that means an almost $800 increase to be chipped in by each cop and firefighter, also matched with tax money. 

Expect those government workers to bemoan the pay check cut — even though their benefits contributions are being increased — and run crying to the Legislature to demand more money. 

The Nevada government worker retirement system, unlike anything found in the private sector, is based on a defined benefit plan, meaning pensions are calculated as a percentage of the highest pay the worker receives at the end of his or her career times the number of years worked. 

According to the American Enterprise Institute, the average Nevada public employee pension is $64,000 a year, while the average Social Security annual benefit is $16,000. Nevada Policy Research Institute has posted at its TransparentNevada.com website a list of pensions paid in 2015. This includes more than 1,500 public employee pensioners drawing more than $100,000 a year.

The cost of these pensions have skyrocketed over the years.

Victor Joecks, a columnist for the Las Vegas newspaper, points out, “Nevada has been increasing contribution rates for decades to pay off unfunded pension liabilities. When PERS started in 1948, the contribution rate was 10 percent for all employees on their first $400 in earnings. In 2003, it was 18.75 percent for regular employees and 28.5 percent for police and fire. Next year’s rates are 56 percent higher for regular employees and a 49 percent increase for police and fire compared to 2003.”

Joecks calculates that if teachers contributed at the same rate they did in 2003 their take-home pay would be $2,800 more a year.

The system has an unfunded liability of more than $40 billion when one uses generally accepted accounting principles. That’s more than $53,000 per Nevada household.

It is long past time that the state change its ever more costly pension program from the defined-benefit plan to a defined-contribution plan, similar to the 401(k) plans used by corporations. The worker and the employer each contribute a set amount of the salary and the money is invested until the worker cashes out.

There actually was a bill introduced in the 2013 legislative session that would have done this. The bill garnered no discussion and no vote was ever taken. It died without a whimper in the Assembly Ways and Means Committee.

One day the PERS balloon will burst. We call on lawmakers to act now.

A version of this editorial appeared this week in some of the Battle Born Media newspapers — The Ely Times, the Mesquite Local News, the Mineral County Independent-News, the Eureka Sentinel,  Sparks Tribune and the Lincoln County Record.

Editorial: Window on government employee pensions is eye-opening

The Nevada Policy Research Institute has updated its popular transparentnevada.com website, which reports the names and salaries of state and local government employees, with 2015 data.

While the salary data is significant information for taxpayers who want to make sure we are getting our money’s worth, it may be the benefits, particularly retirement benefits, that warrant greatest scrutiny.

Yes, according to Nevada’s own employment records state and local government employees are paid about $10,000 more a year in wages than those in the private sector, but taxpayer-funded pensions for those workers in the Nevada Public Employees’ Retirement System known as PERS, are the richest in the nation, according to research conducted by the American Enterprise Institute.

Robert Fellner, director of transparency research at NPRI, points out in a press release announcing the update at transparentnevada.com that, while the median private employer spends 3 percent of pay on their employees’ retirement accounts, Nevada taxpayers contribute 28 percent of each state and local government employee’s salary toward pensions and 40 percent for police and fire.

“Nevadans can expect higher taxes or service cuts if they are forced to continue paying for retirement benefits that are nearly ten times richer than what they themselves are likely to receive,” Fellner writes. “In 2013 — the most recent year data was available — Nevada’s local governments spent a national-high 9.6 percent of direct general expenditures on retirement costs, nearly quadruple the 2.5 percent national average.”

The government pension program has an unfunded liability of $40 billion.

Fellner’s research turned up one example of just how daunting it is for the average taxpayer to unravel the lucrative pension formula.

A Clark County police officer who retired in 2015 with 30 years on the job was eligible to receive 78 percent of his salary as an annual pension, which would have been $92,000 since his salary was $118,000. Instead, he is scheduled to receive $172,000 a year for life.

This is because PERS, as Fellner explains, counts as salary a variety of additional pay, such as call-back pay, as well as part of the government’s pension contribution, which seems like double dipping.

According to transparentnevada.com, in 2014 there were more than 1,000 Nevada state and local retirees receiving annual pensions in excess of $100,000.

American Enterprise Institute found Nevada full-career PERS retirees fetch the most generous retirement checks of any state in the union — $64,000 a year on average or more than $1.3 million in lifetime benefits. That doesn’t include police and firefighters, who can retire earlier and generally have higher salaries.

In comparison, the average Social Security recipient gets $15,500 a year after being on the job decades longer.

In a report published during the 2015 legislative session, NPRI’s Fellner wrote, “Over the past 20 years, the amount Nevada taxpayers contribute toward public employee retirements has skyrocketed — from $384 million in 1995 to $1.4 billion today. That’s an increase of more than 50 percent after adjusting for both inflation and membership growth.”

