Summary
Alaska Ballot Measure 1 addresses three issues simultaneously. First, it would raise Alaska’s minimum wage from $11.73 to $13 per hour beginning July 2025, $14 per hour beginning July 2026, and $15 per hour beginning July 2027. Thereafter, Alaska’s minimum wage would continue to be adjusted upward in accordance with the rate of inflation, as it is under existing law. Second, the initiative requires any Alaska employer with fewer than 15 employees to award 40 hours of paid sick leave to each employee on an annualized basis. Employers with 15 or more employees would be required to award all employees 56 hours of paid sick leave on an annualized basis. Third, the initiative would forbid any employer from taking adverse action against an employee who refuses to listen to the employer’s opinion on religious or political matters as part of a meeting or other forms of communication.
Fiscal Impact
Legislative staff has not provided a fiscal analysis for Measure 1. However, minimum wage increases and the mandatory awarding of paid leave time can affect state and local governments in a few ways. First, corporate income tax revenues may decline in proportion to reduced corporate earnings associated with higher labor costs. Second, state and local governments may bear additional direct compensation expenses for their own hourly or part-time staff. Third, state and local governments may experience some relief in public assistance expenditure to the extent that higher wages cause individuals to no longer qualify for assistance programs.
Proponents’ Arguments
Measure 1 is supported by a political action committee called Better Jobs for Alaska. On its website, Better Jobs For Alaska argues that wages have not kept up with the cost of living and that working parents who don’t get sick days must choose between sending a sick child to school or missing a day’s pay. The organization also claims “[c]orporations can force workers to attend closed-door meetings about the bosses’ beliefs about religion, politics, or the economy, and they can fire workers who disagree. The Economic Policy Institute also argues in favor of the initiative:
Increasing Alaska’s minimum wage would strengthen the economic security of working people in the state. The wage benefits that the increase will bring are much needed for low-wage working people who face living expenses far in excess of the current minimum wage.
Alaska AFL-CIO President Joelle Hall told the Alaska Beacon that a higher minimum wage has positive ramifications for non-minimum-wage earners. She pointed out that collective bargaining agreements sometimes reference the state’s minimum wage. For instance, unionized school bus drivers are entitled, through their collective bargaining agreement, to a starting wage that is twice the rate of the minimum wage. So, employees with these contractual provisions will automatically receive higher wages if the minimum wage is increased.
Opponents’ Arguments
Greg Sarber, a board member of Alaska Gold Communications, authored a commentary in opposition to Measure 1. He argues that when California increased the minimum wage for fast food workers to $20 hourly in April 2024, more than 10,000 low-wage workers lost their jobs as their employers pivoted toward less costly alternatives like computerized sales kiosks. He also argues that many entry-level jobs in Alaska already pay more than $15 per hour. Meanwhile, businesses that pay less than this amount often do so because they face limited demand for their products. So, they may be unable to recoup higher labor costs by raising prices and may just close their doors instead.
Discussion
Standard economic theory indicates that as the price of anything increases, the quantity demanded will decrease. In terms of labor, this means that prospective employers will seek to employ fewer workers as the price they must pay for those workers rises.
In theory, wages are primarily a function of productivity, and minimum wage laws tend to most strongly affect the labor market for workers with limited skills or experience, such as those seeking entry-level jobs. Empirical evidence confirms this is true. The Federal Bureau of Labor Statistics publishes data about the characteristics of minimum wage workers every year. Its latest release, summarizing data from 2023, shows that 3% of employed teenagers are minimum-wage earners while only 1% of workers over the age of 25 are minimum-wage earners. Workers without a high school diploma are also twice as likely to be minimum-wage earners. Similarly, part-time workers are twice as likely as full-time workers to be minimum-wage earners. Although this federal data assesses the characteristics of workers earning the federal minimum wage, which is lower than many states require, it demonstrates that the effect of minimum wage laws is concentrated at the entry-level. To the extent minimum wage laws reduce employer demand for labor, relatively unskilled or inexperienced workers are more likely than skilled and experienced workers to experience unemployment.
There are two main caveats to this reasoning. First, if almost all entry-level workers are being paid more than the minimum wage, then a minimum wage law will not affect employment levels. For instance, the average hourly wage for a worker in food preparation workers was $17.48 per hour in 2023 while for retail salespersons it was $17.47, according to federal data. Although these occupations are commonly entry-level and associated with minimum wage laws, the proposed minimum wage that would be implemented with the passage of Measure 1 is unlikely to strongly affect market outcomes.
Second, the relationship between the minimum wage and employment offerings may be affected by the cost or availability of different production techniques. For example, if machinery like a computerized sales kiosk is available at a lower cost than a minimum wage worker, businesses are more likely to substitute machinery for human workers, which would result in fewer job offerings. By contrast, if labor cannot be easily substituted for machinery, then employers may be compelled to retain human workers and offset the additional wage cost through some combination of higher prices charged to consumers or reduced corporate earnings. As economists at the Federal Reserve Bank of St. Louis concluded in 2021: “A higher minimum wage can also result in employers using automation to replace more expensive human labor.”
The evidence on how minimum wages affect workers is clear:
- Some workers get a pay increase.
- Many teenage and young adult workers see their jobs cut. Despite the individual studies supporters will point to showing no job cuts, there are vastly more studies that find job reductions from minimum wage hikes.
- Many more workers see their hours cut.
- Other workers have benefits cut, especially healthcare.
Despite evidence showing that minimum wage laws tend to reduce employment opportunities for entry-level workers or result in higher consumer prices that negate the purchasing power of nominally higher wages, minimum wage laws have been popular at the ballot box. Between 1996 and 2022, 28 ballot initiatives appeared across the country proposing higher minimum wages, and 26 of those were approved by voters. Nevada and Nebraska were the most recent states to raise minimum wages through ballot iniatives in 2022. As of 2024, Washington State has the highest minimum wage at $16.28 per hour while Alaska, at $11.73 per hour, is near the national median, ranking 24th among the states.
Although organizers claim that wages have not kept up the with cost of living, the existing minimum wage is indexed to inflation so that it grows each year in proportion to living expenses.
The language in Measure 1 includes a requirement to award sick leave to all employees. This fringe benefit is an additional form of employee compensation and carries a financial cost that would push the implied minimum wage higher than what is stated. Employees would be awarded one hour of paid sick leave for each 30 hours worked, which implies an additional compensation value of $0.50 on an hourly basis. Employees in large firms would be permitted to use up to 56 hours of sick leave per year while employees in small firms could use only 40. While this caveat may be intended to shield small businesses from some of the measure’s economic impacts, it’s not clear why a worker would need more sick time simply because they work in a business with 15 or more employees.
Finally, Measure 1 forbids employers from penalizing any employee who refuses to listen to the employer’s views on religion or politics. However, Title VII of the federal Civil Rights Act already protects employees from religious discrimination and the federal Equal Employment Opportunity Commission plainly states on its website, “An employee cannot be forced to participate (or not participate) in a religious activity as a condition of employment.” So, at least part of this provision is already covered by federal law.