I remember mine: Twelve hours a week, $1.60 per hour, working the jewelry counter at Stuart’s department store.
A year later, the minimum wage rose to $2 per hour and I took a housekeeping job at a local hospital, working part time my senior year of high school.
Back in the mid-’70s, minimum wage was what you expected to earn at any number of low-skill, entry-level jobs. It wasn’t a political hot potato, and no one exchanged the adjective “minimum” for “livable.”
Fast-forward to 2015. Seven bills attempting to change the state’s minimum wage are percolating through this legislative session. Additionally, it’s been a hot issue in cities like Portland and Bangor, where there are efforts to establish a city minimum wage by 2018 ($10.68 per hour and $9.75 per hour, respectively).
Blame the federal government, which has moved at a glacial pace to increase the federal minimum wage of $7.25 per hour, unchanged since 2009.
But this wave of disparate and uncoordinated attempts to change Maine’s minimum wage of $7.50 has businesses worried. At a breakfast forum the Press Herald hosted in late February, our three panelists – Michael Cuzzi, manager of communications firm Vox Global, Dick Woodbury, an economist and longtime lawmaker, and Peter Gore, top lobbyist with the Maine State Chamber of Commerce – all expressed concern that a scattershot attempt to change the minimum wage will create headaches for a wide array of businesses.
For instance, a retail company with stores in multiple Maine locations would have to adjust entry-level wages based on a store’s location. A repair shop that hires at minimum wage and then offers a 50-cent-per-hour increase after three months would likely have to adjust wages throughout the company to mitigate the “ladder effect” – the notion that if you lift the lowest wages on a scale, all the others should be modified to reflect merit-based compensation.
There are about 20,000 minimum wage earners in Maine out of nearly 600,000 employed people – just over 3 percent of the population. So while the numbers are low, the impact could be high, not only because of the ladder effect, but also because of the political hay that can be made around this issue.
Advocates for Maine’s most disadvantaged people point to profits by companies like Wal-Mart as evidence that they can afford to pay higher wages. Advocates for Maine’s business community counter that the vast majority of businesses here have fewer than 20 employees and operate on slim margins – they don’t need the government dictating wage hikes.
The irony is the private sector might have more impact than whatever Augusta ends up doing, despite hours of bill-writing and hearings. (The issue has come up nearly a dozen times in the last 15 or 16 years.) Don’t underestimate the power of competition.
When Wal-Mart announced it was raising its minimum wage to $9 an hour, T.J. Maxx and other retailers followed suit within one week. Some companies established their own thresholds earlier – Whole Foods, Ikea, the Gap, Starbucks all offer minimum wages of $9 per hour or more. Here in Maine, Adam Lee, owner of Lee Auto Malls, contacted me last spring to say his company was adopting a $10-per-hour minimum wage. Jim Wellehan, owner of Lamey-Wellehan shoe stores, has always paid well above minimum wage, with new employees now earning $10 per hour.
Perhaps lawmakers will reach a consensus on Maine’s minimum wage this year, but I wouldn’t be surprised if – encouraged by Wal-Mart and others – they defer this to the private sector.
TAX REFORM
Although Maine’s minimum wage is in the news now, it was Gov. Paul LePage’s tax reform and budget proposal that generated the most impassioned debate at the breakfast forum. In its wake, I asked each of the panelists what political or policy change he expects in 2015 that will significantly affect Maine business?
To a man, they answered the governor’s plan.
Peter Gore: Really, nothing the Legislature will consider even comes close to being the game-changer as a reform of our tax structure and lowering of the income tax. I’m not necessarily saying I believe the package as he presented will be the one that is eventually ratified, but some version with the major structural components as he outlined would be a very significant policy change.
Dick Woodbury: Because the governor has put tax reform into the budget, and believes in it strongly, some version of reform seems likely to happen this year. Nearly all businesses will benefit from an income tax rate cut, and from an increase in the amount of income that is exempt from taxation. Businesses in some service industries, whose sales have been exempt from taxes in the past, will need to collect sales taxes under the reform. (For more on Dick’s perspective, read his column here.)
Michael Cuzzi: The budget clearly holds the most potential for significant changes impacting Maine businesses. From the expansion of the sales tax to hosts of currently exempt businesses, to the possibility of income and business tax reductions, the budget will affect businesses of every size and sector across the state. Of course, the budget’s fate is far from certain as legislative leaders, appropriators, advocates and citizens all attempt to influence the final outcome. In the end, it will almost surely look different than what the governor has proposed. (For more on Mike’s perspective, read his column here.)
According to my colleague Steve Mistler, who co-moderated the breakfast forum with me, the governor’s proposal is now being reviewed by the Legislature’s Taxation Committee, which will vote on the plan before kicking it back to the Appropriations and Financial Affairs Committee. It’s there that lawmakers and legislative leaders will negotiate various elements of the plan, but they’ll do so largely out of public view so we won’t know much until they get ready to vote it out at the end of the session. It’s unclear if the tax reform proposal will survive as part of the budget or get carved out as a separate initiative.
Check Steve’s blog, Capitol Ticker, for State House updates.
And feel free to offer your own opinion on the governor’s proposal – or your thoughts about minimum wage – in the comment section below.
Carol Coultas, business editor, can be contacted at 791-6460 or at:
ccoultas@pressherald.com
Twitter: carolacoultas
Send questions/comments to the editors.