During that session there was a bill pending to rein in this growth in public employee pension cost.

The bill — Assembly Bill 190 — would have changed the current system from a 100 percent defined-benefit program, in which the retirement benefit is calculated based on years of service and level of pay of the employee at retirement, to a hybrid — part defined-benefit, part defined-contribution. A defined-contribution plan is similar to the 401(k) programs used primarily by the private sector in which a portion of the salary is invested in something like a mutual fund. The amount of the pension depends on how well the investment does and relieves the taxpayer from having to cover any shortfall.

It would not have affected the pensions of current employees and only applied to those hired in the future.

Of course, it died in committee without ever being voted on.

Transparency is good, even when what you are seeing is so eye-opening.

A version of this editorial appeared this past week in many of the Battle Born Media newspapers — The Ely Times, the Mesquite Local News, the Mineral County Independent-News, the Eureka Sentinel,  Sparks Tribune and the Lincoln County Record. It ran as a column in the Elko Daily Free Press.

Newspaper column: Minimum wage hike proposal would have opposite effect of its intention

Be careful what you ask for, because you just might get it — good and hard.

A group of altruistic, benevolent and well-meaning Nevadans calling themselves the Committee to Raise the Minimum Wage in Nevada has filed a petition with the Nevada Secretary of State’s office that — if it garners enough signatures to be placed on the 2016 ballot and then enough votes at the polls — would nearly double the minimum wage over the next decade.

The petition, filed this past week, would amend the Nevada Constitution to increase the minimum wage to $9.25 an hour upon passage and by 75 cents a year until it reaches $13 an hour, after which it would increase to match any federal minimum wage hike or equal to an increase in the cost of living. The current constitutional minimum wage is $7.25 an hour if health insurance is provided and $8.25 if not.

Fast-food workers rally for minimum wage in Las Vegas (R-J photo)

The petition also states that tips and gratuities shall not be credited as a way to offset the minimum wage and removes the $1 credit for providing health insurance. It also removes the exemption for those under 18 employed part-time by non-profits, but it does allow a lower wage if it is part of a “bona fide collective bargaining agreement” — the usual sop to the unions.

A measure to raise the minimum wage to $9 an hour never made it out of the 2015 Legislature.

The committee must gather 55,000 signatures from across the state to qualify for placement on the ballot.

One of the leaders of the petition drive, Neal Anderson, a Unitarian minister from Northern Nevada, told The Associated Press, “All labor has dignity and therefore we need to value that work. At some point we need to change policy as well, not just provide charity, which is never enough.”

The problem is that study after study has found that raising the minimum wage does not lift more people out of poverty, but rather its net effect is to actually increase the portion of families that are poor and near-poor, according to an analysis of those studies by the Heritage Foundation. This is because a few will see higher income, others will have their work hours reduced and some will drop from minimum wage to zero wage due to layoffs and businesses closing their doors.

The Congressional Budget Office has estimated that if the federal minimum wage were increased to $10.10 an hour — as proposed by President Obama and others — up to a million workers would lose their jobs.

According to the American Enterprise Institute, when the minimum wage rose 41 percent between 2007 and 2009, the jobless rate for 16- to 19-year-olds increased by 10 percentage points, from about 16 percent in 2007 to more than 26 percent in 2009 — even higher for minorities.

These are entry level jobs without which younger Americans cannot build the skills needed to earn higher pay.

Another Heritage study reported that every dollar increase in minimum wage really only raises take-home pay by 20 cents once welfare benefits are reduced and taxes are increased.

Then there are the affects on everyone. A Cato Institute analysis reports that a “comprehensive review of more than 20 minimum wage studies looking at price effects found that a 10 percent increase in the U.S. minimum wage raises food prices by up to 4 percent and overall prices by up to 0.4 percent.”

Victor Joecks, executive vice president of the Nevada Policy Research Institute, has warned that this proposal is not only anti-business, but anti-worker as well.

“Ultimately, it is the workers who get paid the least that will suffer the most from hikes in the minimum wage — with many of them losing their jobs as businesses close or turn to automation to replace entry-level jobs,” Joecks writes on the NPRI website. “The primary value of entry-level jobs is that they allow workers to gain basic employment skills, which in turn allows them to earn higher wages in the future. Raising the minimum wage, however, makes it harder for low skill workers to get those first jobs. Having that first job is crucial, because two-thirds of minimum wage workers earn a raise within a year.”

He points out that Nevada teenage unemployment already is 23.6 percent.

If this petition is successful it could put countless Nevadans on the dole for life.

A version of this column appears this week in the Battle Born Media newspapers — The Ely Times, the Mesquite Local News, the Mineral County Independent-News, the Eureka Sentinel, the Lincoln County Record and the Sparks Tribune — and the Elko Daily Free Press.