[House Hearing, 117 Congress] [From the U.S. Government Publishing Office] PERSPECTIVES FROM MAIN STREET: RAISING THE WAGE ======================================================================= HEARING BEFORE THE SUBCOMMITTEE ON OVERSIGHT, INVESTIGATIONS, AND REGULATIONS OF THE COMMITTEE ON SMALL BUSINESS UNITED STATES HOUSE OF REPRESENTATIVES ONE HUNDRED SEVENTEENTH CONGRESS FIRST SESSION __________ HEARING HELD FEBRUARY 24, 2021 __________ [GRAPHIC NOT AVAILABLE IN TIFF FORMAT] Small Business Committee Document Number 117-004 Available via the GPO Website: www.govinfo.gov __________ U.S. GOVERNMENT PUBLISHING OFFICE 43-447 WASHINGTON : 2021 -------------------------------------------------------------------------------------- HOUSE COMMITTEE ON SMALL BUSINESS NYDIA VELAZQUEZ, New York, Chairwoman JARED GOLDEN, Maine JASON CROW, Colorado SHARICE DAVIDS, Kansas KWEISI MFUME, Maryland DEAN PHILLIPS, Minnesota MARIE NEWMAN, Illinois CAROLYN BOURDEAUX, Georgia JUDY CHU, California DWIGHT EVANS, Pennsylvania ANTONIO DELGADO, New York CHRISSY HOULAHAN, Pennsylvania ANDY KIM, New Jersey ANGIE CRAIG, Minnesota BLAINE LUETKEMEYER, Missouri, Ranking Member ROGER WILLIAMS, Texas JIM HAGEDORN, Minnesota PETE STAUBER, Minnesota DAN MEUSER, Pennsylvania ANDREW GARBARINO, New York YOUNG KIM, California BETH VAN DUYNE, Texas BYRON DONALDS, Florida MARIA SALAZAR, Florida SCOTT FITZGERALD, Wisconsin Melissa Jung, Majority Staff Director Ellen Harrington, Majority Deputy Staff Director David Planning, Staff Director C O N T E N T S OPENING STATEMENTS Page Hon. Dean Phillips............................................... 1 Hon. Beth Van Duyne.............................................. 3 WITNESSES Dr. Heidi Shierholz, Senior Economist and Director of Policy, Economic Policy Institute, Washington, DC...................... 7 Mr. John Puckett, Co-CEO, Punch Pizza, St. Paul, MN.............. 8 Ms. Rebecca Hamilton, Co-CEO, W.S. Badger Company, Gilsum, NH.... 10 Ms. Rachel Greszler, Research Fellow in Economics, Budget and Entitlements, The Heritage Foundation, Washington, DC.......... 12 APPENDIX Prepared Statements: Dr. Heidi Shierholz, Senior Economist and Director of Policy, Economic Policy Institute, Washington, DC.................. 40 Mr. John Puckett, Co-CEO, Punch Pizza, St. Paul, MN.......... 46 Ms. Rebecca Hamilton, Co-CEO, W.S. Badger Company, Gilsum, NH 48 Ms. Rachel Greszler, Research Fellow in Economics, Budget and Entitlements, The Heritage Foundation, Washington, DC...... 52 Questions for the Record: None. Answers for the Record: None. Additional Material for the Record: A&P Master Images............................................ 72 ATR Coalition Letter......................................... 73 Boyer's Food Markets Inc..................................... 77 Casey Waits Testimony........................................ 79 Congressional Budget Office.................................. 80 Council for Citizens Against Government Waste (CCAGW)........ 97 Eureka Pizza Co.............................................. 99 FASTSIGNS.................................................... 100 Fleet & Farm Supply/Ace Hardware............................. 101 Florida Restaurant and Lodging Association................... 103 FreedomWorks................................................. 104 Gary Siebert Testimony....................................... 107 International Franchise Association (IFA).................... 108 Mad Hatter Restaurant & Bakery............................... 110 Maddens Resort............................................... 111 Mark Klinger Testimony....................................... 112 Marshall Street Bar & Grill and The Union Tavern............. 113 Missouri Farm Bureau Federation.............................. 114 National Restaurant Association.............................. 115 NFIB Research Center Study................................... 117 NFIB Letter.................................................. 164 Raise the Wage Act of 2021 Coalition Opposition Letter....... 166 Rangaire Manufacturing Company, LP........................... 169 Rick Knoebels Testimony...................................... 171 Rohrbach Brewing Co.......................................... 173 Rosario Longo Testimony...................................... 174 Rosebud Tractor.............................................. 175 Sal and Jerrys Bakery........................................ 177 SBE Council Letter........................................... 178 Sergio's Family Restaurants.................................. 180 Stephanie Figueroa Testimony................................. 181 54th Street Grill & Bar...................................... 182 Urban Air Adventure Park..................................... 183 U.S. Chamber of Commerce Small Business...................... 185 Zanz Mexican Restaurant...................................... 190 PERSPECTIVES FROM MAIN STREET: RAISING THE WAGE ---------- WEDNESDAY, FEBRUARY 24, 2021 House of Representatives, Committee on Small Business, Subcommittee on Oversight, Investigations, and Regulations, Washington, DC. The Subcommittee met, pursuant to call, at 10:01 a.m., in Room 2360, Rayburn House Office Building, Hon. Dean Phillips [chairman of the Subcommittee] presiding. Present: Representatives Phillips, Craig, Chu, Evans, Davids, Van Duyne, Hagedorn, Meuser, Donalds, and Fitzgerald. Also Present: Representatives Velazquez, Tenney, Luetkemeyer, Bourdeaux, and Young Kim. Chairman PHILLIPS. Good morning, everybody. I want to call the meeting to order and thank everybody for joining us today. I also want to thank our witnesses in particular for taking time out of their busy schedules to be with us. First, I want to go over some important requirements, most of which you already know. But beginning by saying that the standing House and Committee Rules and Practices will continue to apply during hybrid proceedings. All members are reminded that they are expected to adhere to these standing rules, including decorum. House regulations require members to be visible through a video connection throughout the proceeding, so please keep your cameras on. Also, please remember to remain muted until you are recognized so that we can minimize background noise. If you have to participate in another meeting, please exit this one and log in later. In the event that a member encounters technical issues that prevent them from being recognized for their questioning, I will simply move to the next available member of the same party and I will recognize that member at the next appropriate time slot provided that they have returned to the proceeding. For those members physically present in the Committee room today, we will also be following the health and safety guidelines issued by the attending physician. That includes social distancing and especially the use of masks. Members and staff are expected to wear masks at all times while in the hearing room, and I thank you in advance for your commitment to a safe environment to all here today. It is an honor to Chair this Subcommittee and to provide a platform for listening to and supporting small businesses across America. Though our members may disagree on occasion on matters of policy, I want to make it clear that we work for you, the small business owners present today, and the small business owners across the country pursuing the American Dream. I look forward to conducting this hearing and this year's work in a productive and bipartisan manner with Ranking Member Van Duyne. Since the implementation of the New Deal in the 1930s, Congress has been tasked with determining from our collective belief of what is fair and what is right, a standard of living under which no working American citizen should fall. An essential part of this floor is the minimum wage, which was intended to ensure that the least advantaged workers in America can provide for themselves, let alone for their families. But over the past decades, this floor has significantly eroded in value despite a modest increase to $7.25 per hour in 2009. Meanwhile, Washington is caught in partisan gridlock and unable to provide the leadership so desperately needed to resolve the issue despite overwhelming public support for addressing it. It is my core belief that all working Americans who live on the wages that they earn be paid one on which they can survive. It is not just good for humanity, it is good for our economy because consumption is the engine of our economy and money in people's pockets is its fuel. Unfortunately, the current minimum wage falls well below the poverty line for a family of two or more. I cannot imagine that anybody in this room or participating today would say that it is fair and just for any American relying on a full-time wage to survive to earn only $15,000 per year. That cannot make rent. That cannot pay for food. It cannot pay for healthcare. It cannot pay for childcare, and it surely cannot pay for education in any region of our country. But, as I said during our markup just 2 weeks ago, I am troubled that the Raise the Wage Act was included in this COVID relief package without more opportunities for small business voices to be heard and thoughtful members of Congress on both sides of the aisle to offer constructive feedback and amendments. And that is why we were here today, my friends. I am certain that all of us in this room have heard from small businesses and hard-working people in our districts about the impacts, both the positive impacts and the negative impacts that this policy change would have. In my office, we heard from Ken, the owner of the original Pancake House in Plymouth, Minnesota, one of my favorite joints. Like so many businesses which rely on public gathering to succeed, he is barely hanging on. His restaurant, like all restaurants, runs on thin margins during even the best of times and Ken is deeply concerned that a $15 minimum wage will mean that he has to cut jobs if he hopes to stay open. I take these concerns seriously, and they are guiding how we will conduct this hearing today. However, we cannot ignore the benefits that our economy would reap from raising the minimum wage. We often hear from small firms how hard it is to attract and retain skilled workers, and experts say that this policy could help. Studies also suggest it can make workers more productive and boost morale. According to the CBO, the policy at it is written would likely raise wages for 27 million Americans, raise almost 1 million out of poverty, and increase the aggregate wages for low wage workers in American by over $300 billion over the next decade. These newly empowered workers will live in turn to support local businesses and our entire economy. It is also essential that we address this through a racial and gender equity lens. Women and minorities would disproportionately benefit from a $15 minimum wage, which would close pay gaps based on both race and gender. Unfortunately, the same CBO study also projects that this policy as it is written could cost up to 1.4 million American jobs, and intuition tell us it would also result in the loss of a number of small businesses, both of which are consequences which I find as unacceptable as they are preventable. It is our duty on this Committee to listen to the voices of small businesses and support them accordingly. And while we may disagree on whether to increase the minimum wage or by how much or in what manner, I hope and I expect that we will come together for a cordial, productive, and even provocative hearing that will serve the best interests of small businesses, their employees, and our communities. Lastly, and most importantly, I ask that we use our time today to identify ways in which we can mitigate the negative impacts of such a policy while maximizing the positive impacts of raising wages for millions of Americans. As I said 2 weeks ago and I will say it again right now, livable wages, thriving businesses, and job growth are not mutually exclusive options. So let's work together to achieve that trifecta beginning with today's hearing. And with that, I will yield to the Ranking Member, Ms. Van Duyne for her opening statement. Ms. VAN DUYNE. Thank you so much, Mr. Chairman. Before I begin, I would like to thank Ranking Member Luetkemeyer and my colleagues on the Subcommittee for the opportunity to serve as Ranking Member on the Subcommittee of Oversight, Investigations, and Regulations, and I look forward to working with each and every one of you in this capacity. Small businesses shuttered, American families struggling to pay their rent, livelihoods destroyed. These are the devastating consequences we witnessed as a result of this pandemic and along with it forced lockdowns all across the country. Fortunately, in my state of Texas, we were able to open back up quickly, giving millions of small business owners the opportunity to keep their doors open and to fight to protect the businesses that they have invested their lives in. But what we are here to discuss today, a Federal, nationwide mandate to raise the minimum wage to $15 an hour will put us right back to where we were months ago--American jobs destroyed, small businesses forced to close their doors, and life savings gone to waste. I cannot think of anything more devastating in a time when our small businesses are barely getting back on their feet. And Mr. Chairman, I want to thank you for your comments on wanting to take this slower, getting as much input from small businesses that will affect as possible, I really appreciate that. And you had actually quoted from the Congressional Budget Office, the nonpartisan Congressional Budget Office that estimated that an increase in the minimum wage to $15 an hour would lead to a loss of 1.4 million jobs by 2025. And of those 1.4 million workers displaced, the CBO estimated that 700,000, half of those workers, would fall out of the labor force entirely. And make no mistake, this top down, ``one size fits all'' mandate will impact our small businesses the most. These ``mom and pop'' shops already operate on thin margins. The local Main Street restaurants, hardware stores, hair salons, and florists are the heartbeat of our communities, and they simply cannot absorb this mandated increase by any way. And not to mention a wage mandate takes away any variation in discretion that an entrepreneur has to scale his or her business to the area in which it operates. Whether that is in my home state of Texas or the Chairman's home state of Minnesota, why should a waitress at a busy restaurant in the heart of New York City where the average rent for a one-bedroom apartment is $2,475 a month be forced to make the exact same amount as a waitress in Billings, Montana, where the average rent for a one-bedroom apartment is $678 a month? The Federal government does not and cannot know what is best for each town across America, and this ``one size fits all'' mandate fails to recognize the diversity and uniqueness of our townships, towns, cities, and metropolitan communities. What I cannot seem to wrap my head around is the American workers who will be impacted the most by this reckless policy. My colleagues who support this proposal claim this will help our lower to middle class, our single moms. And as a single mother myself who was a waitress back in the day, I sit here wondering what these single moms will do when the local restaurant or hair salon where they work is forced to close their doors because they simply cannot pay their employees $15 an hour. Or when businesses have to choose between shutting down or replacing their workers with automation. As