September 25, 2017
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These Maine workers would benefit most from a higher minimum wage

By Christopher Burns, BDN Staff
Updated:

When Maine voters decide next month whether to raise the minimum wage, people we see every day behind store counters, waiting tables and helping educate our children will feel the results.

By approving an increase in the state’s hourly wage to $12, voters could elevate the living standard for the state’s lowest-paid workers, particularly those in service-sector jobs. That could affect nearly a third of the state’s workforce if Question 4 prevails on Nov. 8, according to the Maine Center for Economic Policy, a progressive think tank that has for years advocated that Maine raise its minimum wage.

If Question 4 passes, the minimum wage would rise from $7.50 to $9 per hour in 2017 and increase $1 per year until it hits $12 in 2020. After that, it would rise further based on changes in the cost of living. It also would phase out the lower minimum wage for tipped workers — $3.75 per hour — over a decade so restaurant servers would eventually qualify for the new minimum wage.

In the first year, when the wage would hit $9 per hour, there would be a widespread jump in base pay for jobs across the state.

Here’s what a higher minimum wage could look like in Maine in the first year.

Economic hubs would feel a minimum wage hike the most.

In Cumberland and Penobscot counties, entry-level wages will rise for the highest number of jobs if the minimum wage hike passes, at least for the first year. Both counties are home to major economic hubs and service centers where many Mainers find employment.

In Cumberland County, the starting pay for 32,500 jobs is less than $9 per hour, according to data from the Maine Department of Labor’s 2015 wage reports. That’s about one fifth of all jobs in the county. (The department’s 2015 wage estimates for Cumberland County don’t account for the increase in Portland’s minimum wage, which rose to $10.10 in January.)

Penobscot County is home to more than 16,940 jobs for which the estimated entry-level wage is below $9. That’s about one quarter of all jobs included in the wage reports.

Most of those jobs in Cumberland and Penobscot counties are in the service sector.

Many of the jobs for which starting wages will rise in Penobscot County, for example, are cashiers, who earned $8.31 per hour on the low end of the pay scale; dishwashers, at $8.32; and food preparation, at $8.33. But this also encompasses jobs you might not associate with minimum wage increases, such as substitute teachers. There are 170 in Penobscot County, and the lowest paid subs make $8.29 per hour.

In Cumberland County, that also includes funeral attendants, who make $8.29 per hour at the bottom of the pay scale.

“It’s not a wide range of industries in which you can find these low-wage and low-skilled jobs,” said Glenn Mills, chief economist at the Department of Labor’s Center for Workforce Research and Information. “It’s fast-food restaurants and other service jobs that don’t require much in the way of education or skills.”

The wage reports also show that even outside the state’s economic hubs, there will be large wage gains. For instance, in rural Somerset County, raising the minimum wage to $9 would lift entry-level pay for 3,480 jobs, about 20 percent of all employment.

Not all counties can expect such a dramatic increase. Only 400 jobs would see a higher entry-level wage in Waldo County that first year, or just less than 4 percent of jobs there.

Low-paid workers stand to benefit from a pay bump, as long as their jobs survive.

Mills said the wage hike could prove disruptive in communities north of Greater Bangor, where the mills and factories that once formed the backbone of those economies have closed.

“What’s left is not a dynamic environment, so wages tend to be relatively low in those communities,” Mills said. “Propping up the minimum wage will tend to have a higher impact on employers in those areas.”

That could spur businesses in rural communities to shed workers. Researchers have predicted a range of job losses after minimum wage hikes, but some economists have found that the tradeoff in higher wages comes with overall small job losses.

One industry in which wage gains could be offset with job losses is food service. Not only would workers face competition among themselves, but they also may wind up competing against computers as businesses seek to control higher labor costs through automation, according to researchers from Brookings Institution. The movement for a higher minimum wage comes at a time when the cost of computers is falling, making automation a cheaper alternative to flesh-and-blood workers. Earlier this year, the fast-food chain Wendy’s unveiled plans to do just that at some restaurants.

“The replacement of workers with technology has gotten very advanced and very inexpensive these days,” Mills said. “There’s a competition between labor and technology that’s likely to come into play if the cost of labor is higher.”

The consequences of Question 4, however, could be less severe than many fear. Researchers at the Institute on Labor and Employment at the University of California, Berkeley, have found that businesses can absorb a minimum wage increase when it amounts to less than 60 percent of the median wage in a given area. Even that threshold doesn’t necessarily represent a tipping point.

Job losses likely would be minimal for Maine because adjusted for wage inflation trends, the $12 wage in 2020 would be just under 60 percent of the state’s median wage, Michael Reich, an economist at the institute, said in an email. Even in states and cities where the increase is greater than proposed in Maine, the impact on employment from wage hikes is fairly neutral.

The reason is that the negative consequences of a higher wage are offset with increased purchasing power for workers, who can provide a lift to the local economy as they spend more, Reich said.

In rural areas, workers would see the biggest boost in their purchasing power.

In Maine’s more rural counties, where the cost of living is lower, workers earning a higher minimum wage could stretch their dollars further.

Last year, Amy Glasmeier, a researcher at the Massachusetts Institute of Technology in Cambridge, crunched those numbers for every U.S. county for a living wage calculator. She identified for each county the gap between the minimum wage and the “living wage,” or what a worker needs to cover her basic expenses — food, health care, transportation, housing, taxes and child care.

Nowhere in Maine does the current minimum wage come close to meeting the cost of living. The biggest gap is in Cumberland County. There, the living wage for a worker who is single and childless is $10.95 per hour, almost $3.50 per hour more than today’s minimum wage. Even if Question 4 passes, that worker would still fall short of earning a living wage by $1.95 per hour.

When you add children into the mix, the wage gap nearly doubles. If that same worker in Cumberland supports a spouse and a child, she needs to take home at least $22.06 per hour to cover basic expenses for all three of them. Add another child, and the living wage jumps to $24.56.

But take this same worker and put her in a more rural county, and those earnings stretch much further.

Penobscot County has one of the smallest gaps between the cost of living and the minimum wage, according to Glasmeier’s living wage calculator. It’s home to Bangor, the economic hub for northern and eastern Maine, but it also has a largely rural population outside the city.

For our worker who is single and childless to meet her basic expenses there, she needs to make at least $9.64 per hour. Next year, if Question 4 passes, she would fall just 64 cents shy of her estimated living wage.

Many workers like her on the lower end of the pay scale would gain purchasing power, more easily meeting their costs of living and potentially even earning more than they need to pay basic bills. But even if the full wage hike sets in, for plenty of workers, the minimum wage would still be just that — barely enough to get by at the end of the month.

BDN business writer Darren Fishell contributed analysis and data-crunching to this report.

 

Correction: A previous version of this story overstated the number and share of jobs starting at below $9 per hour in each county, due to an error tabulating data.


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