Commentary

Raising Minimum Wage Will Hurt Small Businesses and Increase Layoffs

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The debate over the November ballot initiative to raise the statewide minimum wage has just started – but supporters of this measure are already trying to pull the wool over the eyes of Maine voters.

They are now touting a misleading study by the labor union-supported National Employment Law Project, which uses cherry-picked statistics to allege that a minimum-wage increase would help small businesses and power the local economy forward. However, these ridiculous claims could not be further from the truth, since an increase in the minimum wage would disproportionately burden small businesses.

As shown by an analysis by the Employment Policy Institute, raising the minimum wage to $12 per hour would eliminate at least 4,000 jobs in Maine. This would unfairly affect women, as they would comprise over 60 percent of the job losses, and teenagers, who would make up almost half of the job losses. With roughly three-fifths of Maine workers employed at small businesses, this policy would surely harm the mom-and-pop stores and independent companies that form the backbone of the Pine Tree State’s economy.

And according to the very same data cited by the National Employment Law Project, Maine companies with fewer than 500 employees already pay their workers nearly 28 percent less than larger corporations – a significant margin, which proves that big businesses are not the source of our wage problems. Even worse, small businesses are devoting over 26 percent more of their income just to fulfilling their payroll. This means small businesses would be hit hardest by a minimum-wage increase and would also have much less ability to absorb the dramatic rise in the cost of labor.

As a result, many small businesses could be forced to institute cost-cutting measures such as laying off workers, raising prices, cutting employees’ hours or scaling back benefits. Competitive forces would discourage them from raising prices, meaning workers would likely shoulder much of the burden in the fallout. With thousands of Maine workers already struggling to make ends meet, this would only compound their existing woes and set our economy further back.

Given these basic economic facts, it’s amazing that the National Employment Law Project was able to concoct an entire study proclaiming that raising the minimum wage would aid small businesses. In fact, they had to ignore all but one industry – retail – in their analysis in order to make these dubious claims. This is not only surprising, given that this organization has previously devoted entire reports to criticizing the food service industry, but also deeply troubling and misleading.

Also overlooked by the National Employment Law Project is the fact that minimum-wage jobs are frequently a foot in the door for young workers. Teenage workers often seek out these positions, which tend to be at small businesses such as restaurants, grocery stores and other food service locations. With many young people lacking significant work experience or training, these are often the only obtainable positions which are suitable for their limited skill sets.

*View the full article here on the Portland Press Herald.

About Patrick Marvin

Patrick Marvin is a former Policy Analyst for The Maine Heritage Policy Center. He holds a Masters Degree from the University of New Hampshire, and has an extensive background in analysis and research.

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