one of my colleagues across the aisle said over the weekend, we do not want those businesses. That is his message to our ``mom and pop'' shops struggling to keep their doors open right now--if you cannot afford to $15 an hour, we do not want you. Let that sink in for a minute. After being selected to serve on this Committee, I was eager to sit down with local business owners across North Texas to hear firsthand what is working and what is not working. Where they need government to get out of the way. And they were all crystal clear. Increasing the minimum wage will have a disastrous impact on their business. In fact, many were confident they would have to close their doors immediately. And what does that mean for American workers? From young workers to single moms, our working families will be hit hardest by this policy. And do not just take my word for it. Over the last few weeks, our Committee has received testimony from small business owners all across the country explaining how this Federal mandate would decimate their businesses and their livelihoods along with it. And I would like to ask for unanimous consent to be able to enter these statements into the congressional record. Chairman PHILLIPS. Without objection. Ms. VAN DUYNE. Thank you. I would also like to take a moment to share testimony we received from Ian MacLean, president and owner of Highland Landscaping in my district of Southlake, Texas, and the Chair of the U.S. Chamber of Commerce's Small Business Council. Here is what he had to say about how legislation that would increase the Federal minimum wage from $7.25 an hour to $15 per hour would affect his business. Before we started hearing about Congress's plan to raise the Federal minimum wage, we had begun exploring solutions to growing wages in our industry such as robotic mowing systems and purchasing more machinery to do more of the labor work on the construction side. In order to mitigate the effects of a minimum wage hike, we would fast- track those solutions and eliminate most of our entry-level and less-skilled labor positions. Unfortunately, this would eliminate our ability to provide youth jobs, entry-level jobs, and summer jobs. And as a small business owner, I take great pride in creating and sustaining jobs for people who can then provide for their families. I believe most small business owners do as well. During the pandemic, I was able to create new jobs. With news of a potential wage hike, I am now making preparations to move in the opposite direction. Small business is the biggest job creator in the United States and the driving force of our economy. A wage hike to $15 per hour would cause small business owners like me to not only stop creating jobs but to eliminate jobs.'' Mr. Chairman, I truly believe each and every one of us here, from our colleagues to our witnesses to our small business owners, want the same thing. We want to see our small businesses make it out of this pandemic. We want to see working families lifted up. And we want to advance policies that will give every American a shot at living their American Dream. I look forward to finding ways to work across the aisle to accomplish these goals, but a ``one size fits all'' minimum wage mandate is not the answer. I thank all of the witnesses for joining us today, and I yield back. Chairman PHILLIPS. Thank you, Ms. Van Duyne. And I would like to take a moment before we begin to explain how this hearing will proceed. Each witness will have 5 minutes to provide a statement, and each Committee member will have 5 minutes for questions. Please ensure that your microphone is on when you begin speaking and that you return to mute when you are finished. With that, I will begin by introducing our witnesses. Our first today is Dr. Heidi Shierholz, senior economist and director of Policy at the Economic Policy Institute. From 2014 to 2017, she served the Obama administration as the chief economist at the Department of Labor where she and other department leaders worked to develop and execute initiatives to boost workers' rights, wages, and benefits. Her research and insights are routinely used to shape policy proposals and inform news coverage in many broadcasts, radio, print, and online news outlets. She received her M.A. and PhD in Economics from the University of Michigan, and her policy focuses include labor policy, wage inequality, unemployment insurance, minimum wage, and many others. So a heartfelt welcome to Dr. Shierholz, and we look forward to your testimony today. Our next witness is John Puckett, co-owner and CEO of Punch Neapolitan Pizza, an 11-store restaurant company headquartered in St. Paul, Minnesota that recently celebrated its 25th year in business. John has always been a fierce advocate for investing in his own employees and creating career path opportunities for everybody. In 2014, Punch was recognized by President Obama in the State of the Union Address for paying starting wages significantly above the industry average. Prior to Punch, John cofounded and grew Caribou Coffee into a significant retail brand across the country. He has an MBA from the Tuck School of Business and a BA from Dartmouth University. Thank you, John, for being here today, and I look forward to your testimony as well. Our third witness today is Ms. Rebecca Hamilton, a second generation owner and co-CEO at Badger, a natural and organic personal care manufacturer known for its unique company philosophy, pioneering family friendly benefits, and B Corp community engagement. In addition to her role as co-CEO, she has spoken at the White House, addressed the UN Convention on Biological Diversity, and testified before Congress on behalf of safer cosmetics. Recently, she was appointed to the National Women's Business Council, a nonpartisan Federal advisory Committee, and we thank you, too, Rebecca, for being here and look forward to your testimony. With that I will yield to the Ranking Member to introduce our fourth and final witness. Ms. VAN DUYNE. Thank you. Our next witness is Rachel Greszler. Ms. Greszler is a research fellow in Economics, Budget, and Entitlements at the Grover M. Hermann Center for the Federal Budget at the Heritage Foundation. Since joining the staff at the Heritage Foundation in 2013, Ms. Greszler has concentrated her research and findings on numerous areas of labor, Social Security, pension, and employment policies. Given her extensive knowledge and research, she has also been a frequent witness on Capitol Hill providing testimony on many of these topics. Her latest research focuses on the minimum wage and its impact on childcare costs. Prior to joining the Heritage Foundation, Ms. Greszler was on staff at the Joint Economic Committee. Ms. Greszler, welcome back to Capitol Hill. We appreciate you and the other witnesses for joining us today as we explore this critically important topic and we look forward to your testimony. Chairman PHILLIPS. Thank you, Ms. Van Duyne. And we will begin with Dr. Shierholz. You are recognized for 5 minutes for your opening statement. STATEMENTS OF DR. HEIDI SHIERHOLZ, SENIOR ECONOMIST AND DIRECTOR OF POLICY, ECONOMIC POLICY INSTITUTE; JOHN PUCKETT, CO-CEO, PUNCH PIZZA; REBECCA HAMILTON, CO-CEO, W.S. BADGER COMPANY; RACHEL GRESZLER, RESEARCH FELLOW IN ECONOMICS, BUDGET AND ENTITLEMENTS, THE HERITAGE FOUNDATION STATEMENT OF HEIDI SHIERHOLZ Ms. SHIERHOLZ. Thank you. Chairman Phillips, Ranking Member Van Duyne, and members of the Subcommittee, thank you for the opportunity to testify on the importance of increasing the minimum wage to $15 an hour by 2025. I want to start by talking about the well-documented, enormous benefits of a $15 minimum wage. My colleagues at EPI have estimated that increasing the minimum wage to $15 in 2025 will generate $107 billion in higher wages for low-wage workers. And CBO's recent analysis shows that $15 in 2025 will make low-income people as a group unambiguously better off. The total income of low-income people would rise, income inequality would shrink, and nearly a million people will be pulled out of poverty. And from a prior CBO analysis, we know that roughly half of those pulled out of poverty by a $15 minimum wage will be children. Research also shows that by providing families with higher incomes, minimum wage increases have improved infant health, they have reduced child abuse, and they have reduced teen pregnancy. And then particularly important in this moment, essential and frontline workers make up the majority of those who would benefit from a $15 minimum wage. More than a third of those working in residential or nursing care facilities would see their pay increase. Forty-two percent of workers in grocery stores would see a raise. More than four in 10 janitors and housekeeping cleaners would benefit. Ten million workers in healthcare, education, construction, and manufacturing would see a raise. And $15 in 2025 would not just reduce overall income inequality; it will reduce inequality by race and gender as well. So due to things like occupational segregation, discrimination, and other impacts of structural racism and sexism, women and Black and Hispanic men are more concentrated in low-wage jobs and would see disproportionate gains from this increase. Raising the minimum wage is long overdue. Workers today who are paid the current Federal minimum wage are paid more than 30 percent less in inflation-adjusted terms than their counterparts were paid 53 years ago. And this is despite the fact that the economy's capacity to deliver higher wages, which is measured by labor productivity, that capacity more than doubled over that period. Had the minimum wage kept pace with productivity growth since 1968, it would be over $23 in 2025. So a $15 minimum wage in 2025 simply means that low-wage workers are able to share in a small portion of the country's growth over the last half century. Another key thing to note is that we can raise the minimum wage to $15 in 2025 with little to no job loss. Minimum wages are one of the most well-studied topis in economics, and although there sometimes appears to be a great deal of controversy about the size of employment effects on the minimum wage, the weight of the evidence clearly shows that minimum wage increases have worked exactly as intended by raising wages without big, negative consequences. So comprehensive reviews of the academic literature on the employment effects of minimum wage increases have found that the typical academic study of the employment effect of minimum wage increases finds little to no impact on employment. And relevant, for the increase that we are talking about now, research also shows that the highest Federal minimum wages the U.S. has ever experienced, the minimum wages of the late 1960s, they also significantly raised wages without reducing the employment of low-wage workers. So that brings up the question, how is this possible? How can minimum wages be raised without causing employers to have to lay off workers? And I will list a couple of reasons here. For one, businesses find that raising wages increases productivity. It improves morale and reduces turnover. Workers with more income have less chaos in their lives. They are more likely to have access to reliable transportation to work, to steady childcare, and to healthcare, and all of those things. Reduce absenteeism and turnover. Turnover is hugely expensive for firms. Research finds that a typical cost of turnover is 20 percent of the position's annual salary. So a reduction in turnover and an increase in productivity help businesses recoup some of the increased costs of the higher wages. And another key thing is that businesses also see an increase in demand for their goods and services when the minimum wage goes up. Low-wage workers are those who are the most spending constrained. They cannot buy all the things they need. So when you raise the minimum wage, you are getting money into the hands of people who are the most likely to have no choice but to spend it, and that increases demand which is very good for business. And I will leave it there for now and just end by saying that the failure to adequately raise the minimum wage has denied workers significant improvements in their standard of living. It has increased poverty and inequality. By raising the Federal minimum wage to $15 by 2025, we will finally deliver a much-needed boost to this country's lowest paid workers. And I look very forward to answering any questions that you may have. Chairman PHILLIPS. Thank you, Dr. Shierholz. Mr. Puckett, you are now recognized for 5 minutes for your opening statement. STATEMENT OF JOHN PUCKETT Mr. PUCKETT. Thank you, Chairman Phillips. And good morning from sunny and warm Minneapolis, Minnesota this morning. We appreciate the chance to talk about what our company has learned from paying our employees more. I am John Puckett. I am the co-owner of Punch. We are a 25- year-old business located in the Twin Cities in Minnesota. We employ almost 300 people at our company and we operate 11 pizzerias. Prior to joining Punch and helping grow that company, my wife and I started Caribou Coffee, which is today the second largest coffee retailer in the country, and I think of significance, we started Caribou Coffee with an SBA loan 30 years ago. So thank you 30 years later for the support of Congress to help small businesses. Everybody knows how competitive the pizza industry is. It may be the most competitive part of the restaurant business. And everybody thinks that is going to survive that their pizza is the best. Our pizza is made in a 1,000 degree wood-burning ovens. Our toppings melt in the oven--fresh mozzarella, crushed tomatoes, olive oil, sea salt. We think our pizza cannot be beat. But our secret ingredient is our people, our fantastic employees. And when we ask our customers why they come back to Punch, they tell us two things. They say it is the quality of your food, but very closely or tied with that answer is it is our engaged employees, our friendly employees. And we think when you walk into a Punch store versus our competition, you can tell our employees like what they are doing and they feel a part of something that they are proud of. Part of our strategy with people is to pay our employees more. As you mentioned, we were featured in the State of the Union Address in 2014 for paying our employees more, and today our average starting wage is $13 an hour and our average employee earns $15 an hour, and this excludes management, and earns an additional $5 an hour in tips. And we are really in the fast food, quick service industry. So that is a remarkable number when you add those two together. Our average hourly employee earns over $20 an hour at Punch Pizza. And we think it is one of the largest, if not the largest in the quick service industry. Another key part of our people strategy, it is not just what they earn when they start. If we could, we would have everyone move on beyond starting wages. We offer several different skill levels and increased pay and make training and development a priority of our business. In addition, we promote most of our managers from our hourly workforce, and these are jobs that start at over $50,000 a year and grow up to $100,000 a year. And I think it is important to note that we have zero educational or accreditation requirements for these manager positions. Our turnover is significantly better than the industry average and pay is a part of it, but it is not all part of it. Advancement opportunities are important. Employees need to believe in the leadership of their store and of the company and of the mission of the company, and