Can Portland raise the minimum wage and still attract businesses?

Posted Feb. 23, 2014, at 5:40 a.m.
A December 2014 file photo of Portland Mayor Michael Brennan. The mayor recently called for the establishment of a minimum wage in Portland.
A December 2014 file photo of Portland Mayor Michael Brennan. The mayor recently called for the establishment of a minimum wage in Portland. Buy Photo

PORTLAND, Maine — Before the president and one of Maine’s top gubernatorial candidates made headlines in recent weeks calling for a higher minimum wage, Portland’s mayor said he’ll pursue one in the state’s largest city.

And with a shorter path to approval and a constituency widely regarded as supporting liberal causes, Portland is positioned to be among the leaders in the national charge toward sweeping wage increases.

But will that effort — which would put Portland on the heels of Washington, D.C., as just the second East Coast city to establish a municipal minimum wage — serve as a repellant or magnet for business growth?

Studies of the few other U.S. cities that have taken the step may provide hope that Portland can prop up its wages without losing businesses or jobs, but opponents remain unconvinced.

And with workers who, on average, already make at least a dollar more than the federal minimum wage, critics argue it may not be necessary to set a new bottom limit for pay in Portland.

The proposal

During the annual State of the Union address in late January, President Barack Obama called for an increase in the federal minimum wage — starting with a low limit of $10.10 per hour for federal contractors.

Last week, gubernatorial candidate and current U.S. Rep. Mike Michaud said, if elected to the Blaine House, he’d push to hike the state minimum wage to $9 an hour — essentially reviving a bill that fellow Democrats in the Legislature were unable to get past Republican Gov. Paul LePage’s veto pen last summer.

But both of those efforts promise to involve drawn-out political battles with uncertain timelines or results.

A week before Obama’s address, Portland Mayor Michael Brennan said in his yearly State of the City speech that Maine’s largest city won’t be waiting to see how those battles play out. He called for the establishment of a minimum wage in Portland, where the traditionally left-leaning voters and City Council may more quickly embrace the move.

“I’m fairly certain nothing will happen at the state level by the end of the year and so far, what the president has proposed only applies to federal contractors. What I’m looking for is a minimum wage that applies to all workers,” Brennan said late last week.

“Cities are becoming less tolerant and less patient with state and national government actions — or inactions, as the case may be — and they’re taking things into their own hands,” said Portland Community Chamber consultant Christopher O’Neil. “Mike Brennan is the poster child for that in Maine.”

A place at the front of the progressive pack is a position the Forest City is accustomed to. It was among the first in the country to adopt rules protecting gays from discrimination in 1992, and voters last fall made Portland the first East Coast city to legalize recreational marijuana use, among other movement-leading measures over the past few decades.

“Portland, at least in recent years, has never been shy about being on the tip of the spear,” said O’Neil. “At least from the Chamber of Commerce perspective, that can be scary. We’ve always said, ‘Yes, be pioneering, but don’t make us an outlier, and don’t put us at a disadvantage compared to other cities.’”

Brennan said he plans to assemble a task force to investigate a new minimum wage for Portland in March, with hopes that team will recommend a path forward for the city.

He said he doesn’t have a particular hourly wage amount in mind, nor any specific plans on whether — or how — to phase one in over time.

“Certainly, the number that everybody’s been talking about recently at the national level and some state levels is at least $10 an hour,” he said. “But I’m not wedded to any particular numbers.”

Knowing it’s uncharted territory, at least in Maine, Brennan said he will seek a transparent process with multiple opportunities for public input.

On a national scene, Portland isn’t alone. However, almost every other city to enact or propose a municipal minimum wage is on the Pacific Coast. Other than Washington, D.C., which will raise its minimum wage to $11.50 over the next two years, the next closest city with a low wage limit under consideration is Chicago.

Others who have taken the plunge — San Francisco, Santa Fe, San Jose and suburban SeaTac, Wash. — are all on the West Coast, as are four of the five other cities where new minimum wages are being proposed.

Some of the newest cities to the movement are eyeing minimum wages of $15 per hour, more than double the current federal minimum of $7.25 an hour.

Maine’s minimum wage is $7.50 per hour.

‘A market consideration’

Jim Coen is the executive director of the Portland-based Maine Franchise Owners Association, which represents owners and operators of local Dunkin’ Donuts, McDonald’s and Burger King franchises, among others.

According to the association, Portland has the second most such franchises in the state, with 95. Bangor, where there is a shopping mall, has 98.

Fast food restaurants and retail stores collectively employ 80 percent of Maine’s minimum wage earners, according to the state’s Center for Workforce Research.

Coen reiterated a frequently made argument against increasing the minimum wage Thursday, saying the additional payroll costs hefted onto low-margin businesses could be the difference between staying open and closing.

“The challenge is it increases labor costs across the board but doesn’t necessarily deal with whether a location is marginally profitable or not,” Coen said. “It puts pressure on franchise owners and business owners to make hard decisions about what to do with marginally profitable establishments. It might turn a marginally profitable situation into a no-profit or unprofitable situation, which could lead to the need to close the location.”

