Minimum Logic

February 23, 2010 by

The Legislature is currently debating legislation, LD 192, to index Maine’s minimum wage to inflation, ensuring the earnings of these Maine workers keep pace with the increasing cost of living.  I presented MECEP’s testimony in strong support of the bill before the Legislature’s Labor Committee. 

Bill opponents label it a “job killer” that would undermine business development.  One group actually suggested that past minimum wage increases “may not have been as much as desired (for workers), or even deserved.”

Such “falling sky” rhetoric is unfounded and demonstrates not so thinly veiled contempt for low-wage workers.  Maine’s minimum wage has been adjusted approximately three out of every five years since its introduction in 1959 and consequently has kept pace, more or less, with inflation.  A chart MECEP provided legislators details this history and the impact indexing would have had in terms of maintaining buying power for minimum wage workers.

MECEP’s analysis finds that increasing Maine’s minimum wage did not cost jobs or reduce economic activity.  This experience is mirrored elsewhere.  States that raised their minimum wage above the federal minimum between 1997 and 2007 actually enjoyed lower unemployment rates than states that did.  With regard to economic activity, the Federal Reserve Bank of Chicago concluded that “an increase in the minimum wage boosts consumer spending substantially more than tax cuts.”

From the standpoint of governmental efficiency and predictability of labor costs for businesses, indexing the minimum wage makes perfect sense.  Rather than arguing annually over whether and how to raise the minimum wage (indeed better solutions are available), we should concern ourselves with creating an economic environment in which the wages of low- and middle-income workers keep pace with overall economic activity and foster greater prosperity.  In the most recent business cycle, working family incomes remained stagnant or declined despite continuing productivity gains.  Indexing the minimum wage will clearly benefit Maine workers and their families, Maine businesses and the Maine economy.

Author’s note: On February 22, the Labor Committee tabled LD 192 and will vote on it at a future work session. Stay tuned for further updates.

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