we find that providing the best quality tools to do the job and having excellent work processes lead to higher retention as well as pay. This strategy does come at a cost. We earn less money than the companies that we study that are publicly traded, that we can track their labor expense. So we are giving up profit margin in the short and near term, we think for our longer term strategy of having our business both survive and thrive in the future from having better employees and having more engaged employees. To close, I just want to talk about the biggest challenge that small businesses like Punch face. We reconfigured our operations to have socially distanced and keep our employees safe. And we are very proud that we have had zero workplace infections. But that has come at a cost to sales. We lost over $1 million last year and we are losing tens of thousands of dollars a month this winter. And we expect to lose that until we are able to safely reopen our dining rooms. We are hopeful given the increased rate of vaccinations that the restaurant business and Punch will return to more normalcy later this spring and summer, but it has been a challenge like no business has ever faced in the restaurant industry in our lifetime. To close, I would like to thank you all for the incredible lifeline Congress gave small businesses like Punch with the Paycheck Protection Program. There is not a doubt in my mind that Punch, nor most small, independent restaurants could have survived without that lifeline. So all of our employees greatly appreciate that. And I look forward to answering any questions you have later in the meeting. Chairman PHILLIPS. Thank you, Mr. Puckett. And now, Ms. Hamilton, you are recognized for 5 minutes for your opening statement. STATEMENT OF REBECCA HAMILTON Ms. HAMILTON. Thank you, Chairman Phillips and distinguished members of the House Subcommittee on Oversight, Investigations, and Regulations for this opportunity to testify in support of raising the Federal minimum wage. My name is Rebecca Hamilton, and I am the co-CEO and family owner of the W.S. Badger Company, a small cosmetic and drug manufacturer located in rural New Hampshire. I also serve on the National Women's Business Council, a nonpartisan Federal advisory committee advocating for women-owned businesses. Badger was founded in 1995 in our family kitchen by my carpenter father who created a simple balm to soothe his cracked hands. Today, my sister and I lead the company alongside our mother, where we employ 90 people and manufacture over 100 body care products and sunscreens which are sold throughout the United States and in 26 countries worldwide. Badger has been recognized by Forbes as a leading small company and as the New Hampshire Business of the Year. Throughout our 25-year history, fair pay has helped our business to succeed and grow. Our lowest starting wage is $15 per hour. We also provide a range of benefits from day one, and I think that our fair pay business model has helped us to attract and retain excellent staff, while supporting the health of our community and keeping us successful into second generation family ownership, even as many other businesses in our region have struggled. New Hampshire is unique, and that is one of the only states in New England still following the current Federal minimum wage of $7.25 per hour. For businesses, this low wage floor makes it harder to hire and retain employees, build our customer base, and grow. Furthermore, it undermines regional economic development. We participated in a working group in New Hampshire of a number of businesses and healthcare providers examining the relationship between our region's low wage floor and poor health outcomes. We found that an hourly age below $15 was inadequate to maintain a safe and decent standard of living in our region, and that is in a rural region, and that it could not sufficiently meet a person's food, housing, transportation, and healthcare needs. New Hampshire has struggled to attract and retain a young workforce. A 2018 survey found that younger workers see New Hampshire as lacking in job career opportunities. Several years ago we also participated in a series of workforce development meetings where business owners, educators, researchers, and local government officials examined a further concern with attracting a more qualified and talented workforce. And what we found was interesting. This is something that stood out to me is that Badger stood apart from many of these other businesses in our region because we did not struggle with developing our workforce. Our approach to paying a base wage of $15 an hour, combined with compelling benefits set us in a much stronger economic position. This approach has enabled us to spend virtually zero dollars on recruitment while retaining an engaged and committed workforce for the past 25 years. Recruiting and training a new employee involves thousands of dollars and dozens of hours in nonproductive costs. It has been estimated that turnover costs are about 20 percent of an annual salary or higher. By retaining experienced staff, we see increased productivity, less waste, and fewer errors, which is very important in a manufacturing facility. This further saves us considerable money and time. The more we can retain already trained staff, the more money we save, the more reliable our staff, the better our productivity. The success of our business is directly tied to the dedication of our staff. Good pay and benefits also boost morale. When we treat our employees well, they care more about our business success. In a recent employee engagement survey conducted by the Employee Engagement Group, 100 percent of employees surveyed at Badger felt that their managers respected their work-life balance and 82 percent reported feeling highly engaged. What we have seen is that having engaged in motivated staff has helped us to innovate for success in the long run. Our experience in New Hampshire is an excellent case study for how low wages do not help small businesses in regions compete. Rather, low wages hold back businesses and economic growth and hamper employee and community health and well-being. Raising the minimum wage is vital to help us recover from the pandemic and build a stronger economy. In our consumer-driven economy, businesses like mine depend on customers who can afford our products and services. Raising the minimum wage will put more money in the hands of working people who will spend it at businesses in New Hampshire and across the country. Raising the minimum wage to $15 an hour by 2025 will provide a more solid-level playing field for small and large companies. It will help small businesses succeed, and it is an investment in our Nation's workforce that will pay in great dividends now and in the future. Thank you for your time. Chairman PHILLIPS. Thank you, Ms. Hamilton. And Ms. Greszler, you are now recognized for 5 minutes for your opening statement. STATEMENT OF RACHEL GRESZLER Ms. GRESZLER. Thank you. Good morning, and thank you for the opportunity to testify today. As someone who started out my career earning the minimum wage washing dishes and making pizzas and then the sub-minimum wage waiting tables, I can attest to the value, especially for young workers, of minimum wage jobs. Minimum wage jobs are steppingstones, not careers, and that is why young workers fill most minimum wage jobs. $7.25 an hour is not sufficient to support a family, but fortunately, single parents earning the minimum wage make up only 0.1 percent of all workers, and in that case, the Earned Income Tax Credit brings the true minimum to about $10 per hour. I think everyone here agrees that rising incomes are a great thing, especially for low-income workers. But lawmakers cannot create higher income; they can only redistribute it. And despite pretty clear evidence and basic laws of economics, there has been debate over whether a $15 minimum wage would cost jobs or have negative impacts. Those economic studies can be complicated, but for anyone who doubts that doubling the minimum wage will cause substantial disruption and harm, consider what would happen if your mortgage payment or rent were to double. That would likely require a lot of changes, and sometimes those changes end up hurting the people they are aiming to help. For example, Mae Martinez's husband got a $4 per hour raise but then her family lost $2,200 per month in childcare subsidies, forcing Ms. Martinez to stop her daytime college classes and stay at home with her kids. Families without subsidies would also be hurt. I estimate that a $15 per hour minimum wage would increase the cost of childcare by 21 percent on average across the U.S., with 30 percent or greater increases in 10 states. This can make childcare unaffordable for millions of families, especially those in low-cost areas. And this is one example of why a ``one size fits all'' national minimum wage is unjust. It is one thing if high-cost areas like D.C. or Seattle want to hike their minimum wages. At least then workers can go outside the city as some have had to do. But what works in D.C. is unlikely to work in D'Iberville, Mississippi. In fact, $15 in Mississippi would be like a nearly $36 minimum wage in D.C. I would like to now share some of the voice of Main Street employers who have aptly explained the unintended consequences of a $15 minimum wage. Bryn Hornsby is an Air Force veteran who owns two nursing homes in rural Mississippi. For him, a $15 minimum wage would require substantial, but unlikely increases in Medicare and Medicaid reimbursements. And even so, then their private customers cannot afford to pay any higher rates. As Mr. Hornsby said, ``COVID has already brought us to our knees financially. Any increase in the minimum wage would be a death knell for us and many other small nursing home operators.'' Gary Armstrong co-owns seven frozen yogurt shops across three states and he enjoys providing entry-level jobs for teenagers. He says, ``We see ourselves as mentors in basic business operations and customer service skills.'' But Mr. Armstrong said that any significant minimum wage increase would cause them to eliminate many of those jobs and raise prices in an attempt to keep their doors open. Susannah Koteen owns Lido Harlem and Bixi Harlem restaurants in New York City. Ms. Koteen explains, ``The hospitality industry is one of the few careers left that one can make a good living and move up quickly without a college education.'' Think of the millions of jobs that are involved in this business from front of the house, in the kitchen, to farms, delivery drivers, sanitation companies, food and beverage distributors. Ms. Koteen has already had to cut hours and jobs because of New York's hike in the tipped minimum wage to $10 per hour, and she said that a $15 per hour minimum would force many small and independently-owned businesses to close their doors or completely change the way they do business. Betsy LeRoy owns Pizza by Elizabeths in Delaware, and she served and staunchly supports President Biden. She explains, ``It would be difficult to absorb any increase in labor costs right now, much less the steep increase Mr. Biden has proposed. Even in good times, our profit margins were low. Today, our profit margins are nonexistent, as is our ability to increase prices.'' She said a $15 minimum wage would be a death knell to her industry and she asked President Biden to ``save my restaurant from the good intentions of progressive policymakers.'' These examples show that policymakers cannot mandate higher wages into existence without hurting many of the people they want to help. But there are better ways to help workers achieve higher incomes without hurting others, such as expanding alternative education opportunities, like apprenticeships, reforming occupational licensing laws so that it is easier and less costly for workers to use their talents to earn an income, and by protecting workers' rights to contract and earn income through flexible and independent jobs. Thank you. Chairman PHILLIPS. Thank you, Ms. Greszler. And thank you to all our witnesses. We appreciate everything you have shared with us and look forward to a thoughtful and productive hearing. I will begin by recognizing myself for 5 minutes. Dr. Shierholz, I will start with you. A report published by your colleagues at the Economic Policy Institute in January of last year, 2020, argued that policy discussions often treat the Earned Income Tax Credit (EITC) expansion and minimum wage increases as alternatives of which we should simply choose just one. But in reality, of course, the paper argues also that ``the two policies are complementary and may be more effective in combination than either is on its own.'' So before I move on, I would like to ask for unanimous consent to insert this report from EPI into the Committee record. Without objection, the letter will be inserted. So my question, Dr. Shierholz is, please speak to how tax provisions like the EITC and the Payroll Tax Credit can, and perhaps should be used to balance the burden placed on small businesses that would result from higher wages. Ms. SHIERHOLZ. So this is a really important topic. For example, the EITC and strong minimum wages are often presented as being in opposition but they are absolutely companion pieces. The EITC in particular is just an incredibly important program, but one fundamental issue with it is that because workers get the EITC, they will actually accept lower based wages from employers. And this means employers actually capture a meaningful chunk of expenditures on the EITC. So a strong minimum wage is hugely important in this context because it limits the amount of EITC expenditures that employers can capture. So it is just these two pieces go hand in hand. At this point it is definitely a both/and. We should both increase the EITC and increase minimum wages to $15 in 2025. Chairman PHILLIPS. Okay, thank you. I also want to follow up with Ms. Greszler. In your written testimony, you discuss how the EITC essentially ensures that parents do not earn a true minimum wage and that gains from the EITC would phase out as workers earn more. So could you expand a little bit on how those two notions, the two policies would interact and what conditions in the labor market would need to be present to maximize the EITC's usefulness and describe how it might be modified to boost the economic security of low wage workers? Ms. GRESZLER. Yeah, I think this is an example where we have these good policy aims but then there are consequences to them as well. And so the consequence with the Earned Income Tax Credit is, of course, that it has to phase out eventually over time. And when you are phasing out, that is a lower rate that individuals are earning. And when you talk about increasing the minimum wage, that is going to impact a fair number of single parents who are earning lower wages. Even if it is above the $7.25, this could potentially push them into the phaseout zone of the Earned Income Tax Credit. And whereas they might have been getting a 35 or 40 percent subsidy on their wages previously, now they would be getting 21 percent lower than their actual stated wage because of that phaseout. And so it is tricky here to find the right balance between those things. But I think that the point is that we do have a program that is specifically aimed at working parents, and that is different than the minimum wage which affects everybody, including teenagers and the people who need to get their foot into the door. And that is kind of the basis here is that the minimum wage