At the very least, he said, a business without much financial wiggle room could decide to keep fewer employees if it has to pay each employee more.

That conclusion was one the nonpartisan Congressional Budget Office reached in its research of a hypothetical minimum wage increase at the federal level. The office reported last week that an increase in the federal minimum wage to $10.10 per hour would lift some 900,000 Americans out of poverty, but it would in turn crowd another 500,000 people out of jobs.

That’s a message that has scared even some minimum wage workers in Portland, who are the ones the wage increase is intended to benefit.

“I think raising the minimum wage would help me a little bit now,” Tabatha Whalen, a mother of two who worked two fast food jobs in the city, said after a meeting with an Obama administration official last year. “But I talked to my boss about this, and he said if they raised the minimum wage to $9 per hour, they wouldn’t use as many workers. So, if they raise the minimum wage, would I be laid off?”

Coen said the private market will drive up hourly wages if the economy is strong, and that federal, state and local governments should resist the urge to meddle with it.

“I think it’s a market consideration. Sometimes the government tries to get involved in setting the wages, and I don’t think it always does the right thing,” Coen said. “Full employment is the one thing that benefits all employees. That means there are jobs out there, and [businesses] are having a hard time filling those jobs, which means they’ll have to pay more.

“If you’re in an economy where you’re not creating enough jobs, raising the minimum wage is not going to help that,” he continued. “It could actually create less jobs.”

Portland has long maintained an unemployment rate lower than the state and national averages — and that remains the case, with the latest Maine Department of Labor statistics showing a city unemployment rate of 5.1 percent, compared to the state’s 6.2 percent and the country’s 6.7 percent.

“If it’s 5 percent unemployment, the wages are probably going up naturally anyway,” Coen said.

According to the most recent information from the U.S. Bureau of Labor Statistics, there are no job classifications in the Portland-South Portland-Biddeford area — which is as local as the federal agency gets — in which workers earn less on average than $8 per hour. Even in the traditionally low-paying food service and retail industries, workers make more than the state minimum wage.

According to the bureau, nearly 17,600 people in the three-city metropolitan area work in food preparation and service occupations, while another 13,000 hold jobs in the retail sector, not including the typically better paid store managers.

In the Portland-South Portland-Biddeford area, fast food restaurant employees make an average of $8.39 per hour, retail cashiers make an average of $9.70 per hour, restaurant waiters make an average of $10.87 an hour, and retail salespeople make $13.33 an hour.

“Your common dishwasher is pulling in $8.50, $9 an hour already,” O’Neil said.

But supporters of a new minimum wage are quick to point out that, although those average wages are significantly higher than the state and federal minimum wages, they’re still not enough for pay for life’s necessities.

A single adult without children needs to earn at least $12.53 per hour to make ends meet in Portland, according to the state Department of Labor’s latest figures. For a single mother of two, like Whalen, the livable wage is $25.45.

‘Same debate every time’

Ethan Strimling, head of a Portland nonprofit and a BDN political analyst, sponsored Maine’s last successful minimum wage increase bill as a Democratic state senator seven years ago.

“It’s the same debate every time. [Opponents] come forward and say businesses are going to lay people off or move, and it just never happens,” Strimling said. “We don’t see businesses fleeing Maine because they can pay 25 cents less an hour in New Hampshire. If there are customers in Portland who are willing to buy those stores’ products, those businesses are going to stay here and sell to them.”

In fact, he argued that the higher wages will attract more and better workers to Portland. An influx of talent from the surrounding communities will attract businesses that want better employees, and the migration will force other nearby municipalities to consider minimum wage rules to stay competitive, Strimling reasoned.

“If you’re somebody in South Portland working at the mall, and you know if you go over to Portland and can make $1.50 an hour more, you’re going to go over the bridge. Eventually, South Portland’s going to take notice,” he said.

While Strimling’s argument involves some assumptions, there is research into minimum wage laws in San Francisco and Santa Fe that suggests he’s right.

A report released this month by the National Employment Law Project, a labor rights advocacy group, cited volumes of previous research showing the two cities’ wage laws “raised the earnings of low-wage workers without a discernable impact on employment.”

San Francisco and Santa Fe make sought-after case studies because they enacted their minimum wage laws about 10 years ago, allowing enough time for longer-term research.

“Researchers found that from 2004 through 2011, private sector employment grew by 5.6 percent in San Francisco but fell by 4.4 percent in other Bay Area, Calif., counties that did not have a higher local wage,” the project report reads, in part. “Among food-service workers, who are more likely to be affected by minimum wage laws, employment grew 17.7 percent in San Francisco, faster than in the other Bay Area counties.”

According to the study, higher employee productivity and lower workforce turnover — with corresponding drops in hiring and training costs — helped offset the increase in hourly wages for local businesses.

“I’m very familiar with all the arguments against increasing the minimum wage,” Brennan said. “But if anything, it will attract people to Portland because they know if they work here, they’ll get a reasonable wage.”

 

More slideshows

SEE COMMENTS →

ADVERTISEMENT | Grow your business
ADVERTISEMENT | Grow your business