- The Maine Wire - https://www.themainewire.com -

Raising the Minimum Wage (At All) Will Kill Economic Growth

This fall, the voters of Maine may be treated to not one but two different ballot proposals to raise the state’s minimum wage (which currently stands at $7.50 per hour).

The first proposal, backed by the Maine People’s Alliance (MPA), would see the minimum raised to $12 per hour by the year 2020. The potential counter-measure would raise minimum wage to $10 per hour (also by 2020) and is still before the legislature for approval. MPA argues that the workers of Maine deserve a “living wage,” and seem determined to perpetuate the false idea that only through government mandate can this be achieved.

Proponents of the $10 counter-measure argue that a hike to $12 per hour will result in job loss for the very people the wage hike is intended to assist. The solution, clearly, is to raise the minimum wage by two fewer dollars. The problem, however, is not that we might raise the minimum wage by too much; the problem is that we might raise it at all.

Both proposals operate on the false premise that mandating a higher wage will actually improve the lives of working people. While a minimum wage hike will benefit the best, most productive employees, many minimum-wage workers will find themselves unemployed if either measure passes. What Maine truly needs is economic growth that creates more high-paying jobs, not additional laws that will lock many people out of the workforce.

To exemplify the effects of minimum wage hikes, I will draw upon my own recent experience as an employee of a certain Portland-based parking lot management company. As a 19-year-old with very little work experience, I was charged with the low-skill tasks of flagging motorists into our company’s lots and explaining the procedure to ensure that they paid correctly. I showed up to work on time every day, consistently agreed to stay later than scheduled because we were having a good night, and ultimately was entrusted with closing down our operations at night and handling cash revenues. The young company valued my labor at $10 per hour and paid that same salary to at least a dozen other attendants on the payroll.

Among these was a certain 17-year-old coworker of mine who was less inclined to punctuality, more hesitant to go above and beyond the dictates of his position and who managed to inflict minor damage on multiple customer vehicles. Nonetheless, he showed up to work and improved over the course of the summer, acquiring valuable skills he could put into whatever future position he might hold.

Now suppose you are Big Dan, the owner. Would a hike in the minimum wage to $12 per hour lead to your three-year-old company giving raises to both my fellow employee and myself? Or would one of us be shown the door? Would any business owner rather increase the amount of money they are paying out in salaries than eliminate under-performing employees?

A dozen employees’ wages increasing from $10 to $12 an hour would result in several jobs lost just to break even. If the owner does decide to keep everyone on board and raise wages, they certainly won’t be hiring any new attendants anytime soon. They would probably end up raising prices as well to cover rising operating costs, which can be catastrophic for a young company still trying to turn a profit, especially if they compete with companies abroad that do not have to operate under the same rules.

I realize this anecdote may seem to argue for the alternative $10 minimum proposal, as that was the starting salary at our particular firm. The truth is that any increase in the minimum wage will result in job loss, irrespective of starting salary. The principle outlined in my parking lot example applies just as credibly to a close friend of mine at his $7.50 per hour job washing dishes at a barbecue eatery. At his restaurant, raising the minimum to $10 would result in either several eliminations or higher prices to the detriment of the customer, the employee and the business. Raising the minimum all the way to $12 could be disastrous.

Mandating a higher wage will actually hurt the workforce, so the question remains: what will help the people of Maine achieve a living wage? The answer is simple: economic growth. Only by encouraging our local businesses to turn profits and expand can we ensure higher-wage jobs in greater quantity.

The path to economic growth is clear: fewer laws and regulations, such as high minimum wage laws, that raise the cost of doing business. Barbecue proprietors and parking lot managers are not the oft-vilified corporate executives trying to trample the working man. They are small business owners trying to make money by providing a service. If we let them operate without mandating their practices, they will have an easier time creating jobs and paying higher wages for the benefit of all the people of Maine.