needs to be the bottom rungs on the career ladder so that people can step in and they can climb their way up. And we do not want to cut those off for tens of millions of Americans. Chairman PHILLIPS. Okay, thank you. I have got about a minute left. Mr. Puckett, one area that I think we have failed to investigate and consider much is how a policy like this will surely help millions, tens of millions of Americans at the lowest wage scale. But how would it affect an entity like Punch Pizza with 300 people, I think you mentioned seven tiers of pay. How would this increase ultimately affect the entire wage inflation issue, if you will, at a company like Punch? Mr. PUCKETT. Thank you, Chairman Phillips. That is a good question. And we are really experiencing that today. As you probably know, about half our stores are in Minneapolis-St. Paul markets and both of those markets will be going to $15 an hour in the next 18 to 30 months. And we do offer a significant boost to wage above our starting wage. And thus far, we have handled that and encouraged that increase in our employee skills. But it is a significant inflation. Our total labor cost is about 40 percent of sales. The flip side is we think advancement and giving our employees a chance to build a career. The alternative to that is not very good. A job with no career or no advancement. So we are trying to figure it out. And we look forward to having customers in our dining rooms and business restored so we can get back to more normalcy. But it is definitely a challenge. And as anything at Punch, we have a saying on our wall, ``Figure it out.'' We are going to figure it out. Chairman PHILLIPS. Here, here. Thank you, Mr. Puckett. My time has expired, so now I will turn it to the Ranking Member, Ms. Van Duyne for 5 minutes. Ms. VAN DUYNE. Thank you very much, Mr. Chairman. Ms. Greszler, can you talk to us a little bit about the second and third layer effects of price increases due to an increase in the minimum wage? Ms. GRESZLER. Certainly. So when employers have choices of how to respond to these higher wage increases, one of the most natural ones is to raise prices. And so there are some industries where they will be able to raise their prices-- grocery stores, restaurants. The Heritage Foundation estimated that a $15 per hour minimum wage would increase prices at fast food restaurants by 38 percent. But then there are also other industries that cannot raise their prices. Childcare is one of those. It is highly regulated. There are very strict child-to- teacher ratios, square footage-to-child ratios. And there is really no room to reduce costs through labor, so they would have to strictly increase their prices. But we already know that childcare is extremely costly, even unaffordable to millions of families, and I have estimated that just raising the minimum wage to $15 per hour would increase the cost of childcare by 21 percent across the U.S. And as I said, 10 states would have 30 percent or larger increases. So we are talking about in some states families would face an extra $6,000 per year for two children to attend childcare. And of course, this leads to them having to make family decisions. One worker might need to stay home. Somebody might need to make more so that they can pay for childcare and then they are spending less time with their children. So all of these things just kind of spiral out of control. And I think one other second order is that we are looking at the immediate job losses and thinking of them. You know, 1.4 million, 2.7 million, whatever it is, but you are talking about a lot of young workers who do not have an opportunity to get their foot in the door. And studies have shown that teens who are exposed to higher minimum wages have lower earnings in the future. And those who actually work and are employed in minimum wage jobs have higher earnings because there is so much value to that experience. And for some of them, it is the only way they get their foo tin the door. As you pointed out, the CBO said that half of the people who lose their jobs are going to give up looking for work in a few years from now, and that is not what we want for society. I mean, the American Dream is not to come here and to live on government welfare benefits and to just be sedentary. People want to work and to produce things of value. Ms. VAN DUYNE. I appreciate that. The cost of a dollar in Middle America is different than the cost of a dollar on the Coasts. So how does creating a ``one size fits all'' minimum wage impact states differently? Ms. GRESZLER. That is a great point is that the minimum wage really should be a local wage. Not even a state wage. I grew up in a very small town in Western New York State, 5 minutes from Pennsylvania where you can still buy a good home for $60,000. And so the cost of living just varies so much across the United States. And as I was talking to some business owners, you know, about their employees that are working there, some of them are very content earning the $10-$15 minimum wage range because that is a decent living in some places, especially if you are in a two-income household. And I just do not think that it is the role of lawmakers in D.C. to say that we picked this one size that fits everybody. You know, we saw in Seattle, they are already a high-cost area and they are better able to absorb these higher minimum wages, but even there, when they raised their minimum wage from $11 to $13 per hour, the studies showed that, yes, the employment effects were not huge. They were slightly negative. But the biggest thing was there was a shift. And so the lower experienced workers had to go outside the city to find their jobs, whereas the companies just started hiring and keeping the more experienced workers and it made it harder for entry level workers to get their foot in the door. Ms. VAN DUYNE. One of the most popular case studies on minimum wage came out of Seattle, Washington. Can you just describe the impact that the minimum wage had on those Seattle workers? Ms. GRESZLER. Yes. So it did slightly benefit the wages of the workers who kept their jobs, and those were the more experienced workers. But then there were less experienced workers who were pushed outside of their jobs or who maybe had their hours cut and had to go outside of Seattle to find more income and more job availability. And I think that that is an important thing to look at because when we are talking about on a national scale, that leaves nowhere else for these workers and these businesses to go. And we can look at websites like the Faces of 15 who document hundreds of small businesses who have been affected by rising wage increases, and a lot of them who have struggled to keep their doors open have sometimes moved somewhere else. And we are cutting off that opportunity by saying that $15 works across the entire U.S. And actually, we are advantaging those places who have already gotten to $15 per hour because they have already been there and they have higher costs of living, whereas, it is going to be the lower cost of living areas who would be most devastated by this. Ms. VAN DUYNE. Great. Thank you very much, Ms. Greszler. I yield back. Chairman PHILLIPS. Now I would like to recognize the gentlelady from New York, Chairwoman Nydia Velazquez, Chairwoman of the Small Business Committee, for 5 minutes. Ms. VELAZQUEZ. Thank you, Mr. Chairman. And thank you for holding this important meeting, and the Ranking Member. Dr. Shierholz, the last time we raised the minimum wage was in 2007 and it was only by a mere 65 cents. Can you walk us through how the minimum wage has changed in value over time and what effect this has had on workers and the economy? Chairman PHILLIPS. You have to unmute, please. Ms. SHIERHOLZ. I am so sorry. I am that person in every room. I guess hearings are just no exception. Chairman PHILLIPS. We have all been there. Ms. SHIERHOLZ. I will just say, okay, I will go quickly. I know I am wasting time. Workers today who earn $7.25 an hour are paid 30 percent less in real terms than their counterparts were paid 53 years ago. We have seen a dramatic erosion of the real value of the minimum wage. At the same time, productivity growth has kept marching on. Labor productivity has more than doubled over this period. And I think I mentioned this in my original comments, but if minimum wage increases just kept pace with productivity they would be over $23 in 2025. So what we are seeing is that low-wage workers have not shared in any of the country's growth over the last half century, meaning they have experienced much lower living standards and higher poverty rates than our economy could have afforded them. And a $15 minimum wage in 2025 would help reverse that. Ms. VELAZQUEZ. Thank you. And can you please expand on the positive impacts an increased minimum wage will have on small businesses? Ms. SHIERHOLZ. Yeah. So this is a really important question. I think one of the things that we see with small businesses is they are the folks, small businesses are people who are most likely to work side by side with their low-wage employees. They know them. They know their families. They know their children. They hired them themselves. They really want to be able to give them a raise. But when the Federal minimum wage is very low, when the overall minimum wage is low, they cannot raise the minimum wages independently because it puts them at a big disadvantage, a competitive disadvantage to larger employers who can pay less. And so raising the minimum wage actually allows them to pay their workers more, to attract and retain the workers that they need. And also as I mentioned before, it means they will face lower turnover and a more productive workforce, not face high turnover costs. And then a higher minimum wage means greater demand for their goods and services. When you put money in the pockets of low-wage workers, those are the workers who are very likely to have no other choice but to immediately have to spend it. And that means an increased demand for goods and services which is good for business. Ms. VELAZQUEZ. Thank you. Mr. Puckett, you mentioned that most of your management hires come from inhouse and you have a workforce development program for employees that show promise. How has this benefitted your business? And do you recommend that other businesses do similar, something similar? Mr. PUCKETT. I think it has been a vital part of our business because it gives people a chance to build a career. We would like to reward our top employees with a great job that they can, you know, buy a house, send their kids to school, and being able to offer that in the restaurant business where we do not even require a high school GED to succeed. We just require passion, enthusiasm, and reliability. So it is very important to our culture. I would not want to encourage my direct competition to do it. We think it is so important but I think obviously it is a great thing for businesses to offer a career from a starting hourly. Ms. VELAZQUEZ. Thank you. And many have suggested that an increase in the minimum wage is too much, too fast, but the Raise the Wage Act increased the wage gradually and over a period of 4 years. If the bill passes and the first raise is on June 1st to $9.50, will your business be impacted by this? Mr. PUCKETT. Punch Pizza's business will not. And really, we are almost operating today like, I believe, your scheduled wages would be in 2023 and 2024 given the very strong economy in Minnesota to pay more than our competitors pay. We are really starting at $13 an hour already. Ms. VELAZQUEZ. Thank you. Mr. Chairman, I yield back. Chairman PHILLIPS. Thank you, Madam Chair. And now I recognize the gentleman from Minnesota, my friend, Mr. Hagedorn, for 5 minutes. Mr. HAGEDORN. Mr. Chairman and the Ranking Member, thank you. I appreciate that. I just think this is the wrong approach. This ``one size fits all'' deal as a mandate from Washington is not good. It certainly is not good for a rural district like mine in southern Minnesota. And it seems like if we want to build up folks' wages and opportunities, we should just look at what we did in the last 4 years with President Trump and Republican policies that made sense and worked. Tax reform was excellent. Regulatory reform, less regulations, low-cost energy, trade deals like USMCA. We have the strongest economy in our Nation's history with the lowest recorded unemployment. And people who had ``been left behind'' in the past were doing better than ever. I mean, I would like to see us not have $15 minimum wage as our goal. Fifty thousand dollar jobs is the goal. And when you have like we did a year ago 1.2 million open jobs and not even the people to fill them, you can guess what happens. Wages go up. Businesses do everything they can to find good employees. And I think we just need to build the economy rather than mandate from Washington. But I think about how this works in my hometown. I go to the grocery store there. There are a lot of young kids working in that grocery store getting their start. I think you do a $15 minimum wage in Blue Earth, Minnesota, you are going to be cutting some staff. You are going to be cutting some opportunities. And it is going to hurt that grocery store. It is going to put them in a position, they are probably struggling already, it is a small community. You know, they are not making the big bucks like some of the stores up in Minneapolis and St. Paul. And you close that grocery store in Blue Earth, Minnesota, you are going to destroy that city. You are going to really undermine the whole community. We cannot have that in our small communities. We need to defend them, not put them in a position where they can go out of business. Now, we talked to Bonnie Vetter, the Fleet and Farm and Ace Supply in Fairmont and St. James, she says that this is going to hurt them. They are going to have to drop employees. They are going to have to cut staff. I would like to put her letter in the record if I could, Mr. Chairman with your consent. Chairman PHILLIPS. Without objection. Mr. HAGEDORN. And then, you know, I talked to my friend Wes Otto who owns Zanz Restaurant up in Mankato. Small restaurant, good tacos and all that stuff. And he writes they would have to reduce, with this $15 minimum wage, reduce staff by 20 percent and raise food prices by 25 to 30 percent. And then he adds this, other costs will more likely go up for our business such as vendor prices, cleaning services, and window washers because those employees are going to be paid more and those prices, those costs are going to be passed along to this restaurant and that is going to put him in a position of cutting staff or maybe going out of business. It is not all good stuff. I would like to put Mr. Otto's letter in the record as well, Mr. Chairman. Chairman PHILLIPS. Without objection. Mr. HAGEDORN. So I would ask Ms. Greszler, what Mr. Otto says about driving up other costs, unintended consequences of this, it is not just the direct cost that he has for labor but maybe other costs for services. Does that square with you? Is that something you could see on the horizon for businesses? Ms. GRESZLER. I think absolutely this is going to drive up all types of costs and that is clear when CBO said that it is not just the 17 million impacted workers who would have higher wages but 10 million more above that. And it is the same thing that I heard when talking to employers is it just cycles upward. And so while some of the employers we have here today have a competitive advantage from paying higher wages, you lose that competitive advantage when