What does $7.50 buy you? An hour of a minimum wage worker’s time in Maine, and it’s been that way for more than five years.
Now, City Councilor Joe Baldacci is suggesting the city of Bangor break away from the rest of Maine and require a higher minimum wage for employees within city limits. Under an ordinance Baldacci introduced earlier this month, Bangor’s minimum wage — with exceptions for workers younger than 18, employees at small businesses and tipped employees — would rise to $8.25 on Jan. 1, 2016, to $9 a year later and to $9.75 in 2018. After that, the wage would rise annually with inflation.
“The largest point is that we need a statewide or a federal minimum wage increase, and right now there’s no action happening at the state or federal government,” Baldacci said.
If Bangor raises the minimum wage for employees working within city limits, it would be following in the footsteps of about a dozen cities nationwide, all larger than Bangor, that have elevated wage levels on their own.
As Baldacci floats his wage plan, several are raising concerns about the potential effects on Bangor’s economy.
“When you look at the market right now, that change would touch very, very few people,” said John Porter, president and CEO of the Bangor Region Chamber of Commerce. “Is it worth the hit to our reputation as a community welcoming to business relative to the people it’s going to help?”
While academic research on the impact of local minimum wage laws isn’t exhaustive, the experiences of cities such as Santa Fe, New Mexico, and San Francisco, California — which passed some of the first local minimum wage increases in the U.S. — generally point to higher earnings for low-wage workers and no detectable effects on job numbers, including in the industries most affected by minimum wage increases.
Maine instituted its first state-level minimum wage in 1940 — 33 cents an hour if the payoff from an alternative piecework rate wasn’t greater. Maine’s minimum wage generally rose with the federal level until federal increases slowed after 1985, then again after 1997.
In 1997, both Maine and the federal government had $5.15 hourly minimum wages. In 2007, Maine’s was $7 an hour while the federal government’s had moved to $5.85. The last change for both Maine and the federal government was in 2009.
Measured in 2014 dollars, Maine’s minimum wage peaked in 1971, when the nominal rate, $1.80 an hour, was worth $10.52 in today’s dollars.
Half a million fewer jobs?
President Barack Obama’s call last year to raise the minimum wage to $10.10 didn’t go anywhere in Congress, but the Congressional Budget Office estimated the move would endanger about 500,000 jobs nationwide — affecting about 1.5 percent of the 33 million low-wage workers nationwide who earn less than $11.50 an hour. A smaller increase to $9 an hour, according to the CBO, would jeopardize about 100,000 jobs.
That’s the result of a combination of potential reactions to the wage bump, the CBO said. Some businesses could automate some tasks performed by low-wage workers; others would raise prices to compensate, potentially reducing consumer demand for their product, which, in turn, would lower the need for labor; some would cut back on employee perks such as free meals or discount merchandise; other businesses would shift more responsibilities to their higher-paid, most productive employees, increasing demand on the higher end of the wage scale; other enterprises would absorb the increased labor costs, potentially affecting profit margins.
“A lot of small businesses, they budget X number of dollars for payroll,” said Brad Ryder, owner of Epic Sports in downtown Bangor. “My concern would be that if the minimum wage goes up, then the overall number of hours that the employees work would go down to compensate for that. So, no one is really benefiting if that’s the approach someone takes.”
Overall, the economic benefits of low-wage workers with more money to spend on goods and services would cancel out the loss of tens of thousands of jobs the CBO projects with a $10.10 minimum wage. Eighty-eight percent of those workers are 20 or older; 56 percent are female; 53 percent work 35 or more hours per week; and 91 percent don’t have college degrees, according to the CBO.
But the effects aren’t limited to those earning the minimum wage or slightly more.
“It eventually affects everybody,” said Gary Eckmann, owner-operator of McDonald’s restaurants on Main and Union streets in Bangor and another in Brewer. “You end up adjusting all your rates right through your pay scale … because you’ve got somebody who might be at $8.25 today and has been with you for a while. Now, you’re starting at $8.25.”
Limited effects within city limits
While the CBO projects job losses from a nationwide wage hike, a slowly growing number of cities have stepped out and raised minimum wages on their own. Santa Fe, New Mexico, and San Francisco, California, were the first. Their hourly minimums jumped to $8.50 in 2004, compared with $5.15 at the time in New Mexico and $6.75 in California. Today, the cities’ minimums are $10.66 and $11.05 respectively.
A 2007 study on San Francisco’s minimum wage by economists at the University of California-Berkeley found no statistically significant effect on employment when the researchers compared restaurants in San Francisco with restaurants in the surrounding area. Fast-food restaurants, the economists found, responded differently than table-service restaurants: They raised prices to account for the higher cost of labor; in exchange, they experienced significant increases in job tenure and full-time employment among their workers.
A follow-up study in 2014 found restaurant employment rose slightly faster in San Francisco than in the surrounding area.
A 2006 study that compared Santa Fe with Albuquerque — which didn’t raise its minimum wage until more than two years after Santa Fe — found no statistically significant employment declines in Santa Fe, including in the industries with the highest proportions of minimum-wage workers: hospitality and food services.
Other studies have documented increased business costs following minimum wage hikes. Among restaurants, research has shown a 10 percent minimum wage hike increases operating costs by 1 to 2 percent, according to a research summary the UC Berkeley Labor Center produced for Seattle policymakers last year.
Restaurants typically raised their prices — by about 0.7 percent following a 10 percent minimum wage increase. Other industries typically didn’t.
The Queen City’s unknowns
No one yet has attempted to project the precise effects of a minimum wage increase in Bangor. But data on the Bangor metropolitan area from the Bureau of Labor Statistics offer some insight into the types of workers whose wages would most likely be affected.
The largest numbers of workers with median hourly wages — meaning half earn less and half earn more — below $10 in the Bangor area include:
— Personal care and service workers, a label that includes gaming and slot workers as well as personal care aides, child care workers and hospitality workers. Their median wage is $9.71 per hour.
— Retail salespeople, with a $9.39 median wage.
— Food-preparation and service workers, including fast-food workers, cooks, bartenders, coffee shop workers, waiters and waitresses, restaurant hosts and dishwashers, with a $9.18 median wage.
— Maids and housekeepers, with an $8.97 median wage.
— Cashiers, with an $8.93 median wage.
Matthew Stone is the BDN’s opinion page editor.