Maine Voices: Minimum-wage hike would have harmful consequences in Maine
Author: David Clough and Michael Saltsman
Publication Date: September 2016
Newspaper: Portland Press Herald
Topics: Minimum Wage
Maine voters face an Election Day decision that is perhaps as significant as Donald Trump versus Hillary Clinton: whether to raise the state’s minimum wage by 60 percent to $12 an hour – a proposal that would apply to every town without regard to local economic conditions.
Proponents such as the labor union-backed National Employment Law Project argue that big businesses – not mom-and-pop businesses – would be most affected by the 60 percent wage hike. The NELP goes as far as to say that the Maine proposal “would level the playing field for small businesses.”
But the NELP’s analysis is flawed because it looks only at the state’s retail industry and doesn’t bother to isolate those businesses that would actually be affected by the new law. A more careful analysis of Census Bureau data across all the state’s industries finds that the majority of businesses affected by a $12 minimum wage have fewer than 100 employees, and 42 percent have fewer than 50 employees.
The disproportionate impact of the proposal on the state’s small businesses is just one reason that Mainers would be wise to reject it at the ballot box this November.
The NELP and its allies contend, “There is no evidence that transitioning to higher (minimum) wages has hurt small businesses … .” Tell that to the numerous small businesses in New York state and elsewhere that have had to lay off staff, reduce hours or close entirely because of the increased labor costs associated with dramatic starter wage increases. Most recently, the Del Rio Diner in Brooklyn closed after 40 years in business as a consequence of New York’s dramatic wage hike. (These and other stories can be found on Facesof15.com.)
What does this mean for Maine? Economists at Trinity and Miami universities followed the methodology of the nonpartisan Congressional Budget Office, which found that 500,000 jobs would be lost nationally at a $10.10 minimum wage, and concluded that roughly 3,800 jobs would be lost in Maine at a $12-an-hour minimum wage.
This figure is conservative, as it doesn’t account for the impact of the extreme increase in the tipped minimum wage. The brunt of this job loss would fall on women, young employees and vulnerable employees whose skills don’t justify the increased labor costs.
But maybe these lost job opportunities are just a necessary price to pay for raising incomes of other employees. One advocate, Sarah Austin of the Maine Center for Economic Policy, wrote in these pages last week that “a $12 minimum wage would lift wages for one in three working Mainers, putting economic security in reach for tens of thousands of Mainers … .”
It sounds nice, but MECEP’s analysis simply counts up the number of employees in Maine earning less than $12 an hour without taking into account the associated reduction of jobs that the best academic research – including a recent review by a visiting scholar with the San Francisco Federal Reserve – indicates is part and parcel of wage hikes.
By MECEP’s logic, why not raise the minimum wage to $20 or $30 an hour to raise wages for thousands more? The answer, of course, is that it would devastate employers and the state’s economy.
When Maine voters hear about these and other consequences, their support for the minimum-wage proposal plummets. The Employment Policies Institute used Google’s Consumer Survey tool to poll Mainers and found that while a plurality support the proposal at first, when the consequences of job loss and small-business closures are explained, this support flips and opposition exceeds support.
Proponents may try to explain away these consequences by pointing to the Maine Small Business Coalition, a group of pro-wage hike small businesses created by the Maine People’s Alliance.
But a closer look at the coalition’s members indicates that they might not be the best authority on the economic realities of a dramatic starter wage increase. For instance, the list includes numerous businesses that appear to have no employees other than the business owner, and are thus unaffected by a wage hike.
For many small businesses, a dramatic increase to their entry-level and second-tier labor costs would force them to reduce job opportunities, hurting employees, customers and local economies. Labor-backed groups are trying to promote the feel-good fiction that it’s big business that will be affected. Maine voters should look through this and see the non-fiction horror of dramatic minimum-wage increases.