Minimum wage increase: Great appeal, great cost

Who doesn’t like a wage increase? Maine voters will decide this November if the state should implement a minimum wage schedule that moves the current $7.50-an-hour wage to $12 an hour by 2020. Tipped employees would see changes that mandate that their minimum pay also will increase to match the adjusted hourly rate by 2026. Both rates would increase automatically thereafter based on the Consumer Price Index.

Maine has become one of several states that are now breeding grounds for citizen-initiative legislation. Organizers come to Maine, spend money soliciting citizen signatures by hired proxies ($244,000 for this proposal) while asking vague, feel-good questions that assure support for apple pie, motherhood and the issue at play.

Both proponents and opponents of these initiatives then spin the story, using selected and sometimes cooked data to incite emotional responses, skewed to entice support for their effort. It is a poor way to create law, and a surefire way to create bad laws and regulations that end up costing everyone while destroying Maine traditions.

In Maine, approximately 60 percent of workers are employed by small businesses, forming the very backbone of our economy. Unfortunately, too many of these small businesses already struggle to pay competitive wages, with rates as much as 28 percent below what larger 500-employee companies and non-profits can allocate to their employees.

Small businesses also pay a larger portion of their income for labor costs, 26 percent greater, than larger businesses. With a lower population density, half the national average, this cost disparity is inevitable in a rural state and illustrates part of the variance of Mainers’ average family income, $48,453 in 2013 vs. the national average, $53,046.

An opposing effort in the legislature to increase Maine’s minimum wage to $10 an hour went to defeat this spring. Small business groups such as the Maine Restaurant Association advocated for wage increases, but less than the referendum proposal.

Already battling increased regulations — including a dramatic expansion of those employees eligible for overtime pay — higher taxes and other costs, such as the recent health care initiatives, small businesses are finding it more difficult to create new jobs, hire skilled workers and remain competitive in a transitioning economy.

Adding higher wage costs, as all employee wages will inevitably rise with any mandated minimum increases, will force many businesses to hike prices or reduce labor costs through employee reductions.

That might seem reactionary, but the elephant in the room is the size of the proposed minimum pay increase — 62.5 percent. Should your household expenses increase by 62.5 percent, you would be forced to eliminate certain items, or find more income.

Mainers are a generous lot. And the minimum wage in Maine should increase from $7.50 an hour. However, a 62.5 percent wage increase will certainly cause less employment for those needing the work the most and increase prices for everyone.

The formal and informal business alliances in Maine, working with the state Chamber of Commerce, must educate voters about the dangers ahead this fall. A perfect storm awaits the state in December, should the Labor Department’s plan to vastly increase overtime pay eligibility become law.

Were voters also to support this new minimum wage proposal, private employment in Maine will be severely challenged.

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