WAGE HIKE RATIONALE

A proposal to raise Maine’s hourly minimum wage from $7 to $8.40 by 2009 will be the center of heated debate in coming months. But a dispassionate examination of the proposal, with attention to the reason a minimum wage exists in the first place, ought to lead legislators to approve the change.

Maine’s minimum wage increased from $6.75 to $7 on Oct. 1. The wage is set to increase to $7.25 in July 2009 under the current law. But Sen. Ethan Strimling, a Portland Democrat, proposes to raise it to $7.70 next year and $8.40 in 2009, and, perhaps more significantly, tie future raises to the consumer price index.

Critics will point to the already high cost of doing business in Maine, but the minimum wage does not contribute in a significant way to that burden. Maine joins 28 other states that have hourly minimum wages higher than the federal rate, which increased last summer to $5.85, and moves to $6.55 next summer and $7.25 in July 2009. According to Christopher St. John, executive director of the Maine Center for Economic Policy, modest increases to the wage have not been tied to job losses. And in fact, adding wages to low-income households “contributes to the economy in a significant way,” he said.

When the lower middle class and working poor have more money in their pockets, they spend it. It may be on rent, food or goods at chain stores like Wal-Mart, but it enters the local economy. “Those dollars flow quickly,” Mr. St. John said, unlike the CEO whose higher compensation package is more likely to be salted away. Since most of the U.S. economy is now tied to consumer spending, this is critical.

Opponents of raising the wage argue that few households are supported by minimum wage jobs. But the Maine Department of Labor reports nationally 24 percent of minimum wage earners work full time. In Maine, 63 percent of those earning minimum wage are women.

More significant is what has been observed at other wage levels when the minimum rate is increased. Mr. St. John said a ripple effect in the wages that are $1 to $1.50 above minimum wages has been documented following a hike to the base wage. Employers who pay higher than the minimum wage for entry-level work do so because they value honest, diligent and loyal employees and want to keep them; the cost of hiring and retraining is high. Those employers are “signaling value that they place on the job,” Mr. St. John said, and as the base wage rises, “they have to increase that signal.”

Mr. St. John likes Sen. Strimling’s proposal to tie future hikes to the rate of inflation because it de-politicizes the process by which raises are considered, and, by implementing regular increases, the wage does not fall behind purchasing power.

But the most compelling reason for increasing the wage is tied to its purpose. It sets a floor for workers, a level of “basic decency,” said Mr. St. John, allowing them to afford housing, food and other necessities, “which enables workers to get back to work the next day,” certainly a critical component of any economy.