Lawmakers will reconvene briefly in Augusta this week, to finish work they left uncompleted when they adjourned in early May. Gov. Paul LePage is again pressuring legislators to rollback the state’s minimum wage. They should not.
The governor’s arguments are flawed. In his Thursday radio address, LePage argued that lawmakers should slow down scheduled increases in the state’s minimum wage because Maine businesses are having a hard time finding workers.
This is backward. In 1958, economist A.W. Phillips, a professor at the London School of Economics, wrote that when unemployment is low — as it currently is in Maine and nationally — wages tend to increase at a fast pace. This principle became known as the Phillips Curve. It is simply a variant of the well-known supply-and-demand principle. When something is in high demand, but the supply is low, the price for that item — whether it be goods or labor — rises.
Depressing wages won’t result in more workers suddenly being available to fill Maine jobs. Instead, Maine employers need to attract people from other states and countries and to draw people back into the workforce. Paying competitive wages is part of the solution.
In 2016, Maine voters passed a referendum to raise the state’s wage. Under the new law, Maine’s minimum wage will be increased by $1 a year until reaching $12 an hour in 2020. After that, the minimum wage will be indexed to inflation. Before the November 2016 vote, Maine’s minimum wage was $7.50 an hour. It is now $10 an hour.
In January, about 59,000 workers in Maine got a raise, which will result in nearly $80 million in additional money that will flow through the Maine economy.
U.S. Department of Labor statistics show that wages grew across the board for Maine workers in 2017, the first year of the $1 minimum wage increase. As expected, the largest gain was among the lowest-paid workers, who saw the largest increase in earnings in the more than 15 years that the department has tracked this state-level data.
At the same time, overall employment and the average number of hours worked also grew in Maine, dispelling warnings that the minimum wage increase would depress hiring and hours.
There is long-standing national evidence that increasing the wages of low-wage earners is one of the best ways to stimulate the economy, because these workers spend their money on goods and services. Wealthier individuals tend to invest or save money they receive from raises or tax cuts. Every extra dollar that goes to a low-wage worker creates $1.21 worth of economic activity, according to respected economic models. Every dollar that goes into the pockets of high-earning Americans adds just 39 cents to the national economy.
That’s why so many economists argue that raising the minimum wage is one of the best ways to boost the economy.
Earlier this year, Maine lawmakers rejected an administration-backed bill that sought to reduce the current minimum wage to $9.50 an hour and then raise it by 50 cents a year until it reached $11. The legislation also would have allowed a lower minimum wage for teen workers and a “training wage” for workers between 18 and 20 for the first three months they are on a job, the length of Maine’s summer tourist season.
LePage continues to push to ease restrictions on 14- and 15-year-olds entering the workforce.
Lawmakers have a lot to accomplish when the return to Augusta this week. Rolling back the minimum wage should not be on the agenda.
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