A new study calls into question the wisdom of a minimum wage hike in Maine, warning that it could destroy jobs.
The Employment Policies Institute, a free-market organization that focuses on employment growth and entry-level employment, is releasing a study that claims a $12 hourly minimum wage could cause almost 4,000 jobs to be lost across the state, according to the Washington Free Beacon.
A minimum-wage referendum will be on the ballot in 2016. Efforts to get the issue on the ballot were led by the Maine AFL-CIO and the Maine People’s Alliance.
If successful, the referendum would increase Maine’s current $7.50 hourly minimum wage to $9 per hour by 2017 and an additional dollar per hour every year until 2020, according to the Bangor Daily News. Tipped workers would receive $5 per hour by 2017 and increase until the minimum wage reaches parity with non-tipped workers by 2024.
The minimum wage debate is difficult because the effects are less clear than is supposed by those for and against increases.
From various studies, it seems clear that large increases in the minimum wage causes unemployment. That is why most proposals, like the one in Maine, opt to phase it in over longer periods of time. Negative effects are weaker, but it’s also harder to trace the effects over time.
Workers who keep their jobs after a minimum wage increase see a larger paycheck, but those who lost their jobs don’t see the gain. Similarly with businesses; small businesses on smaller profit margins can’t sustain minimum wage hikes when payroll expenses make up a higher cost of business.
Workers with larger paychecks can’t be ignored as beneficiaries of a minimum wage increase. However, that benefit doesn’t complete the picture without weighing the cost of those who lost a job or those who find a difficult time obtaining an entry-level position. Workers who had marginal productivity of $9 per hour or $10 per hour now won’t have an easy time getting their first job come 2020.
Nor will all of Maine face the same effects from the minimum wage hike. The median hourly wage for the state is $16.29, and the cost of living varies. Increasing the minimum wage to almost 75 percent of the median wage (though the figure will change by 2020) could be more disruptive than advocates assume. When considering large mandated increases, the marginal effects can mean success or failure.