everybody is paying that wage. And so therefore, they have to increase their wages even higher to maintain those workers because the reality is if everybody that is below 15 is brought up to that 15 and you have some very experienced workers who are making just as much as an entry level person, and they are not going to want to keep that job anymore if they could go take an easier one. And this really just cycles out of control. And to your point at the beginning of the differences here across the U.S., we are talking about an extremely high minimum wage for some areas. And I think that Puerto Rico is a good example of where we might be headed here. The $7.25 minimum wage for the U.S., which applies to Puerto Rico, is over 70 percent of the median wage there. Fifteen dollars per hour is the median wage in Mississippi. And across the entire U.S., we are getting close to that percentage that it would be for Puerto Rico at 15. Well, Puerto Rico has a 40 percent labor force participation rate. That is abysmally low and it is nowhere near where we would want to be. That is 30 percent lower than the U.S. has right now. We do not want to push all these people out of jobs and then have to supplement it with something like a universal basic income and just all these costs that are simply unaffordable. The economy will not work that way. Mr. HAGEDORN. Thank you. I just think the better approach is to build up our economy. Do the pro-growth policies that work. Help people that way. And these arbitrary standards that we are going to impose across the Nation are going to destroy areas like rural southern Minnesota. And I do not think it is in the best interest of the people. Thank you. Chairman PHILLIPS. And now I recognize the gentlelady from Minnesota, another friend from Minnesota, Representative Angie Craig, for 5 minutes. Ms. CRAIG. Thank you so much, Chairman Phillips. And congratulations on your leadership here of the Subcommittee. I am looking forward to working even more closely with my fellow Minnesotan here to help our small businesses across the state. I am grateful for this hearing today and thank you for the witnesses for sharing your experiences and your expertise. The data today to me is clear. Raising the minimum wage gradually over the next several years would lift nearly a million people out of poverty and significantly improve the quality of life for millions more. As an advocate of small business, I do want to be sure we can increase the minimum wage in a sustainable way for our Main Street businesses, especially those that have been impacted by the COVID-19 pandemic, mainly restaurants. I am a proud cosponsor of the Restaurant Act and have pushed for the inclusion of a grant program for restaurants in the American Rescue Plan that we expect to vote on later this week. That bill would include $25 billion in grant money for a new SBA administered Restaurant Revitalization Fund. With that, I want to turn my question to a leader in the restaurant industry and another fellow Minnesotan. It feels like it is Minnesota Day on the Small Business Committee. Mr. Puckett, thank you so much for being here today. Your positive contributions to the state of Minnesota and this industry are indisputable and really evident in your testimony today. And to me and my staff as well, we are all big fans of Punch Pizza back in Minnesota, especially your location in Eagan. You talked in your testimony about the immense loss of revenue your business has experienced due to the pandemic, which we know is a trend across restaurants. Can you speak for just a minute on how restaurants receiving grant dollars through the SBA's Revitalization Fund would help assist the industry in recovering? Mr. PUCKETT. Thank you so much for that good question. We appreciate all you and your staff's business as well back home in Minnesota. The grant programs, similar to the Paycheck Protection Program, have enabled us to operate in this scary, frightening environment but keep our employees safe and withstand some just frightening losses. We never lost money. Punch even made money its first year of business. It was successful. So to just keep jobs, keep our employees, keep our stores operating, keep our landlords paid, operating at a loss until we get back to more normalcy, the comfort and the protection knowing that we are not going to go out of business because of the Paycheck Protection Program, and I hope that you are successful with the new restaurant program. That enables us to tolerate the losses in cashflow and make sure our vendors are being paid and our landlords and employees are being paid. Ms. CRAIG. Mr. Puckett, let me follow up back a little bit closer to the topic and subject of this hearing today. I know Minnesota has gradually raised the minimum wage in the last few years and I know in your testimony you talked about the impact on talent that you are able to recruit to your restaurants. Minnesota has done what we are attempting to do somewhat at the Federal level here already. Give us some sense of how you were impacted by Minnesota's minimum wage increase, and if so, what were some of the tactics you used to navigate those impacts? Mr. PUCKETT. Thank you for the question. Yes, as you know, Minneapolis and St. Paul I believe were in the $10-$12 range at present for minimum wage. And so it has forced us to stay above that. And what we have also done is offer higher wages for cooks than cashiers. So we have a range. So we are ranging from $12-$15 an hour. And in general, for Punch, our cashiers are more part-time students and our cooks are more people that are household heads or their family is primarily responsible. So one of the ways we have done it is also look for ways to grow sales. And expanding digital sales, figuring out the takeout business has been one of the maybe unintended benefits of COVID-19 is that we have been able to survive with 100 percent takeout, and we think that coming out of the pandemic that we will be able to retain more of that business and hopefully continue to stay ahead of the minimum wage. Ms. CRAIG. Mr. Puckett, thank you so much. Sadly, I am out of time. And so with that, Mr. Chairman, I yield back. Chairman PHILLIPS. Thank you. Now, I recognize the gentleman from Pennsylvania, my friend Dan Meuser for 5 minutes. Mr. MEUSER. Thank you very much, Mr. Chairman. And I thank the Ranking Member. Thank you to the witnesses here with us today as well. So we are hearing some theory, some data, and some from the real world. I think this issue, its intent is fine. The intent is to try to help. But the Federal government stepping in and saying I am here to help on a macro level for every business in town throughout the United States usually does not work out. The idea of helping employees by telling employers what to pay them, President Biden actually said that raising the minimum wage to $15 across the Nation, regardless of the economic situation of the area, somehow that is going to help businesses through this very difficult recovery. So lets look at a little bit of the data. According to the Bureau of Labor, 392,000, .48 percent of employees of workers in the workforce make the minimum wage. Another 1.2 million are in that category as well but they earn tips. So they make more, much more than the minimum wage. Two-thirds of those who make minimum wage within 9 months are out of the minimum wage category. Eighty percent that make minimum wage are part time, and it is estimated, and there are lots of reports on this, we have to agree upon that, that nearly 67 percent of the job losses that occur, if we move to $15, are between the ages of 16 to 24. Sixteen years of age to 24. So that is when opportunity is being created. Right? So again, there are reports from the CBO. They say 1.4 million jobs. The NFIB states how damaging it will be. There was the Seattle report from a couple years back. And I think all of us, I was in business for 25 years. Small business, large business. If this would work, I think we would all sign on and say lets go if this would actually do the things that theoretically we are hearing from economists that will take place. But there is a real world out there and I live in it, and I still live in it. And Mr. Chairman, I have some testimony from the following small businesses: Boyer's Food, Knoebels Amusement Park in my district, Luigi's Brick Oven Pizza. Great pizza in Tamaqua. Klinger's Restaurants and Gary Seibert, who runs a Small Business Resource Association. And Boyer's Food has 374 full- time employees, 709 part-time. Their average wage is about $13. Supermarkets run on 1 percent margins. Okay? So doing this will force them to raise prices and have a more difficult time than they have already had. Knoebels is an amusement park that largely provides for summer jobs during the season, seasonal. Every kid within 60 miles, young person, wants to work for Knoebels during the summer because they sit at a pool and watch people come down on log flumes. And if we were to do this they would have to enormously cut back. They are in Central Pennsylvania, not Austin, Texas or, you know, New York City. Klinger, a restaurant, same sort of situation. They believe they would have 40 percent less business. They would have to increase their prices and lose customers. And Luigi's says the same thing. He would have to increase his prices which equals in the real world less customers. Increase the price, people want less of it. So I will ask Ms. Greszler this. Since our restaurants have had the most difficult time during this pandemic and should be targeted in the upcoming so-called Relief Package, what will this do, Ms. Greszler, to restaurants applying this mandate on them? Ms. GRESZLER. This is in the worst possible time that we could put a new mandate on restaurants. They have already reduced their employment by 20 to 30 percent during the pandemic. Dozens of restaurants have gone out of business completely. Big name restaurants. I mean, hundreds, if not thousands across the United States have. And so when Congress is looking at ways to help these restaurants and other small businesses, this is not throwing them a lifeline. This is throwing them a load of bricks. These businesses are out there struggling to survive and they have the hope, especially as the vaccines are rolling out, that there is a future there and that they will be able to recover. But jobs that are lost to a $15 per hour minimum wage will not come back. Those are the types of jobs that big companies like Amazon will be able to, you know, automate out of existence, outsource to other companies. I mean, these jobs will not come back and that is the sad reality here is that we are talking about a completely different environment where there are not opportunities for tens of millions of Americans, especially young workers, to get their foot in the door. Mr. MEUSER. Thank you very much. I yield back, Mr. Chairman. Chairman PHILLIPS. We will see if we cannot do a second round of questioning, too, and come back, Mr. Meuser. Now I recognize the gentlelady from California, Ms. Chu, for 5 minutes. Ms. CHU. Thank you. Dr. Shierholz, your testimony discusses the importance of eliminating the subminimum wage for tipped workers. In my home state of California, tipped workers are paid the same minimum wage as nontipped workers, at least $14 an hour, arising to $15 an hour by next year. I am so proud of my state for leading the country by raising the wage to $15 and for eliminating the harmful and discriminatory subminimum wage for tipped workers. So these steps have been a success. Now, before the pandemic, our restaurant industry was robust employing nearly 1.5 million people at over 75,000 establishments. That includes an estimated 1,700 restaurants in my district alone. What is the problem with the subminimum wage and what advantages do tipped workers in states like California have over those in states that have a subminimum wage, tipped wage which can be as low as $2.13 an hour? Ms. SHIERHOLZ. The advantages in those seven states that do not have a subminimum wage for tipped workers is enormous. So one of the things we know is that tipped workers have much higher poverty rates than nontipped workers but that difference is substantially lower in those states that have phased out their subminimum wage for tipped workers. What that means is that the subminimum wage for tipped workers reduces living standards of tipped workers. It raises poverty of tipped workers and doing away with it could help reverse that. I think one of the things that happens is people think of, you know, people typically think of tipped workers as being servers in fine dining establishments who actually bring in a lot of tips and those people exist but they are a very small slice of tipped workers. And we need to actually keep the big picture in mind. Can I just make one little thing? There has been a lot of talk about teenagers in this hearing and I just think it is useful to bring some data to this. While people who would benefit from increasing the minimum wage are frequently characterized as teenagers, that stereotype is profoundly wrong. Only 1 in 10 people who would benefit from raising the minimum wage to $15 in 2025 is a teenager. I think teenagers should get decent wages but let's actually just be clear about who is really being impacted by this policy. Ms. CHU. And I want to thank you for saying that because there are those who are saying we do not have to raise the minimum wage because these are just teens trying to earn extra money. But as you said, that is not true; only 10 percent of them are teens. But they also should earn a decent living from their work. Ms. SHIERHOLZ. Yeah. More than half of the people who would see a raise are what are known as prime working age adults between the ages of 25 and 54 who provide a ton of the income that their family needs to make ends meet. These jobs matter for these people. Ms. CHU. Exactly. Dr. Shierholz, another thing that distresses me is the gender pay gap. And women earn just 81 percent of the median weekly pay earned by men. Women of color are even more disproportionately affected. Black women earn 61 cents for every dollar earned by men. Native American women, 58 cents. Latinas, 53 cents, and AAPI women, while they earn 85 cents. But the thing is that we can close this wage gap. In California, women own 89 percent of the median wage earned by men. And in fact, those states with the smallest gender pay gap all have minimum wages that are above the Federal minimum wage of $7.25. So can you explain to us why a $15 minimum wage will reduce the gender pay gap? Ms. SHIERHOLZ. Yeah. No, that is a really important question. We know like the CBO's report shows that raising the minimum wage to $15 in 2025 will reduce overall income inequality but it will also reduce other kinds of inequality like gender pay gaps. What we know is that due to the impacts of structural sexism, women are more likely to be in jobs that are affected by a minimum wage increase. So that just mechanically mean that raising the minimum wage is going to reduce gender wage gaps. It is a very important tool to create a more equal economy along gender lines than we have right now which is deeply unequal. Ms. CHU. Yes. And the states with the largest gender pay gap all follow the Federal minimum wage. I would point that out. Ms. SHIERHOLZ. I did not know that. Ms. CHU. And I yield back. Chairman PHILLIPS. The gentlelady from New York, Ms. Tenney, is recognized for 5 minutes. Ms. TENNEY. Thank you, Mr. Chairman. It is an honor to be on the Committee with you, and I hope