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Minimum Wage Research Poses Problem to $12 Hike

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The Maine People’s Alliance (MPA) is leading an aggressive push to raise the minimum wage to $12 an hour. You would think they’d have done some research on the economic impact of their proposal. You’d be wrong.

As I pointed out just over a week ago, the campaign seems to have chosen the goal of $12 an hour at random. Their website neglects to explain why they decided to pursue $12 and not $15 or $20, and highlights no research on what effect their initiative would have on Maine’s economy. Essentially, The Maine People’s Alliance is pushing for an initiative with no regard for how it could negatively impact Mainers. Some might call that irresponsible—and they’d be right.

Surprisingly, not everyone appreciated my pointing that out.

Mike Tipping, the communications director for the Maine People’s Alliance (MPA), replied to my piece on social media, pointing to a March press conference that highlighted research from Professor Michael Reich of UC Berkeley as evidence that their campaign is based on research. Here’s what’s odd about that. First of all, nowhere on their website or materials does the MPA claim that their push for $12 was based on Reich’s research. What’s even stranger is that I can’t find any instance of the MPA even referring to Reich’s work until the March 2016 press conference (that’s almost a year after their campaign began), despite Tipping himself being quoted in a Press Herald story about Reich’s research.

Perhaps that’s because Reich’s research is not terribly helpful to their cause. The gist of Reich’s research is that he couldn’t find any negative effects from raising the minimum wage to 60% of the full-time median wage. While there are certainly many out there who would dispute Reich’s claim, let’s take it at face value. In a letter to a Maine business group who he said had been inaccurately using his research, Reich claimed that a $12 minimum wage would be 57% of the statewide median wage in 2020, and therefore, safe. The Maine People’s Alliance took this letter and claimed success, using it to say that it supported their $12 minimum wage initiative.

That’s a bit problematic though. See, Reich’s minimum wage research has a few caveats that the Maine People’s Alliance is flat out ignoring. For instance, the claim that $12 an hour falls below the 60% threshold is only true at the statewide level. Essentially, this only works if we pretend that Maine is a homogeneous state and that income levels from county to county are roughly equivalent—but they’re not. Any Mainer could tell you that your average income in Washington County is different than Cumberland’s. While metro areas like Portland or Bangor might be able to weather a minimum wage hike with less noticeable effects, lower income areas of the state could see the higher minimum wage jump past the 60% threshold, drastically increasing labor costs.

Other states are starting to accept this reality. In Oregon, the legislature passed and the governor signed into law a 3 tiered minimum wage hike. Lawmakers in that state at least recognize that the economic realities of rural Oregon are different than that of Portland. This is in line with current academic thinking on the minimum wage. While the debate over the negative effects of the minimum wage is still hotly debated in academia, most economists agree that a higher minimum wage will have less negative effects in a high-income urban area than in a low-income rural area.

Perhaps if the Maine People’s Alliance had done their homework, they would have set in place a tiered structure that could lessen the negative impact on rural Maine communities. It’s become abundantly clear, however, that the Maine People’s Alliance couldn’t be bothered to take an even cursory look at the effects of a $12 minimum wage on Maine or the prevailing research on this subject.

I have just one last thought (for now) on this minimum wage hike. If the Maine People’s Alliance based their minimum wage hike on research like Reich’s, then why is the minimum wage linked to the cost of living after 2020? If that 60% threshold is truly the basis for the MPA’s $12 hike (which isn’t supported by any evidence), then the minimum wage should be linked to that 60% threshold after 2020. After all, what happens if wages remain stagnant but the cost of living increases? The minimum wage could easily surpass the 60% threshold, which is when we start to see negative effects according to Reich. The decision to attach the minimum wage to the cost of living is just another indication that the Maine People’s Alliance’s initiative is more closely tied to the progressive ideal of a livable wage than any research on its impact on Maine’s economy.

This sloppily crafted minimum wage hike has no basis in research, is disconnected from economic reality, and fails to take into account the prevailing academic opinions on minimum wages. Their lack of concern for how this massive minimum wage hike will affect real Maine communities is truly concerning—but not terribly surprising.

About Nathan Strout

Nathan Strout is a Development Associate with The Maine Heritage Policy Center as well as a staff writer for The Maine Wire. Born and raised in Portland, Strout is a graduate of Eastern University with a B.A. in Political Science and a minor in Legal Studies.

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