When a coalition led by the Maine State Chamber of Commerce rolled out a proposal to increase Maine’s minimum wage to $10 per hour by 2020, it justified the wage with research from the University of California-Berkeley. Here are two examples:
“According to the Institute for Research on Labor and Employment at the University of California, if minimum wages are raised to no more than 60 percent of median wages, the net economic benefit is largely positive to both workers and business owners,” one article in the Maine State Chamber of Commerce’s March 3 newsletter read.
“In the University of California study on how high you can raise the minimum wage, 60 percent of the median income is the magic number,” Ed Hodgdon of Funtown Splashtown wrote in another article in that same newsletter.
The problem is that the chamber coalition is right about the underlying theory but got the analysis wrong. Getting it right would have led the coalition to advocate for a higher wage than its $10 proposal.
It is absolutely correct that the research concludes that 60 percent of a state’s median wage represents a threshold below which job losses associated with a higher minimum wage are statistically insignificant.
What the coalition got wrong was the point to use for comparison. The chamber group used the median hourly wage for full-time and part-time workers. It should have used the median hourly wage for full-time, full-year workers.
The coalition may have erred in part because an article that appeared in the Portland Press Herald last year had the same mistake. The consequences of this mistake are significant. Maine’s full-time, median hourly wage in 2014 was approximately $19.13, based on a Center for Economic and Policy Research analysis of Census data, not $16.29. Sixty percent of $19.13 is $11.48 — well above the $10 threshold identified by the Chamber coalition.
Secondly, while a minimum wage consistent with the chamber coalition’s own standard — 60 percent of the median — would have been $11.48 in 2014, it is much higher in 2020 when accounting for inflation. Based on a projected annual 2 percent inflation rate, a median hourly wage of $19.13 in 2014 will be worth $21.54 in 2020. Sixty percent of $21.54 is $12.92.
It is worth noting that members of the chamber coalition have opposed minimum wage increases time and again, even as Maine’s minimum wage fell well below the 60 percent threshold it now embraces. Based on the Maine Center for Economic Policy’s analysis of the relationship between Maine’s minimum and median wages, the last time Maine’s minimum wage met the 60 percent threshold was in 1982. For the last 25 years, the ratio of the minimum wage to median full-time wages has hovered around 40 percent and sits at 38 percent of the median. This is too low to support a family.
It is vitally important to make informed policy decisions based on rigorous analysis that is objective and accurate. The chamber coalition is right to point out that Maine should target the 60 percent threshold in establishing its minimum wage. Unfortunately, the coalition’s flawed analysis leads to an inaccurate conclusion about what the new minimum should be. If the chamber coalition were accurate in its analysis, it should be proposing a minimum wage higher than the $12 that Maine voters will consider in November.
Jody Harris is associate director of the Maine Center for Economic Policy.