Commentary

Why Maine Cannot Afford a Minimum Wage Increase

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On Monday, the Maine State Legislature will host public hearings on bill requests made by members of the Maine House and Senate regarding Maine’s minimum wage. There is one bill request asking the legislature to consider the benefits and detriments of increasing minimum wage, but there are seven others proposing to outright increase the minimum wage as soon as October. Increasing the minimum wage at all, let alone this soon, will decrease jobs for low skill workers. Since these minimum wage increases are supposed to help these very people with earning hire wages, this increase will only harm the people these bills are meant to protect. Also, by increasing the minimum wage, Maine’s unemployment rate will likely increase, and business owners and young working people will stay away from Maine, losing potential tax revenue and productivity.

These bill requests ask that Maine increase the minimum wage to rates higher than most states in the country. Currently, Maine’s minimum wage is $7.50 an hour, which is twenty-five cents more than the national minimum wage. Several of the legislative requests ask for an increase to $8-$9 an hour, and few further ask that the minimum wage later be adjusted to what is known as the Consumer Price Index (CPI). What these legislators are asking is that the minimum wage change based on percentage changes of the CPI, which is an annual report that analyzes prices of a number of common goods to determine changes in what money can buy, a.k.a. changes in purchasing power.

If that was not high enough of an increase, one request sent by Rep. Scott Hamann, D-South Portland, advocates an increase to $10.10 an hour, which is higher than any minimum wage requirement in the entire country, and then asks to further increase the minimum wage annually to reflect changes in the CPI.

Increasing the minimum wage will affect the ability for businesses to hire low skill workers who typically work in minimum wage positions. Businesses cannot afford to pay these higher wages, and to compensate, will begin letting people go. These minimum wage hikes are meant to give more money to those working in the minimum wage positions, but increasing the minimum wage will leave these workers without jobs. Last I checked, having a job that pays $7.50 an hour is more profitable than having no job and no income.

This increase in the minimum wage will also likely increase Maine’s unemployment rate. Currently, Maine’s unemployment rate is at 5.5%, which is around the average for the nation. Washington, D.C. currently holds the highest unemployment rate in the nation at 7.7%, and coincidentally also has the highest rate for minimum wage at $9.50 an hour. On the other end of the spectrum, North Dakota boasts an unemployment rate of just 2.9%, and its minimum wage is $7.25 an hour. Maine has had issues regarding high unemployment for years, but has been steadily improving its unemployment rate since 2010. If Maine were to increase the minimum wage, businesses will no longer be able to hire as many people, and would begin letting people go so they can pay the minimum wage to the most skilled employees. This would seriously hurt Maine’s unemployment rate, which in turn would harm other aspects in Maine. For example, a high unemployment rate will discourage businesses and young working people to come to Maine, which in turns harms prospective tax revenues and productivity.

By increasing the minimum wage, Maine runs the risk of serious consequences it cannot afford to pay. An increase in the minimum wage will also likely increase the unemployment rate, as businesses will not be able to hire low skill workers, which defeats the purpose of minimum wage increases, designed to help these very workers earn more income. An increase in unemployment will serve as a warning for businesses and working people to stay out of Maine, thus harming our tax revenues and productivity.

The minimum wage is something Maine cannot afford to pay.

About Nathan Hitchcock

Nathan Hitchcock is currently a law student at the University of Maine School of Law and volunteers as a researcher for the Maine Heritage Policy Center. Prior to law school, he attended Hillsdale College in Michigan, where he earned a B.A. in Political Economy.

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