Gov. Wolf’s budget proposal boosts minimum wage to cut Medicaid costs

April 17--In Gov. Tom Wolf's proposed state budget, administration officials say increasing the state's minimum wage to $12 an hour -- above the current $7.25 -- would shave almost $50 million from public-benefit costs.

The bulk of that potential savings, according to budget estimates, would be from about 100,000 people who would no longer be eligible for Medicaid -- a program funded by both the state and federal governments that provides health insurance to poor and disabled individuals.

But some of the potential savings would be canceled out because state-subsidized wages for child care workers and those who care for disabled individuals -- fields that in some cases pay below $12 an hour -- would increase, according to state estimates.

And while fewer people would be eligible for food stamps under a boost to the minimum wage, the state would realize no savings because the program is federally funded.

Several bills in the Legislature propose to increase the minimum wage. The idea has the support of Mr. Wolf, a Democrat, but is generally opposed by business groups.

Pennsylvania last raised its minimum wage on July 24, 2009, from $7.15 to $7.25, when the federal minimum wage was increased to $7.25.

"It would be transformative at DHS if the governor's [minimum wage] proposal were adopted. There are a lot of folks who work, but they don't make enough money, so they still qualify for benefits," Ted Dallas, the Department of Human Services secretary, said.

Groups such as the Pennsylvania Chamber of Business and Industry and the Pennsylvania Restaurant & Lodging Association say such an increase would ultimately lead to job losses and would hurt small businesses. They also argue that not every low-wage worker is an adult supporting a family; some are teenagers from middle-class households, for instance.

"We're definitely opposed to the governor's proposal," said Melissa Bova, vice president of government affairs for the Pennsylvania Restaurant & Lodging Association.

Alex Halper, director of government affairs at the Pennsylvania Chamber of Business and Industry, argues that low-income families would be better served by programs such as job training, education or a state Earned Income Tax Credit targeted at low-wage working families (such a tax credit exists at the federal, but not state, level).

"We have very serious concerns with the impact on employment of suddenly increasing what are usually entry-level wages," Mr. Halper said.

Sen. Scott Wagner, R-York, who plans to run for governor as a Republican, has said he will introduce legislation that raises that wage to $8.75 per hour in 50-cent increments over the course of three years. It would also keep a minimum wage for everyone under age 18 of $7.25.

Last year, 29 states had higher minimum wage rates than Pennsylvania, including every state around Pennsylvania, according to an annual report published by the state's Department of Labor and Industry.

Mark Price, a labor economist at the left-leaning Keystone Research Center in Harrisburg, said not much research has been done on the impacts of a higher minimum wage on safety-net programs.

A review by the state's non-partisan Independent Fiscal Office of Mr. Wolf's budget proposal noted that people in Pennsylvania with incomes up to 138 percent of the federal poverty level -- about $16,642 per year for one person -- are eligible for Medicaid.

Someone working full time at the current minimum wage would earn only $15,080 annually and would qualify for Medicaid. A person working full time at a $12-an-hour wage would earn $24,960 annually and would no longer be Medicaid-eligible.

The fiscal office's report called the projected savings "reasonable" considering the scope of Medical Assistance services.

A 2014 report by the liberal-leaning Center for American Progress noted the "impact of ... minimum wage policies on public assistance enrollments and expenditures remains an under-explored subject in the economic literature."

Separately from the impact on safety-net program costs, the governor's budget also estimates that state revenues would increase from higher income and sales taxes, though the Independent Fiscal Office's analysis said the benefits would be lower than the governor's estimates.

Mr. Price said a $12-an-hour minimum wage would lift the earnings of about 1.4 million Pennsylvanians.

Kate Giammarise: [email protected], 412-263-3909 or on Twitter @KateGiammarise.

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