Portland’s recently approved minimum wage hike hasn’t even taken effect, and the City Council hasn’t finished sorting out what the wage hike ultimately will mean for tipped workers. But a new minimum wage debate is on the horizon in Maine’s largest city.
In November, Portland voters will decide on a ballot initiative that would raise the local minimum wage to $15 per hour in 2017 — double the state’s current $7.50 minimum — while boosting the base pay for restaurant servers and others who depend on tips.
There’s good reason to expect little economic impact overall from the more modest minimum wage hike Portland councilors approved earlier this summer. Across the country, researchers have found little to no negative impact on job numbers in cities that have raised their minimum wage levels. At the same time, the workers who start earning more experience an undeniable benefit from higher wages. (Bangor councilors could expect the same results from the more modest minimum wage hikes they have been debating but haven’t advanced.)
But the history of local minimum wage increases generally is one of smaller wage hikes. In Portland, the minimum wage is scheduled to rise 35 percent to $10.10 next year, then to $10.68 in 2017 — 42 percent higher than the current state minimum. A $15 minimum wage, meanwhile, would be 100 percent higher than the state’s wage floor.
While there’s limited research on larger local wage hikes, economists — including some who generally support minimum wage increases — worry a steep wage hike won’t have such a negligible impact on job numbers.
The existing research, in addition to finding virtually no negative impact on job numbers, also has found that businesses don’t close more often than usual or relocate outside of city limits in response to moderate municipal minimum wage hikes. But a more pronounced wage hike could trigger both those negative effects, suggests Harry J. Holzer, a senior fellow in economic studies at the Brookings Institution and a public policy professor at Georgetown University.
“Many employers will be very reluctant to pay high wages to workers whose skills … are so modest,” he writes in a recent post for Brookings. “A likely result would be not only increases in unemployment but also drops in formal labor force activity.”
Employers could look to relocation or other measures, such as accelerating the path to automation of many low-wage workers’ tasks — think order-taking at McDonald’s, more self-service cash registers at the grocery store or more sophisticated innovations that would be in greater demand — in order to “economize on their labor costs,” Holzer writes.
The challenge for policymakers is to find the optimal level for a minimum wage hike that won’t end up hurting low-wage workers. Some researchers have suggested the negative effects could set in when the minimum wage reaches about 60 percent of an area’s median wage.
Today, the median hourly wage for all workers in the Portland metropolitan area, according to the Bureau of Labor Statistics, is $17.32 per hour. Assuming that rises to $18.19 in 2017 — reflecting 1.6 percent average annual earnings growth over the past five years — the $10.68 minimum wage that will take effect that year would fall just below the 60 percent threshold. A $15 minimum wage would be worth 82 percent of the median. (Admittedly, the calculations are crude because the Bureau of Labor Statistics provides figures for Portland and surrounding areas when the median wage within the city could be higher. In addition, the median wage could well rise by a greater or lesser amount by 2017.)
Those pushing for increased minimum wages have the right motivations. Those at the low end of the economic spectrum haven’t benefited noticeably from the nation’s uneven economic recovery. But such a steep minimum wage hike should give pause to Portland voters who have workers’ welfare in mind.
