Proposed $12 minimum wage would cost jobs
Author: Michael Saltsman
Publication Date: March 2016
Newspaper: Lewiston Sun Journal
Topics: Minimum Wage
Proponents of a higher minimum wage in Maine, led by the state AFL-CIO, have gathered enough signatures to put a proposed $12 minimum wage initiative to a vote this November. But does the proposed 60 percent increase in the state’s minimum wage, from $7.50 to $12 per hour by 2020, go too far too fast? Last year, residents of Portland rejected a similar wage increase based on that argument.
The proposed measure would have raised the city’s minimum wage by roughly 50 percent — from $10.10 to $15. But even left-of-center voters recognized that a wage hike of that magnitude would be devastating to small business and it was defeated by a nearly 20-point margin.
The opposition effort was helped by the voices of small-business owners who had supported the City Council’s decision to raise the minimum wage to $10.10. Jim Wellehan, of Lamey-Wellehan Shoes fame, put it this way: “I’ve been in business more than 50 years. I’ve been a strong advocate for fair wages and benefits for just as long. A $15 minimum wage would seriously harm Portland’s economy.”
Would a $12 minimum wage have the same harmful impact statewide? The evidence suggests so.
Economists William Even of Miami University and David Macpherson of Trinity University replicated the methodology used in the non-partisan Congressional Budget Office’s 2014 report on raising the minimum wage, which was informed by some of the most current research on the subject. They estimate that roughly 3,800 jobs would be lost in Maine if a $12 minimum wage was implemented by 2020. (That estimate is conservative, as it doesn’t include the impact of the change in the tipped minimum wage.)
Women would bear the brunt of a higher wage, accounting for roughly 63 percent of the jobs lost. When broken down by age, teens would be disproportionately harmed, making up just under 50 percent of the jobs lost. The authors also estimate that roughly 330 jobs would be lost in Maine’s non-profit sector as a result of a $12 minimum wage.
Those aren’t unsupported statistics. Mainers can see the impact of a $12 minimum wage in real-time in the evidence emerging from cities around the country that have enacted a minimum wage close to the $12 level.
In March of 2015, Oakland, Calif., raised its minimum wage by 36 percent, from $9 to $12.25 an hour. Shortly after the new wage took effect, 10 grocery stores and restaurants in and around the city’s Chinatown district closed, citing the new wage requirement as a factor. Elsewhere in the city, child care providers reduced staffing levels and restaurants raised prices by as much as 20 percent. (Other stories can be found at FacesOf15.com).
The impact of a $12 minimum wage would only be magnified in Maine. For instance, the median wage in the Oakland metro area is 38 percent higher than it is in Maine, suggesting that the state would have a much harder time adapting to the new wage mandate. Adjusting for the differences in wages and cost of living, even a notable left-of-center economist, who supports a higher minimum wage, recommended a number for Maine closer to $9.50. Adjusted upward for inflation through 2020, that figure still falls short of the $12 number that proponents have put forward.
The relative wage hike is also much larger in Maine for tipped employees, whose base wage would rise by at least 220 percent under the proposed initiative. In nearby New York state, even a 50 percent jump in the base wage for tipped employees has forced restaurants to cut employees’ shifts and hours, in some cases drastically. One 24/7 diner now closes at 10 p.m., with the two employees who worked the night shift losing their jobs. Another Italian restaurant closed its door entirely.
Maine has been here before. The state raised its minimum wage during the past decade, along with 27 other states, and subsequent research from economists at American and Cornell universities found little impact on poverty rates.
With little to gain and thousands of jobs to lose, the state’s voters may want to think twice before endorsing a dramatic hike in the starter wage.