March 14, 2013

“We should reward work,” said Rep. Scott Hamann, sponsor of a bill to raise the minimum wage by a dollar and index it to inflation.

UPDATE April 3: The measure won majority support in the House and Senate, however the votes were along party lines. A two-thirds majority is needed to bypass a LePage veto. The bill, LD 611, would raise the minimum wage annually in three 50-cent increments starting July 1, 2014. After rising to $9 an hour in 2016, the minimum wage would then increase annually based on changes in the Consumer Price Index, the U.S. Department of Labor’s measure of prices paid by consumers for a designated basket of goods and services.

“Companies are using the excuse of a bad economy as a reason for paying unfairly low wages. This is not a result of the bad economy; it is causing the economy to be bad. If wages were higher, workers would have more money in their pockets to spend, which would create jobs and grow the economy,” said Paul Nickerson of Lewiston.

The minimum wage in Maine would get a much-needed increase under a bill proposed by Rep. Scott Hamann, a Democrat, who would increase Maine’s minimum wage to $8.50 on Oct. 1, 2013 and increase it annually by the same percentage as the Consumer Price Index. The Economic Policy Institute recently projected that increasing the minimum wage to $9.50 an hour would generate $60 billion in new household spending in two years.

“We should reward work.” said Hamann. “We should ensure that an honest day’s work is rewarded with an honest paycheck.With LD 611, Maine has an exciting opportunity to support our dedicated low wage workers, and boost consumption by putting money in the hands of people who are most likely to spend it with a local business.”

Maine’s minimum wage stands at $7.50 an hour and has remained at that level since 2009. Mainers working full-time minimum-wage jobs earn $15,600 a year. President Obama said in his State of the Union that he wanted to raise the minimum wage to $9.

Nobel economist Paul Krugman agrees that it is time to raise the minimal wage and wrote:

For about four decades, increases in the minimum wage have consistently fallen behind inflation, so that in real terms the minimum wage is substantially lower than it was in the 1960s. Meanwhile, worker productivity has doubled. Isn’t it time for a raise?

Now, you might argue that even if the current minimum wage seems low, raising it would cost jobs. But there’s evidence on that question — lots and lots of evidence, because the minimum wage is one of the most studied issues in all of economics. U.S. experience, it turns out, offers many “natural experiments” here, in which one state raises its minimum wage while others do not. And while there are dissenters, as there always are, the great preponderance of the evidence from these natural experiments points to little if any negative effect of minimum wage increases on employment.

Why is this true? That’s a subject of continuing research, but one theme in all the explanations is that workers aren’t bushels of wheat or even Manhattan apartments; they’re human beings, and the human relationships involved in hiring and firing are inevitably more complex than markets for mere commodities. And one byproduct of this human complexity seems to be that modest increases in wages for the least-paid don’t necessarily reduce the number of jobs.

What this means, in turn, is that the main effect of a rise in minimum wages is a rise in the incomes of hard-working but low-paid Americans — which is, of course, what we’re trying to accomplish.

Hamann’s proposed increase is a modest step toward helping Mainers in minimum-wage jobs earn a living wage. Indexing the minimum wage ensures that its buying power keeps up with inflation.

Hamann notes that raising the minimum wage will increase the buying power of Mainers, which in turn will benefit business and allow them to hire more workers. Vermont transitioned to an indexed minimum wage in 2007 and has seen unemployment under 5 percent.

The bill has the support of the Maine AFL-CIO, which organized a rally in support of Hamann’s measure and another proposal to promote American-made products at the State House on Thursday.

The bill had a public hearing before the Labor, Commerce, Research and Economic Development Committee on Thursday. A work session is scheduled for March 22.

Maine is one of 18 states with minimum wages above the federal minimum of $7.25, according to U.S. Department of Labor Statistics. Twenty-three other states are weighing legislation to increase their minimum wages, according to an assessment by the National Conference of State Legislatures on Feb. 13.