to get to know you well. I just wanted to speak as a small business owner, someone who has lived through this minimum wage and the negative effects, though well intentioned, it has been my experience as a business owner that although I would love to pay all my employees the highest wage I could possibly pay, I also had to deal in a competitive industry where my cost as a New York State business competing across state lines was significantly difficult. And I wanted to put into the record, Mr. Chairman, some testimony and a letter from Amanda Potter, who runs a women- owned business that she started with her husband. It is called AP Master Images in Utica, New York. Mr. Potter had a really tough lifestyle growing up in foster care and his wife Amanda led the charge to really put forth this wonderful business. And has expressed deep concern about raising the minimum wage and the effects it could have on their company. She cites a few specific things. If I could get that in the record I would greatly appreciate it. Chairman PHILLIPS. Without objection. Ms. TENNEY. Thank you so much. Among those, as I think many people do not realize, is that once the minimum wage is increased, that also increases a lot of the other expenses that go along with maintaining competitiveness and having employees, such as the taxes, the healthcare insurance, paid leave in New York State, and many other items. Ms. Potter indicated to me in her testimony, and I will just summarize that it costs them over $100,000 over the next 2 years just by the increase in minimum wage in New York State. This made them less competitive and unable to compete across state lines. But also, unable to compete for employees in some ways and also give advantages to employees who, for reasons, you know, are part-time and just looking for part-time work. And that is something I wanted to bring up and I wanted to ask Dr. Shierholz if she could answer a question for me. Ms. SHIERHOLZ. Yes, wait, sorry. What was the question? Ms. TENNEY. Yeah, I wanted to just ask you a question. You indicated in your testimony that the $15 is the ideal wage that we should move to now. And you also alluded to the fact that $23 per hour is what the wage should be. And based on your testimony, can you tell me why the wage should not go to $23 an hour instead of just $15? And what economic reasons would you argue that we do not need to go to $23 an hour today? Ms. SHIERHOLZ. That is a really good question. So one thing obviously that even the $15 does not go to $15 today. It goes in five steps by 2025. What that, $23, I am actually not suggesting that that is necessarily where the minimum wage should be. What it says to me is that there is a lot of wiggle room. Even above 15 where the economy could still afford to pay workers that little if it had just kept up with productivity growth---- Ms. TENNEY. Just to reclaim my time for a minute. Can you tell me, yeah, just I want to get a more precise answer. Why are you not advocating for a $23 minimum wage, or even a $50 if it is such a benefit? And why would it not be good either way? I mean, $50 would be even better, $23 would be even better. Twenty-three or 50 would be even better than a 15. So why would you not advocate for those if it is going to be such a boon to the economy and it would make it even across the board? Ms. SHIERHOLZ. I do not think that it would. I think we have two key programs or two key things that deal with the issue of low wages in this country. It is the minimum wage in broad terms, the minimum wage and the EITC. Those things work together to make sure that low-wage workers actually have enough to make ends meet. And so a $15 minimum wage combined with a strong EITC is the program that I would go for instead of trying to make it all up with increasing the minimum wage. Ms. TENNEY. Okay. So thank you. So let me just summarize your answer is that government needs to come in and determine wages as opposed to the free market. I just wanted to suggest another issue in terms of issues with the minimum wage. There are also people who serve in a part-time capacity who now would lose their wages. One of the most compelling testimonies I received from people on this issue before was from a group of students who now would lose their summer jobs because of the increase in minimum wage and less of them would be able to work. So those were government- paid jobs. And I just want to emphasize that we would love to all pay our employees more, but unfortunately, inflation and the economy have prevented us from being able to do that. But I want to thank the Chairman, and I look forward to further discussion on this issue. Thank you so much. Chairman PHILLIPS. Now I recognize the gentleman from Pennsylvania, Mr. Evans, for 5 minutes. Mr. EVANS. Thank you, Mr. Chairman. And I am going to have to visit Minnesota to get some of Mr. Puckett's pizza. I want to ask him a question. Do you think that retention rate would be 2.5 percent longer than the industry average if you did not pay your workers more than the minimum wage? And what are the benefits in terms of it on the turnover rate, since you are in the real world? Mr. PUCKETT. Thank you for our question, Representative Evans. I think pay is a key part of it. I think when you pay your people well, it makes them feel valued. And that is why the pressure is on Punch to figure out with the minimum wage increasing, can you pay more than the minimum wage? Because I think there is a very positive feedback loop of treating your people better than your competitors are treating them. But pay is not it. Pay is not everything. You need to have a company culture that they believe in. They need to like their boss of the store or their boss in the office, like myself. They need to believe in the product and think they are making something great versus something average. All those things I think contribute to people staying. But I think without a doubt, when people feel good about their employer and feel well taken care of, whether it is pay and benefits, retention increases. Mr. EVANS. Ms. Hamilton, can you explain how using the Fair Pay model has helped you retain employees and the fiscal benefit it has brought? Ms. HAMILTON. Absolutely. Well, we also, like Punch Pizza, have a good starting base salary, and that is the basis of how we structure our employment benefits here. And what we have found is that by treating our employees well, by paying everyone a living wage, people here are really engaged and we have an extremely high retention rate. We have a lot of employees who have been here between 10 and 20 years. Our average employee time here is 7-1/2 years. And what that allows us to have is to have a workforce who is experienced. We have low error rates. We do not have to invest money in recruitment. We have a productive workforce that helps us to be creative, innovative, and successful. Mr. EVANS. Thank you. This is my last question. Dr. Shierholz, can you describe how a large amount of income inequality might hurt the growth of the economy? Ms. SHIERHOLZ. Yeah, no, that is a very good question. So income inequality hurts the growth, overall economic growth because it means there is more money in the pockets of people who are not spending constrained. They already have everything they want. And so when you give them another dollar it does not actually boost the economy and lead to an increase in demand for business services. So if income inequality rises and you shift money from low-wage workers who do spend every extra dollar they have because they have no choice, if you shift that money, redistribute it through rising income inequality to highly-paid workers who are less likely to spend it, it holds back the economy. Mr. EVANS. Thank you. Mr. Chairman, I yield back. And we have to go have some pizza there in Minnesota. Chairman PHILLIPS. I do not think there would be any objection, Mr. Evans. And with that I recognize the Ranking Member of the Small Business Committee, Mr. Luetkemeyer from Missouri, for 5 minutes. Mr. LUETKEMEYER. Thank you, Mr. Chairman. And it is great to be with everybody today. I think it is paramount we have this debate and actually listen to small businesses on the ground that they will be impacted by this type of mandate. I would like to insert two letters from my constituents who are small businesses themselves, the 54th Street Bar and Grill who have written to us, as well as Rosebud Tractor from Rosebud, Missouri, who is a tractor and implement dealer. They detail in their letters the disaster that this thing is going to be to their businesses which we will go into shortly. I would also like to put into the record the report from the Congressional Budget Office, which I think Congressman Meuser noted, but I think it is important we put it in the record because it gives the budgetary effect of the Raise the Wage Act, which is what we are talking about, as well as the latest study from the MFIB Research Center as of June 25th that talks about the effects of the Wage Act on small business. Chairman PHILLIPS. Without objection. Mr. LUETKEMEYER. Thank you. Ms. Greszler, in your testimony you describe that there has been a steep decline in workers earning a minimum wage. You mentioned that pro-growth policies assisted in this area. According to a vast amount of research, small businesses are projecting optimism and confidence prior to COVID-19. The unemployment rate was at historic low levels before we were hit with the pandemic. Can you describe in more detail how pro- growth policies assist workers? Ms. GRESZLER. Yes, thank you. I think this is a good point. While the minimum wage has not risen for more than a decade, the proportion of people who are earning the minimum wage has dramatically declined, 65 to 80 percent because most people are earning above that. And it is this combination of reducing unnecessary regulations on businesses, allowing them to keep more of their hard-earned dollars. When they have those extra resources, they invest them in their workers. They can raise wages. They can provide additional training. They can provide additional benefits, things like paid family leave. And all of this is why we saw just over 3 years, between 2016 and 2019, the wages of the lowest income earners, the 10th percentile of people who are making about $10 per hour, their wages increased almost 15 percent over 3 years. And that was far more than the median, and it was more than the highest earners as well. And that is because when you have a positive environment that keeps opportunities open for people, that allows the businesses to run their businesses as they see best and not as policymakers in D.C. tell them they should do them, then you see these rising wage gains, especially at the bottom. Mr. LUETKEMEYER. Thank you for that. You know, the letters I have from my constituents really point out, I think, the problem with the minimum wage situation here in that the Rosebud Tractor folks, they have a tractor and implement store where they not only sell new tractors but fix them. Fifty-seven percent of their expenses are employee payroll, which points to the fact when you increase over half of your expenses significantly, it is going to amount to something. And for them it is going to amount to about $190,000 more, even though they pay an average wage in their business of $18.56. With regards to the 54th Street Bar and Grill, they are going to wind up losing about $425,000 after they raise the wages to the minimum wage here which means they are going to have to raise everything on their menu or go out of business. And we have already stressed the restaurant business with the COVID problem enough. And in fact, here is an article out of Roll Call of all places back on January 26th which says the restaurant industry already wracked by COVID-19 now faces a minimum wage hike in which they talk about one more blow to our restaurants. One more blow to people who cannot afford one more blow. So why are we thinking about this? So I guess, Ms. Greszler, do you think this is a responsible thing to do to put another burden on businesses like this that are really struggling to add a minimum wage, another blow to them? How would you react to that? Ms. GRESZLER. No, I think this is reckless and tone deaf to the realities and the struggles that these small businesses are facing out there. And to potentially decimate entire industries by implementing a ``one size fits all'' $15 minimum wage does not make any sense. As some of the business owners here have attested to, a lot of individuals work for small employers and there is real value in that to having that relationship and feeling like you are a part of something. And a lot of the restaurants and industry people are working for smaller, independently-owned restaurants, and they have that upward mobility opportunity. But as I said before, if we implement a $15 minimum wage now, those jobs that are lost will not be coming back and you are completely just devastating that industry and those opportunities that are out there for people to get their foot in the door and potentially stay in that industry and be able to have a good career. Mr. LUETKEMEYER. Thank you for that. And I appreciate the extra time by the Chairman. And I also would like to welcome Congresswoman Tenney to the Committee. We are excited to have her back in Congress, have her back on this Committee to be a very valuable member, and I look forward to working with her over the next 2 years. Thank you, Mr. Chair, and I yield back. Chairman PHILLIPS. Thank you, Mr. Luetkemeyer. And now I recognize the gentlelady from Kansas, Ms. Davids, who is the Chairwoman of the Subcommittee on Economic Growth, Tax, and Capital Access, for 5 minutes. Ms. DAVIDS. Good morning. Thank you, Chairman. Well, I am glad we are holding this hearing today. I represent the 3rd Congressional District in Kansas, which is the Kansas City Metro area. And we have a pretty vibrant entrepreneurial ecosystem in our area. And that is part of the reason that during my time in Congress I have been committed to working on the Federal minimum wage issues that we are getting a chance to talk about today so that we can help our hardworking Kansans, their families, and also be mindful about our small business community. We have heard it multiple times it has been over a decade since we raised the minimum wage and the cost of living for folks has certainly increased over that time. I do continue to be concerned about the impact that our policy decisions that we make here in Congress related to the minimum wage, what those impacts will be on our small businesses who right now are facing an unprecedented economic crisis. And last Congress I pushed for a tax credit to be included to help our small businesses cover increased expenses. I was disappointed to see that it was excluded, but I was also proud to support an amendment that was included commissioning the study for what the impacts of the bill that we passed would have so that we can get a clear understanding and make decisions based on the evidence. So I am really glad that we are getting the chance to hear from experts and small business owners about an increased minimum wage today. I want to start off with Mr. Puckett and Ms. Hamilton. I am curious about your thoughts on the impacts that the tax credits we have been talking about would have on small businesses and, you know, how helpful that might be in transitioning as the minimum wage starts to go up. Mr. PUCKETT. Go ahead, Ms. Hamilton. Ms. HAMILTON. Thanks. Well, I want to start by saying that with or without the tax credit, I