Minimum Wage

With the new year comes another increase to Maine’s minimum wage

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On January 1, Maine’s minimum wage increased to $12.75 per hour. The increase is the result of a law passed by ballot initiative in 2016 that indexed the minimum wage to the Consumer Price Index for Urban Wage Earners and Clerical Workers for the Northeast Region (CPI).

The increase is determined annually in August by measuring the percent increase in the cost of living from the previous year. The 2022 wage is an increase of 60 cents. Between 2020 and 2021, the minimum wage increased by 15 cents. 

The law also increases the minimum wage for tipped workers and affects overtime wages. Tipped workers must now be paid at least $6.38 per hour by their employers. State statute dictates overtime wages must be 1.5 times the hourly rate of pay and be paid for all hours over 40 worked in a week.

There are also exemptions to overtime for salaried workers that are affected by the minimum wage increase. Employers are exempt from overtime requirements if an employee is salaried and their job duties meet certain tests. To qualify for the exemption, the salary exemption was $36,450 prior to the January 1 increase in the minimum wage. Beginning January 1, the new minimum salary threshold is $38,251 per year.

According to small business advocates, with many employers still struggling with the effects of COVID-19 and inflation, the size of this year’s increase may be difficult for some businesses to absorb.

David Clough, the Maine State Director of the National Federation for Independent Businesses, says the costs of employment are being “pushed up statewide” by either the new hourly wage or labor market wages where employers are struggling to find workers to fill positions.

“The effect of these higher costs will be higher prices for consumers and greater struggles to survive for many small businesses. Small business owners hope this wage-price storm is not made worse by costly legislative actions in Augusta,” said Clough.

According to Peter Gore, Executive Vice President of the Maine State Chamber of Commerce, one of the difficulties posed by the state’s minimum wage increases is that they are instituted automatically.

“It’s on autopilot according to the referendum that was passed at the ballot box and employers have little option but to make adjustments for the increase in the cost of doing business they’ll experience,” he said.

Gore said the size of the most recent increase was a surprise for many businesses, but is caused by inflation, which drives up the CPI. 

Gore also said the new wage is likely to be passed on to consumers, particularly by small businesses in rural areas that have been struggling to recover from the COVID-19 pandemic compared to businesses in urban areas. 

“Sixty cents is a significant increase particularly because for a lot of businesses, the size of that increase probably wasn’t in their business plan for the next year. I think some businesses are just going to have to make adjustments, and in some cases, they may be difficult adjustments,” he added. “In the more rural areas though, I think the impact could be felt a little more.”

According to Gore, the minimum wage increase puts pressure on other workers’ wages, which may also increase costs for employers and consumers.

“When you have a minimum wage worker who walks in the door and is making $12.75 an hour and your shift leader makes $13.50 an hour, then all of a sudden that person is going to be looking for more money. Now realistically in the Portland area and the Souther Maine area, people are paying more than the minimum wage,” Gore said.

Maine’s new minimum wage of $12.75 is one of the highest in the nation and is also the third-highest minimum wage in New England. 

Both Connecticut and Massachusetts have higher minimum wages. Both states have passed laws that annually raise the minimum wage until it reaches $15 in 2023. In Massachusetts, the minimum wage increased from $13.50 to $14.25 on January 1. Connecticut’s minimum wage is $13 and will increase to $14 on July 1.

New Hampshire’s $7.25 minimum wage is tied to the federal minimum wage. In 2021 the state approved a bill that froze the tipped minimum wage at $3.27. It was previously required to be at least 45% of the minimum wage.

Rhode Island’s minimum wage increased from $11.50 to $12.25 on January 1. Like Connecticut and Massachusetts, Rhode Island passed a law in 2021 that increases the minimum wage to $15 by 2025.

On January 1, Vermont’s minimum wage increased from $11.75 to $12.55. Like Maine, Vermont ties minimum wage increases to a wage index. Vermont’s minimum wage is tied to the U.S. City Average Consumer Price Index for All Urban Consumers and is capped at 5%.

About Katherine Revello

Katherine Revello is a reporter for The Maine Wire. She has degrees in journalism and political science from the University of Maine. Her writing has appeared in Reason, The Washington Examiner, and various other publications. Got news tips? Contact Katherine at krevello@mainepolicy.org.

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