By Bill Moore
The General Assembly will convene its 2018 session in less than one month, and the business community is already concerned about the direction in which we may be headed.
It is apparent that one of the priority bills in the new year will be to increase the minimum wage to $15 an hour. The Central Vermont Chamber of Commerce has joined many other pro-business/pro-growth groups to oppose this recommendation.
In 2014, the business community agreed to a stepped increase in the minimum wage from $8.73 an hour, (nearly a dollar above the federal minimum) to $9.60 in 2016, $10 in 2017 and $10.50 in 2018. The agreement also called for indexing the minimum wage, beginning in 2019.
These increases were agreed to by all parties interested in workers’ wages and enacted by the General Assembly. One of the primary reasons for the agreement was to allow businesses to plan and prepare for increases and, by indexing increases annually, to avoid the constant battles over increasing the minimum wage.
Minimum wage jobs are generally those at the entry level. They are intended to be short-term until the employee gains the necessary skills and experience to take on more responsibility. More experience and responsibility leads to better jobs which leads to increased wages. The Minimum wage was not created to provide a permanent wage. The wage was in fact created to ensure that workers during The Great Depression were not exploited.
We believe that market forces should determine the minimum wage, not artificial increases imposed by the Legislature. In fact, the market is already driving the wages earned by Vermont’s workers. In 2016, only 10 percent of all Vermont workers earned less than $10.45 per hour, at a time when the minimum Wage was $9.60 per hour.
According to a 2016 study by the Heritage Foundation, “Starting wages of $15 per hour mean full-time employees must create at least $38,700 a year in value for their employers (including wages, employer payroll taxes, and Affordable Care Act mandated penalties). Such a high hurdle would make it much harder for less-experienced and less-skilled workers to find full-time jobs. Many of these workers are not yet productive enough to create that much value for their employers and businesses will not hire them at a loss. Consequently, many businesses might respond to a $15 mandate by eliminating positions, cutting hours, and looking for new ways to implement labor-saving technology.”
Such “labor-saving technology” is already available in the forms of self-check out counters and kiosks taking orders in restaurants.
We are concerned about the upward pressure on wages that increasing the minimum wage will have on the cost of doing business in Vermont. We are concerned that simply increasing the minimum wage does not increase workers’ productivity. We are concerned that the increase will in fact negatively impact the productivity of current employees who do not see their own wages increase commensurate to the increase in the minimum wage.
We are also concerned about the inflationary impact that increasing the minimum wage will have on the costs of goods and services sold in Vermont. Businesses will not absorb the increases and consumers will feel the burden of increased prices.
Already, a significant study that has been conducted looking at all sectors of Seattle’s economy (where the minimum wage is $13 per hour) is showing a huge negative impact on low-wage workers due to their working significantly fewer hours because of the increased wage. The study found that for every percent increase in hourly wages, low-wage workers saw hours reduced by three percent. The result was a loss of roughly $125 per month due to working fewer hours.
Automatically increasing wages does not address the core issue. We need to be creating a workplace that is assured that productivity is commensurate to the increases in the minimum wage. Education and training are the keys to success. We must be educating students to be prepared for the jobs of the twenty-first century. Training and re-training programs for incumbent workers and those re-entering the workforce must be geared towards today’s job requirements.
There are good paying jobs going for the asking across Vermont today. Employers that I have spoken with tell me that those jobs are not being filled because the applicants are not meeting the necessary job requirements.
Increasing the wage to $15 per hour is a lofty goal, but it does not solve the problem. Increasing the wage can stifle job growth, and even limit employers’ ability to create new jobs.
Better education, the right training and re-training of the workforce for today’s and tomorrow’s jobs will help to ensure a minimum wage greater than $15 per hour.
Bill Moore is president and CEO of the Central Vermont Chamber of Commerce.