believe that raising the minimum wage would be beneficial for our business and for our community here in New Hampshire where we still follow the Federal minimum wage of $7.25. That said, if there is a tax credit that can support our business and businesses in our community in making that transition and it does not harm the community members and employees then I think that would be an all-around beneficial thing. Mr. PUCKETT. I second that. Anything that can be done to help small businesses weather this storm and make it through to the other side, because small businesses really did not have the capital structure that the big, big chain businesses did in our industry. So anything that helps small businesses like Punch would be really appreciated. Ms. DAVIDS. And then I heard both of you talked a little bit about the kind of longer term impacts, whether it is retention, training, these kinds of things. Could you talk a little bit more about just I guess how you envision, are these things that you talk to your employees about when they come on board? Because I imagine folks might even actually wonder why you are maybe paying the wages that you are paying at entry level jobs. Mr. PUCKETT. One of the things that we are just starting to use is the technology like we are using today to do job fairs. And we are doing internal job fairs to explain all the opportunities our employees have from opening, from starting to grow. And then we also do HR Week every 6 months and sit down with every employee and talk about how they can grow with the company. Ms. HAMILTON. Yeah, at Badger as well, when we onboard new employees we talk about our pay structure and how that is integral to the decisions we make in our company and that we are committed to treating our employees fairly and to creating a good work-life balance and supporting them to grow in our company. And then additionally what I would say is that I had mentioned earlier we have a really low attrition rate so that we have employees who stay here for a very long time and that has helped us to be successful. We are now a second generation owned family business. We have not ever had to take outside investing and that comes from being a successful business, and a lot of the success really comes back to the structure that we have created and how we treat our employees. Ms. DAVIDS. Thank you. I appreciate that. Just curious based on some of the relationship conversation that was happening earlier. Chairman, I appreciate the hearing today and I yield back. Chairman PHILLIPS. Thanks, Ms. Davids. And now I recognize the gentleman from Florida, Mr. Donalds, for 5 minutes. Mr. DONALDS. Thank you, Mr. Chairman. Really what I want to do here is read in a statement from a business owner in my district. Her name is Stephanie Figueroa. She owns three restaurants in Florida in my district called Fernandez the Bull. Fernandez the Bull is a family-owned restaurant since 1985 that features traditional Cuban cuisine with a unique flair. I go there often. It is amazing. I recommend it to anybody who comes down. The quality, the consistency and the customer care that has been at their establishment has made it one of Naples most popular restaurants. Fernandez the Bull is more than just a small business; it is the American Dream. It started in the restaurant industry basically out of love for Cuban food. The owner actually started as a server and she is now the proud owner of three restaurants. She employs 85 incredibly talented people throughout southwest Florida. Some of these career servers, some of them started as entry-level students and some of them are, yes, single parents. All of them are family. When she started her business, she had a pride of knowing many of the opportunities that the company had created. It has been the place where people have shared their griefs over meals, celebrated victories over drinks, and proposed to love their life and so much more. She loves to tell the story of one of her most treasured employees who started as a dishwasher and worked his way up to being a manager. She thinks that young people who have come there to work have learned customer service skills, problem-solving skills, or they have learned that they had a passion for management or the culinary arts. Members of the Committee may not be aware but in the last election cycle a constitutional amendment barely passed in the State of Florida that puts us on a trajectory similar to the proposal. The owner is a proud member of the Sunshine State and she is actually quite thankful that even during that election process that I opposed the minimum wage that was on our ballot even though it barely passed. And her concerns are very clear. A Federal mandate of a $15 minimum wage is unreasonable and out of touch. It would actually shut down Main Street America. She believes that what it will actually do is that it will actually make some of her servers leave the industry because of what it will do to the tip environment. Many of her servers already make more than $15 an hour. The mandate will intentionally cost many of her employees to lose income. In short, Mr. Chairman, her belief is not only will it cause her employees to lose this income, but it will also cause her to raise prices in her establishment. It will increase the costs from vendors in her establishment. And all that is going not be borne by the consumer. And I would like to enter in this letter from my constituent in the record, Mr. Chairman. Chairman PHILLIPS. Without objection. Mr. DONALDS. Thank you so much, Mr. Chairman. One of my questions I really had, and I was watching the testimony from my office before I made it down to the Committee room, but could any member, any one of the witnesses today, could they actually speak to the actual costs a business would have to bear with an artificial raising of the Federal minimum wage in such a drastic manner as being purported in the proposal? Is there a witness that can speak to that? Ms. GRESZLER. I would be happy to. When we were talking I think earlier there was a mention of the grocery store and their small profit margins and so I just quickly did a calculation there. If you have a 1 percent profit margin and you go from a $7.25 wage to a $15 per hour minimum wage, that employee, just paying them that extra amount of money each day, they have to sell over $6,000 more in food. Maybe if it is a smaller percentage margin or a larger percentage margin, we are still talking about thousands of dollars more. And as you pointed out, Mr. Donalds, the tipped industry, this is a 600 percent increase in the tipped minimum wage. And make no mistake; there is no subminimum wage in the United States. If you are making the ``subminimum'' wage and you earn less than the actual minimum wage, your employer has to bring those wages up. But the reality is that those tipped workers have fought to overturn increase in the tipped minimum wage because it has actually reduced their incomes in those areas. And so this is just drastic assumptions that we are making that these employers can raise their prices or somehow pull this money out of who knows where. But to say that we are going to allow employers to pay their workers $15 per hour by mandating it, where is that money coming from? Where are the thousands of dollars per worker in new sales going to come from? Mr. DONALDS. Thank you so much. And with the last 15 seconds, Mr. Chairman, what I will say is one of my closest friends was in Seattle after they raised their minimum wage. A Subway sandwich that was $6.63 in Florida was $11.83 in the City of Seattle. So the prices will go up on all Americans. I yield back. Chairman PHILLIPS. Thank you, Mr. Donalds. Now I recognize the gentlelady from Georgia, Ms. Bourdeaux for 5 minutes. Ms. BOURDEAUX. Thank you so much, Chairman Phillips and Ranking Member Van Duyne for holding this hearing to examine the benefits and challenges to small businesses of raising the Federal minimum wage. I firmly believe that we do need to raise the minimum wage in this country to get it to a living wage. The current Federal minimum wage has not been raised since 2009 and at $7.25 an hour it amounts to just around $15,000 per year. I personally have worked for a minimum wage back in the 1980s when it was $3.25 an hour and I know how incredibly difficult it is to make ends meet when you are working for this kind of very low wage and work two jobs to try to just pay for rent and food and keep going. Luckily, I was single and young at the time and so it was not catastrophic, but if I had children this would be almost impossible to survive. And now, far too many hardworking Georgians are working two jobs, 60-plus hours a week, and really cannot make ends meet. That being said, I definitely understand that we are increasing this quickly and we need to think carefully about our small businesses and the ``mom and pop'' shops in particular throughout my district. More than doubling the current Federal minimum wage over the next 5 years, we are asking small businesses to really bear the entire burden of getting us to a living wage. So I am very, very interested in some of the proposals that are out there to try to soften the burden on small businesses for doing this. One of the proposals reported to be under consideration by some senators is to complement the Federal minimum wage increase with a package of small business tax cuts. I know we have some academic experts here on this and I wanted to just ask, Dr. Shierholz, in your opinion, are there policy proposals that we should be considering to complement the wage hike and soften the blow to small businesses? Are there any strategies in this respect that would be preferred one versus another? Ms. SHIERHOLZ. So there are certainly plenty of targeted investments for small businesses in the COVID relief legislation, so some of that is already totally on track. It has additional PPP funds, targeted relief through the Economic Injury Disaster Loan Program, targeted relief for restaurants, targeted relief for shuttered venues. So there is a lot already in there. But I will say that minimum wage increases have certainly been coupled with things like small business tax cuts in the past. I am assuming that is under consideration here, too, though it is actually worth nothing that we saw a lot of business tax cuts in the TCJA without a minimum wage increase. Ms. BOURDEAUX. So some of those have already happened. Just to follow up on that, the PPP and these Shuttered Venues operations grants, things like that, those are temporary mainstays, right, to get us through the COVID period. Are there longer term policies that we should be looking at, you know, as we go about increasing the minimum wage? Ms. SHIERHOLZ. That is a very fine question and I do not have a complete answer so if others do I am totally up for hearing about that. But I do think it is important to loop back around, that what we know the literature shows us is that increasing the minimum wage actually does not cause meaningful job loss. So keeping that as a backdrop, I think it does underscore that businesses in this country are able, the empirical evidence shows they are able to absorb these costs. So I love all the stuff that is in the COVID relief legislation. The efforts we talked about are a really good idea but I do not think that we have to really go too far down that road because what we know is that businesses are able to increase these wages, that is what the data show without negative consequences on that. Ms. BOURDEAUX. Okay, I have got a few more minutes. One quick question about that. Why is that? You would assume, right, if you are increasing wages in that way, but also, I think people need to realize this feeds back into the economy because people now have more money to spend and so they are buying new things. Right? And you have this kind of circular benefit to raising the wage. But do you have other insights on sort of why it is that this does not lead to those kinds of problems? Ms. SHIERHOLZ. Yes. I am glad you asked that. So we have talked about a couple of things. Like, it reduces turnover and turnover is very expensive. So some of it is recouped that way. What you just said, it boosts demand for goods and services. So that is good for business. It increases revenues. Another thing that is clear, and I think there has been a lot of confusion about this in this hearing, is it is true that some of the impact of minimum wage increases are passed along in the form of higher prices. So that is another way that businesses help absorb the impact of the higher labor costs. But I just want to put that in context a little bit. Increasing the minimum wage to $15 in 2025 will increase the total wages going to low-wage workers by $107 billion. That is a lot, but total personal consumption expenditures annually in this country are over $14 trillion. So that $107 billion is well under 1 percent of total personal consumption expenditures. So even if the entire amount were passed on in the form of higher prices which will not happen, it would still have a barely perceptible effect on the overall price level as it was phased in. And then after the phase-in happened when we just had regular indexing, it would have zero effect on the overall price level. So it is one way that businesses can absorb some of the minimum wage costs but it is not at all a larger macro problem. Ms. BOURDEAUX. Thanks so much for your insights. And I yield back the balance of my time. Chairman PHILLIPS. And now the gentleman from Wisconsin, Mr. Fitzgerald is recognized for 5 minutes. Mr. FITZGERALD. Thank you, Mr. Chair. First of all, thank you to Mr. Puckett and Ms. Hamilton. You are running much different types of businesses, are you not? One involved obviously in pizza and the other one in hand balm and lotions. So my question would be, and I think it is really negligent of us not to continue to talk about this is a proposal that has come up in the middle of the pandemic. And I think a lot of the studies and any of the research that you have had, and I have seen many of these going back to my days in the state legislature, you know, have all been turned on their head as a result of COVID. So the idea that, you know, while small businesses are literally closing day by day that this would even come up at this point is kind of amazing to me. But here we are. I was just going to say, in Wisconsin, the big three for us are tourism, agriculture, and manufacturing. And for the most part, small manufacturing, all very susceptible to changes in wages. And I think that is not the case, obviously, in many other states. So it is another thing that we have to be aware of. The other industry I just say that could be directly affected, because there are always questions about trying to increase wages without losing employees is assisted living. It is something that we had worked on for many years in our state budgets, and it just feels like that is another, you know, it is a necessary industry, obviously, to take care of those individuals, but at the same time it is susceptible to the back and forth of a small business. And these are all things I think that need to be considered. And like I said, just underscore the idea, we are in the middle of a pandemic and businesses are completely in trouble right now. And the idea that we would be talking about an increase in the minimum wage is kind of ridiculous to me. So I yield back. Thank you. Chairman PHILLIPS. Now I recognize the gentlewoman from California, Ms. Kim, for 5 minutes. Ms. Kim? Ms. KIM. Yes. I just unmuted myself. Thank you. Thank