Low Wage Employer Fee to Boost Connecticut’s Jobs, Revenue and GDP
State and local governments are facing steep costs because underpaid employees of highly-profitable corporations are forced to turn to social safety net programs—and many communities are beginning to drive solutions to this problem. As Connecticut lawmakers consider new legislation requiring large companies to increase wages or pay a fee to help cover state-funded services like child care and health care, a new study shows the economic impact of this approach would be beneficial to the state.
The study released today by Jobs With Justice Education Fund —and authored by Daniel Kennedy, Ph.D., Stan McMillen, Ph.D., and Louise Simmons, Ph.D., —examines the costs and benefits of the proposed statute, An Act Concerning the Recoupment of State Costs Attributable to Low Wage Employers (SB 1044). This economic impact analysis report finds that the Low Wage Employer Fee would increase jobs, revenue and Gross Domestic Product (GDP) for the state of Connecticut.
“Connecticut families are subsidizing highly-profitable corporations at a tune of $486 million a year,” said Jobs With Justice Education Fund Research Director Erin Johansson. “This study offers solid data affirming how the Low Wage Employer Fee is a commonsense solution to reduce the squeeze on state social programs.”
The study’s authors find that the fee collected from covered large employers would generate an estimated $188,592,170 in new revenue for the state per year; net state employment would increase by an estimated 538 to 1,388 jobs; and the state’s GDP will increase by an estimated $92.4 million to $130.57 million per year. This Low Wage Employer Fee would only apply to corporations with 500 or more employees and to those employees earning $15 an hour or less.
The study’s key findings are based on three models for the most likely approach corporations will take – to either absorb the fee in ways that would reduce sales, pass the full cost along to consumers or to share them equally among these two approaches. The economists’ revenue projection is also lower than what the state’s own economists’ project. The study’s authors assume most corporations now paying the minimum wage or just above it won’t chose to increase wages to more than $15 an hour. However, if corporations do increase wages (as Aetna is doing), that would also have a positive impact on working people and the economy, according to a separate study.
View the full report, UConn School of Social Work, Office of Research & Scholarship.