March 29, 2020
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A higher minimum wage will make a difference for those who work hard, still struggle

BDN File | BDN
BDN File | BDN
Caption Question 4 on the November ballot asks if voters want to gradually raise Maine's minimum wage to $12 per hour.

Do you want to raise the minimum hourly wage of $7.50 to $9 in 2017, with annual $1 increases up to $12 in 2020, and annual cost-of-living increases thereafter; and do you want to raise the direct wage for service workers who receive tips from half the minimum wage to $5 in 2017, with annual $1 increases until it reaches the adjusted minimum wage?

An anniversary passed earlier this month with little fanfare. Oct. 1 marked seven years since Maine’s minimum wage last rose.

This fall, the decision whether to pass Maine’s first minimum wage hike in seven years rests with voters. Question 4 would set in motion a series of annual increases that would bring Maine’s wage to $12 in 2020. After that, the minimum wage would adjust automatically each year based on the Consumer Price Index. The ballot initiative would also phase out Maine’s tip credit, so the state’s hourly minimum wage would apply to restaurant servers just as it does to other occupations.

We favor a raise for Maine’s low-wage workers because we know that a meaningful income boost can make a difference for a low-income family, and a minimum wage hike would help many adults who work full time and live at or near the poverty level. But we also want to be sure that such a raise doesn’t unduly burden businesses. We want to see the benefits outweigh the drawbacks of this policy change.

We believe the minimum wage hike proposed by Question 4 meets that standard. We recommend a “yes” vote.

The minimum wage is one of the most commonly researched topics in economics, and a consensus has emerged in recent years that reasonably sized minimum wage hikes have limited or no negative effects on employment levels, including in low-wage industries such as food service and hospitality. Researchers have found this to be the case when a city raises its minimum wage and surrounding towns do not and when one state passes a minimum wage hike and a neighboring state does not.

The reason is that employers react in a variety of ways to minimum wage hikes. They might find higher labor costs offset by lower turnover among better-compensated employees. They might find efficiencies that don’t involve reducing employment. They might raise prices — but researchers have found price hikes are generally limited to restaurants, where prices rise 0.7 percent for a 10 percent minimum wage hike.

So, if a reasonably sized minimum wage hike can happen with minimal effect on employment, what is a reasonably sized raise? Researchers in recent years have homed in on the number 60 percent. Economists at the University of California, Berkeley’s Institute for Research on Labor and Employment have found that a region is unlikely to see negative job effects when the minimum wage rises to a number that is less than 60 percent of the region’s median hourly wage.

And by 2020, based on current wage inflation trends, a $12 minimum wage in Maine would amount to 57 percent of the state’s median wage for a full-time worker — just below the 60 percent threshold, Institute Chair Michael Reich wrote in a March letter regarding Maine’s minimum wage hike proposal.

Question 4 would change more than the standard minimum wage. Restaurants would eventually have to pay their servers the standard minimum wage instead of relying on tips from customers to help their employees get to the minimum. Opponents have argued that this change could hurt servers who rely on tips to make more than the minimum wage.

But the reality for most restaurant servers is low pay, tips included. According to the Bureau of Labor Statistics, the median hourly pay for a restaurant server in Maine is $9.06, not much more than the current $7.50 minimum. The switch proposed in Question 4 would amount to more predictable and likely more pay for most servers in Maine. In addition, shifting the burden of paying servers from customers to employers hasn’t been shown to have a negative effect on restaurant employment growth in the seven states that currently don’t have a separate minimum wage for tipped workers.

Raising Maine’s minimum wage certainly isn’t the only thing the state should do to help low-wage workers and those living in or near poverty.

But raising the minimum wage is something Maine can do in the short term, without hurting the economy, to start putting more money into the pockets of people who work hard and still have a tough time escaping poverty.


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