Revenue Options Real and Fake: A Minimum Wage Increase and Gaming Expansion

Marc Stier |

Ten years ago was the last time Pennsylvania raised the minimum wage in advance of the federal government doing so. In those ten years, inflation has reduced the value of the minimum wage to a poverty wage. That’s why it’s time to raise it again, ultimately to $15 an hour, but immediately to $10.10.

A raise in the minimum wage to $10.10 will help 1.2 million Pennsylvanians who work hard but make less than $10.10 an hour right now. Eighty-seven percent of those affected would be over age 20 (not teenagers).  Eighty-four percent of workers who will be affected by a minimum wage increase have a high school degree or more.  And 30% of affected workers have some college education.

Raising the minimum wage won’t just help workers who receive it — every dollar in new wages will be spent generating economic activity that benefits every business and every community in the state.

And at a time when legislators are struggling to find new revenues to balance the budget, that new economic activity will also generate new tax revenues for the state of $121.5 million. (Counties and municipalities that tax sales and wages will also see new revenues.) In addition, raising the minimum wage will and generate another $104 million in savings in reduced Medicaid spending as thousands of Pennsylvanians move from traditional Medicaid, for which the state carries half the cost, to expanded Medicaid, 90% of which is paid for by the federal government.

This total budgetary savings is $225.5 million. And unlike so much else that the General Assembly is considering this week, the savings are real.

The numbers flying around in the halls of the Capitol for gaming, on the other hand, seem fantastical. We don’t know which gaming proposal will ultimately see the light of day, but given what we have heard, we can confidently say that most of the proposed new gaming revenue comes from the one-time sale of new licenses. Even if the state receives all that is projected —and there are striking examples in the past of those projections being tens of millions too high —legislators will have to come back next year to replace them. And the on-going revenues from internet gaming are entirely uncertain — as is the impact internet gaming may have on reducing revenues from existing casinos.

Rather than continue to spin fantasies, the General Assembly should to base this budget on reality. And the reality of a minimum wage increase is that it benefits working people who deserve a raise, businesses who will benefit from new consumption, and the taxpayers of the state who will be spared another $225.5 million in tax increases to close the deficit.