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Cities going broke: Can Scranton's minimum wage plan work? (+video)

A judge told Scranton's mayor he couldn't break the contracts. Pennsylvania told him he couldn't declare bankruptcy. But he didn't have the money to pay more than minimum wage. Unions sued.

Scranton, Penn., going broke
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The mayor of Scranton, Pa., faced with the city’s swiftly diminishing bank account, last Friday paid the federal minimum wage of $7.25 an hour to all municipal workers – firemen, police, even himself.

Whether Mayor Chris Doherty’s plan remains in place is doubtful, however. A judge has already ruled that he cannot unilaterally abrogate municipal contracts.

But, under state law, he also cannot declare bankruptcy. And, the city council has dug in its feet over Mayor Doherty’s plan to raise property taxes by almost 80 percent. So, despite lawsuits, the city paid its workers less money than they could earn working at the local McDonald’s.

With an increasing number of municipalities on the brink of bankruptcy – and some even throwing in the towel – is minimum wage for civil servants a solution to budget woes?

So far, blue-collar Scranton is alone in proposing such a draconian solution. But the financially strapped cities of Stockton, Calif., and Vallejo, Calif. – both bankrupt – have reduced wages and benefits. Jefferson County, Ala., also bankrupt, cut non-salaried employees’ hours by 20 percent.

Many public sector employees already have seen their wage growth slow or grind to a halt – even fall after adjusting for inflation.

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