Minimum wage again

For the second time in a year, lawmakers are about to debate the state minimum wage. Democrats say a 35-cent boost, to $5.50, will give hard-working employees the raise they deserve without harming employers. Republicans say it will kill business and throw people out of work. The governor says he’s keeping an open mind, then reiterates the argument that led to his veto of a 25-cent hike last spring.

If that’s confusing, try this: The national advocacy group EPI has irrefutable proof that increasing the minimum wage costs jobs, harms the lowest skilled workers and benefits the rest of the working poor hardly at all. Meanwhile, the national advocacy group EPI has irrefutable proof that increasing the minimum age helps everybody — workers, employers, taxpayers.

Yes, there are two EPIs. The first, the naysayer EPI, is the Employment Policy Institute, funded primarily by retailers, fast-food companies and other minimum-wage heavy businesses. The other, the rose-colored EPI, is the Economic Policy Institute, supported by organized labor. Two groups, sharing the same acronym, using the same studies, reflecting on the same history, reaching utterly opposite conclusions. That’s confusing. That’s the minimum-wage debate.

As Congress was considering the last federal minimum-wage increase, the two-step 90-cent raise of 1996-97 to $5.15, EPI number one, call it EmPI, issued the dire prediction that more than 600,000 jobs would be lost. Unemployment promptly dropped from 5.4 percent to 4.5 percent.

The minimum wage has been increased 13 times since it first was established in 1938 at 25 cents; only once, during the 1974-75 recession, was it followed by an overall increase in unemployment. On the other hand, most minimum-wage increases have been enacted during good times, when the nation felt wealthy, Congress was in a generous mood with other people’s money and a modest growth in labor costs was unlikely to spoil the party. Despite that sterling record, EPI number two, EcPI, concedes that the minimum wage does not reduce poverty and that the job losses that do occur are skewed toward rural regions and toward the youngest, least skilled workers. An estimated 215,000 teenagers lost their jobs immediately after the 1996-97 increase.

Those jobs have since been restored. Nothing to do with the minimum wage; credit a continuing boom, low interest rates, high consumer confidence. In fact, the easiest conclusion to reach about the minimum wage is that it bears, in the broad national picture at least, little relation to employment. From 1977-81, the minimum went up some 50 percent and so did employment, by 9 percent. From 1982-87, when the minimum stayed stagnant and its buying power dropped, employment increased by 9 percent.

Another conclusion that can be made about the minimum wage is that its value fluctuates wildly. Before the 1996-97 hike, the buying power of the $4.25 minimum was at a 40-year low, worth just more than half of its early 1970s peak. At $5.15, it still is below the 61-year average.

Minimum in Maine

The Legislature’s Labor Committee holds hearings next Tuesday on several minimum-wage bills. The leading contender is likely to be L.D. 1891 by Senate President Mark Lawrence. It not only increases the wage to $5.50, it ensures that Maine’s minimum will always be 35 cents higher then the federal.

Given Maine’s low-middle national ranking in household income and it’s very low ranking in disposable income, this is an important issue that allows no room for baseless anecdote or assumption. One persistent and erroneous assertion made by opponents is that Maine would become one of only three states to exceed the federal minimum wage. Ten states already are higher, several above the $6 level, and it is an accelerating trend.

More than 20,000 Mainers work at or below the minimum wage (several job categories are exempt). A 35-cent raise equals $14 a week; the annual total, for 40 hours and 52 weeks, is $11,440. While one-third of workers at or below the minimum are teens, two-thirds are not. That’s more than 13,000 adults. Of those, nearly 9,000 are women.

There’s a lot for lawmakers to ponder. If putting more money in the hands of the affluent grows the economy — the trickle-down theory — would not more money in the hands of the working poor trickle up? If, as studies show, society gains from an increase in the minimum wage through lower welfare costs, should not society shoulder some of businesses’ burden, through, for example, the earned-income tax credit? At a time when tax breaks for employers are exploding, isn’t there a little something left for the employees?

Last year and now, Gov. King puts his concern this way: If an employer with 20 minimum wage workers has to fire three because of the increase, they suffer a devastating loss so 17 can enjoy a modest gain. It’s a pretty good argument. So good, in fact, that EmPI picked up on it for a recent anti-raise press release.

One quibble, though. That $14 weekly raise, plus an extra 10 percent for higher payroll taxes, comes to $800 per year per worker. Times 20 equals $16,000 in higher labor costs. That accounts for one and a half workers, not three. This minimum wage debate is confusing enough without bad math entering into it.