Business G-2

nma Nevada Manufacturers Association

780 Pawnee Street,  Carson City, NV  89705-6938

775-882-6662        fax 775-883-8906  email: nma@nevadaweb.com

March 5, 2005

TO:  Chairman Townsend and Members of the Commerce and Labor Committee

FROM:  Ray Bacon

SUBJECT:  AB 87

To the best of my knowledge, there are no minimum wage employees working in the manufacturing companies in Nevada with the exception of company owners.  During start up periods or periods of recessions, company owners often go without pay for some period of time.  We don’t believe you have the authority to dictate that an owner must pay himself.  Just as an owner can exempt him or herself from workers compensation coverage, we suggest the same should apply to this bill.

Additionally:  We see no reason for lines 14 through the first part of line 26 in subsection 4 of Section 2.  Whether a company is union or non union should have no difference on paying the minimum wage.  The cost of living doesn’t change whether a person is a union member or not.  Those lines should be removed from the bill.

In subsection 4 again, attorney fees should not be allowed unless the employee has first taken the matter to the Office of the Labor Commissioner and that office has failed to obtain a timely resolution.  We have no problem with attorney involvement where an employer is resistive to making a correction, but this implies near criminal intent by all employers.  The notification provisions of subsection 1 should be adequate, however the state has a poor record on notification, so there will be “employers” who don’t get the word.  As written this bill make the minimum wage a moving target and “well meaning” employers will get caught as the number moves.  As written, this would cover a senior citizen who hires a neighbor to mow their lawn.  Today, the state has no viable mechanism to notify this type of casual employer, but they are covered by this law.  The objective should be to get the low wage worker paid at higher rate, not to enrich others unless and except there is intent to underpay the worker.

In subsection 5.(c), we see this provision as the section most likely to confuse small employers and lead to penalties and enforcement.  It is a significant benefit to government and society for any employer to provide any health care insurance coverage.  We see this provision having unintended consequences of actually encouraging small employers to drop coverage, raise wages to the $6.15 and put its employees on the public dole for health care coverage.  That is the worst and most expensive option for taxpayers since preventive care is usually minimal or non existent.  Even if a small employer provides major medical coverage for the employee only, that coverage still reduces the potential cost to government significantly and should not be discouraged as this appears to do.  Universal government provided health care coverage is not the law of this country - yet.  We have primarily a system of voluntary health care insurance coverage provided by employers backed up by government welfare and indigent services.  All coverage provided by employers reduces the potential cost of health care for government and should be encouraged rather than penalized. 

We took the time to figure out the minimum wage assuming that the index move 3% or greater each year.  Below you will see two columns with hourly rate.  The third assumes Senator Kennedy is successful raising the wage to 5.85 in 60 days after passage, 6.55 for a year then to 7.25 per hour effective in 2007.

Year	NV Min Wg	Fed. min Wg	NV Min Wg with fed
2006	6.15	6.55	6.55 + 1.40 = 7.95
2007	6.33	7.25	7.25 + 2.10 = 8.35
2008	6.52	7.25	8.35 x 1.03 = 8.60
2009	6.72	7.25	.60 x 1.03 = 8.86
2010	6.92	7.25	9.12
2011	7.13	7.25	9.4
2012	7.34	7.25	9.68
2013	7.56	7.25	9.97
2014	7.79	7.25	10.26
2015	8.02	7.25	10.58
2016	8.27	7.25	10.89
2017	8.51	7.25	11.22
2018	8.77	7.25	11.56
2019	9.03	7.25	11.9
2020	9.30	7.25	12.26

This makes the questionable assumption the federal minimum wage would not be raised again in the 15 years listed.  At some point along this spectrum, Nevada will drive out manufacturing companies.  That point will vary for each company, but we anticipate company will tend to leave before the critical point for them is reached.  Most of those jobs will shift to offshore locations because most products can be built anyplace in the world today.  Manufacturing has accounted for most of the productivity gains in the US for the last 20 years.  This effectively requires we exceed 3% annually to maintain our global competitive position.  Some companies will not be able to do 3% every year.

The Federal Office of Management and Budget completed a study last year indicating the average cost of producing products in the US versus our 20 largest trading partners is 22.4% just because of regulatory and cost burdens here.  Our cost is higher than every other trading partner.  Even Japan with tighter environmental controls than we have does that task for about one tenth of the regulatory cost we have in that area. 

In summary, NMA is not opposed to increasing the minimum wage by a straight simple number because it will have little impact on our members.  However, we strongly believe any law in this area should be simple and be focused on the low wage worker needs and reducing the cost to government.  We believe our suggested changes are consistent with good public policy.  We don’t believe the strong passage by voters of the petition is a good reason to neglect good public policy.  Further we don’t believe the petition as written is good public policy.