you, Chairman Phillips and Ranking Member Van Duyne for hosting this important hearing today. I look forward to working with both of you and everyone else in the Committee to ensure our small businesses have the tools and resources to overcome this pandemic. This proposal to increase the minimum wage comes at a time when many small businesses in California's 39th District are struggling to keep their doors open due to our state's heavy- handed lockdown. So Chairman, I have a statement from Steven and Patricia Bangos of Eureka Pizza. They are small business owners in my 39th District and I had a chance to visit with them and speak with them. They are already running a razor think line with micro thin margins for profit. And COVID-19 has already had a major impact ranging from cost of goods to food costs. I would like to ask their full statement to be entered into the record. Chairman PHILLIPS. Without objection. Ms. KIM. Thank you. According to a study, approximately 62 percent of all small businesses think the worst of the pandemic is ahead of them, not behind them. Instead of increasing costs for small businesses, we should be looking to decrease costs and restore some of the economic certainty that was lost due to the pandemic. I would like to pose a question to Ms. Greszler. As a former business owner myself and mother of four, I was troubled by the findings in your study estimating that a $15 minimum wage would increase the cost of childcare by an extra $3,728 in costs for a family with two children. So can you please elaborate on how would an increase of the Federal minimum wage to $15 result in higher childcare costs? Ms. GRESZLER. Certainly. And so childcare is a little bit of a unique industry in that they cannot use other options of reducing the staff because of ratios and those things, and so they have to pass all of those higher wages onto the customers. As I said, 21 percent across the U.S. but as high as 43 percent increase in costs in Mississippi. And California, where you are, has actually already dealt with this to some degree, and California's Department of Education looked at this impact and they said, while we agree that $15 per hour, especially for childcare workers is morally the thing that we should be doing, nevertheless, this is going to be devastating for the childcare industry because childcare workers tend to make lower than $15 per hour on average. And so you are in this catch-22. You increase the prices and then people can no longer afford childcare. And there has also been an experience in California whereas a result of getting a wage increase, a family earns more and now they lose hundreds, if not thousands of dollars in childcare subsidies, as well as you have had the impact on the childcare providers, those who accept subsidized clients will no longer accept those lower rates when they have even higher costs. And so this is an example where you are hurting the exact people that we want to be helping. Ms. KIM. Thank you for that. I have another question to Ms. Greszler. In one of your reports you mentioned that there are better ways to help workers achieve lasting income gains. From your point of view, are there ways to boost income without mandating an increase in the Federal minimum wage? And can you please elaborate on some of the ideas that you propose? Ms. GRESZLER. Yeah, and really the only way that you can boost someone's income permanently to have actual long-term gains is to help them become more productive, to create more things of value. And a $15 minimum wage creates an artificial wage gain by taking it away from somebody else, but we would rather just see these opportunities out there for people to have alternative education, things like the apprenticeship programs that you do not have to incur six figures of debt and get a 4-year college degree. But nonetheless, will have a great career ahead of you. Reducing the occupational licensing laws, things that say you have to pay hundreds of dollars and go through all this training to be able to arrange flowers or to braid hair. There is no reason that we should have those barriers out there. And then also, just keeping the opportunity out there for individuals of all income levels, all education levels to use their skills to go out and to be independent workers and to contract in whatever way they would like. And I know this is particularly relevant as well in California with AB5 shutting opportunities for a lot of workers. Ms. KIM. Thank you. One last question. We often talk about the 1.4 million jobs that could be lost---- Chairman PHILLIPS. Ms. Kim---- Ms. KIM.--but the CBO study. Chairman PHILLIPS.--your time is expired. We are going to go to a second round, so perhaps if you want to stick around, but our time is expired for right now. Ms. KIM. Sure. Thank you. I yield back. Chairman PHILLIPS. And with that, we are going to move to a second round of questioning. And I am going to begin by recognizing myself for 5 minutes. First, I have enjoyed this discussion, and it is exactly what I believe we needed. I also want to point out some facts. That of the OECD countries, the United States currently ranks 14th of all the countries with a minimum wage of $7.25. We are just below Slovenia and just ahead of Poland. Our neighbors to the north, Canada, each province has a higher, significantly higher minimum wage than we do in the United States, including Ontario at $14.25 Canadian, which based on current exchange rates is about $11.40. They also make certain exceptions for students, for servers, and for those who work from home. My question is to Ms. Greszler. I am curious how research relative to how the minimum wage in Canada affects the Canadian economy vis-a-vis our very low wage here in the U.S. Ms. GRESZLER. I have not looked specifically at that but I would just point out that regardless of what the minimum wage is, what matters is what people are actually making. And we have seen in the United States that not only are people having higher incomes and earning more but that we have also had a lower unemployment rate. And so there are fewer people who are not able to find jobs. Chairman PHILLIPS. Do you have a sense of what the median wage is in the United States versus Canada? Ms. GRESZLER. I do not know Canada's. Chairman PHILLIPS. Okay. Ms. GRESZLER. I believe the U.S. is around $25 per hour. Chairman PHILLIPS. Okay. Perhaps the most important question is, my hope was that this hearing results in some ideas and ways to mitigate any potential policy effects. So if in fact, Ms. Greszler, that this policy were to be instituted as written, what would you argue would be the most important mitigating policies that could prevent job losses and ensure that small businesses do not close if this was enacted as written? Ms. GRESZLER. I think the most important thing would be to not implement a ``one size fits all.'' And so to have a provision in there, much like the Federal government does for the general schedule pay scale that has locality-based adjustments and to allow state and local governments to tie it to their median wage in that area so that you do not disproportionately impact those lower cost areas. Chairman PHILLIPS. But if it is enacted as written, which does not provide for any of those opportunities, what would you propose we consider to mitigate the effects? Ms. GRESZLER. I do not have any good proposal there because I think that the mitigation measures would be so large and consequential for the long-term economy that it is not something that we would want to do. We are talking about pitting small businesses against big businesses, lower cost areas of living against higher cost areas of living. This is just not simply something that would work well across the United States. Chairman PHILLIPS. Okay. I will close my questioning back to Mr. Puckett. Mr. Puckett, you are already paying essentially close to this minimum wage, and by the time this was fully in effect 5 years hence, you would probably be over it. But based on your experience in business, building Caribou, building Punch, what would you argue we should be looking at as we reflect on the potential consequences? I think we would all agree that there are some benefits and there will be some consequences. What would you like to see us consider as some potential mitigating policies if we were to enact this wage scale based on its current construct? Mr. PUCKETT. Thank you for the question. We are blessed to be operating in a great environment in the Twin Cities, very competitive. So it has made us adapt and stay ahead of that for our people strategy. I have sympathy for small businesses all across the country in areas that this would be potentially a much bigger jump than what Punch faces. So I do not have any specific policy recommendations but I think considering the different needs and rural versus urban, different parts of the country is certainly an idea. I was curious how Canada's system works. I do not know if it is possible to differentiate people that are household heads or this is their main source of living as a differentiation between someone that is doing that or a part-time student. But those are things that could be considered, I assume. Chairman PHILLIPS. Well, thanks, Mr. Puckett. And I agree. I think we should look to best practices as practice by some of our peers around the world. And with that, I will yield to Ms. Van Duyne, our Ranking Member, for 5 minutes. Ms. VAN DUYNE. Thank you so much, Mr. Chairman. I want to read just a quote from a letter that we had gotten from Casey Watts, who is a business owner from Loaf'n Dog and Burger Bar in Cleburne. He said, ``COVID-19 crushed us at the Loaf'n Dog. We were shuttered for most of the year until we could get deliveries going and curbside pickup, but this was not enough. I did receive a PPP loan which allowed me to keep my employees but only by the skin of our teeth. Now our business is facing a new ominous challenge, a call for the $15 per hour minimum wage mandate. In order to keep the doors open with a wage increase like this I would have to raise many prices at least 100 percent across the board. Perhaps in Destin or Houston, or D.C. or New York, a local joint can charge $11 for a chili cheese dog but that is not going to fly in Cleburne.'' According to the most recent data from the Bureau of Labor Statistics, 392,000 workers made the prevailing minimum wage. So these workers represent .48 percent of the hourly paid workers. According to the U.S. Bureau of Labor Statistics, 17 percent were teenagers, 26 percent were between the ages of 20 and 24, so a total of 43 percent of those were under the age of 24. I think even more enlightening is that single parents, single working parents, hardly any of them actually earn the minimum wage. According to a 2017 report by the GAO's office, only .15 percent of workers in the U.S. are single parents earning at or below the minimum wage. That is really important because I think a lot of the testimony that we have heard today talks about having a living wage, a living wage for families. But we have talked about increase. We have talked about increases in food costs, at restaurants, increase in healthcare. And I guess Ms. Greszler, with the impact of COVID- 19, the unstable school schedule over the last year, it just seems like America's single working parents, but more specifically single working moms, are facing some real challenges. With all of these different increases outside of just the minimum wage increase, how do you think that this increasing the minimum wage would impact working single moms? Ms. GRESZLER. I think that one of the biggest impacts is going to be on that childcare cost. For single mothers, it is not an option whether or not to work, and yet, when you would be facing thousands of dollars more in childcare costs per year, that is going to put these women in a bind, all these working parents out there. And it is just going to negate any of the potential benefits of having those higher wages. And it is not just childcare, but there are reasons that we have more targeted programs in the United States, whether it is through food stamp benefits, childcare subsidies, these things are aiming to help working parents who need them, and the minimum wage is not aiming at those working parents. And so the reality is that you just end up hurting the people that you are trying to hurt out there. And also, you were bringing up the small businesses out there who are being crushed. And I think it is important to point out that these smaller businesses, they are the same as households out there. And so if we were faced with twice the rent or the mortgage payment, we would have to make adjustments. The notion that these business owners can just dig deep in their pockets and pay all this additional money is ludicrous. And I have heard from small business owners they are taking out lines of credit because they care so much about their workers and they do not want to lay them off. They do not want to have that single mother unable to pay her bills each month. And they care about their workers. And these are not the businesses that we want to be shutting down with a $15 ``one size fits all'' Federal minimum wage. Ms. VAN DUYNE. Thank you so much. And Chairman, I yield back my time. Chairman PHILLIPS. Thank you, Ms. Van Duyne. Any other members wish to ask questions before we proceed to closing? Not seeing any, we will proceed. I want to thank everybody. I want to thank our witnesses for joining us today and my fellow members. This was the kind of discussion that we need more of. I think it is fair to say that we all agree we want to see Americans' wages go up. We want to see more jobs created, not fewer. And we want to see businesses thrive, especially small businesses that are the backbone of our economy and the backbone of our communities. And as many of you know, I have built businesses, some very successful larger ones and currently own a small business that does pay a $15 minimum wage. Not because the law requires it, not because it is easy; rather, it is a principle in which my partners and I believe. But I hear small businesses every single day. They are concerned about this policy and I understand their concerns. I know we all do. And I am grateful that we were able to give voice to some of those concerns in today's hearing. We have got to consider options for raising wages for the least advantaged in our country. I believe they have been denied that for far too long and we have a responsibility. So I am committed to working together with all of my colleagues, Democrats and Republicans in a bipartisan fashion to build a better economy for our small businesses and for the people that build them, employees and owners. I talk about the trifecta--higher wages, more jobs, and more businesses. So I ask that we focus on that, not just obstruct and not just demand that we not proceed; rather, come up with solutions on how we can achieve all three because I do not believe they are mutually exclusive. And I want to see American once again be at the forefront. I want to see us be the fastest growing economy and a country to which our peers look to for the best policy in the world. So with that I ask unanimous consent that members have 5 legislative days to submit statements and supporting materials for the record. Without any objection, so ordered. And if there is no further business before the Committee, we are now adjourned. Thanks, everybody. [Whereupon, at 12:08 p.m., the subcommittee was adjourned.] A P P E N D I X [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] [all]