Commentary

How Economic Ignorance Kills Jobs

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For the life of me I can’t understand why anyone would have the mentality to impose a citizens referendum question in Maine that is in antithetical to our state motto “VACATIONLAND.” The referendum to increase the state minimum wage would virtually crush the restaurant industry in our beautiful state, and lay a world of financial hurt on our nursing homes and private non-medical institutions (PNMI’s) by artificially inflating wages to a point that is unsustainable; so unsustainable that many will shut their doors.

I have seen firsthand through experience dealing with Maine Peoples Alliance (MPA), the culprits for this economic folly, that they dispatch teams of young foot soldiers (many from out of state and funded heavily by out-of-state interests) to neighborhoods of unsuspecting voters in order to collect signatures for money to promote their far-left ideology that flies in the face of economic reason, in this case raising the minimum wage.

The proposals that they could not force through the legislative body, because they are job killers, will now be up to you the voters to decide. This proposal will artificially raise wages from $7.50 to $9.00 in 2017 and $1.00 more annually until 2020 when it reaches $12.00, and thereafter indexing for inflation. The tipped wage will go from $3.75 to $5.00 in 2017 and rise each year until it reaches the non-tipped credit. Restaurant owners will no longer get a “tip credit” and servers will take a serious pay cut when they can no longer collect tips, if they even still have a job in Maine.

fogartys (1)I work for a small family-owned establishment in southern Maine. When I asked the owner how this would affect his business, he said in no uncertain terms “I would have to close my doors.” This business has been owned by the same hard working family for 55 years and employs around 50 people year-round. Instead of this family and their employees benefiting from this feel good, economically senseless measure, they will be unemployed. The first year alone would cost this small business about $100,000 and increase annually as the wage increases and the tip credit goes away.

This is not an isolated case. This will be the scenario from Kittery to Caribou. There will be no fine dining, or even family dining, and it is very likely you the consumer will place your order on a push screen and pick your food up on an assembly line manned by machines if this passes at the ballot box. It is no wonder that the Maine State Chamber of Commerce, the Maine Restaurant Association, and the Maine Innkeepers Association are all in opposition to this measure.

An important factor when considering proposals such as this is that an employer with 20 employees will see an annual increase of around $10,000 for every 25 cents the minimum wage is raised, according to the Employment Policy Institute. The U.S. Chamber of Commerce indicates small businesses are the least able to absorb thousands of dollars in additional labor costs. Maine, according to the most current federal data, has 141,936 small businesses.

Nursing homes are considered small businesses. It is already difficult to find nursing home beds for your loved ones here in Maine. This proposal will make finding those beds even harder and we will be forced to send our precious family members out of state for care. PNMI’s will also be affected, which will make it more expensive to take care of our mentally and physically disabled, and again we will lose beds and they too will be forced out of state.

The harm does not stop at small business either. It becomes more difficult for all business to compete with international companies. When places such as India have a $2.00 an hour minimum wage and the U.S. minimum continues to increase, it becomes more difficult to compete and our jobs get outsourced. We are already seeing that happen.

I would think that the unions would take note of these facts, instead they, along with the MPA, push for an increased minimum because their union wages are negotiated by union bosses who depend on dues to survive and union wages are indexed to rising wages. If the union employee is making $20.00 per hour and the minimum is raised 10% they, will demand an increase accordingly. So if this referendum is passed as proposed, it indicates a 60% increase over 4 years, inflating the union wage from $20.00 per hour to $32.00. No wonder they think this is all that and a bag of chips. Follow the money folks.

Raising the minimum wage artificially without consideration of our fragile economic climate seems to be a pat on the back for many politicians who fail to understand basic economics. In fact, after I gave a heartfelt floor speech one democrat legislator apologized to me and said “I know you are right Beth, but the MPA and the unions have me ham strung. If I want to run for the Senate, I will need their support.” I told him he should be ashamed and regardless of what may be politically expedient, he has an obligation to all Maine citizens to do the right thing. Who knows, maybe he will come around, I certainly hope so.

When the cost of a product, in this case human capitol, elevates to a level where the cost outweighs the value of the capitol, there are three choices; cut the waste, increase costs to the consumers, or close your business here and go to a friendlier state. All have the end result of hurting those who the minimum wage is proposed to help, the poorest workers.

Please keep this in mind this November.

About Beth O'Connor

Representative O'Connor represents House District 5 including the towns of Berwick and North Berwick (part). She can be reached at (207) 289-9047.

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