Joint Fiscal Office points to economic losses from $15 minimum wage

Michael Bielawski/TNR

WAGE FALLOUT: Legislative council staff Damien Leonard and Joyce Manchester on Wednesday go over an impact assessment of what a $15 minimum wage would mean for Vermont’s economy.

MONTPELIER, Vt. — The House Committee on General, Housing, and Military Affairs on Wednesday examined raising the minimum wage to $15 an hour, despite signals from the governor that such a measure would get a veto if gets to his desk.

In a hearing before lawmakers, Damien Leonard and Joyce Manchester of the Joint Fiscal Office gave a two-hour presentation on the expected impact of raising the wage.

Their report, titled “The Minimum Wage: Background, History, and S.40,” forecasts annual disemployment of 2,250 jobs for the years 2028 through 2040, which accounts for a 0.5 percent reduction in total Vermont jobs per year. They also project a 0.3 percent loss to state gross domestic product.

The report lists gas stations, retail, restaurants and manufacturing among the long list of jobs likely to be adversely affected by this bill.

“It’s a job’s killer,” committee member Rep. Vicki Strong, R-Albany, told True North after the presentation. She added that the bill is likely destined for a veto, as Gov. Phil Scott stands opposed to placing new burdens on businesses.

Under the current state law, the minimum wage is $10.50. It is set to increase each year according to the increasing consumer price index or 5 percent, whichever is less. If S.40 were to become law, wages starting 2019 would rise in consecutive years to $11.10, $11.75, $12.50, $13.25, $14.10 and finally $15.00.

By comparison, New York plans to raise its minimum wage to $12.50 by 2021. Each year after that the wage will increase by a percent determined by the budget director until it reaches $15.00.

Leonard said raising the wage also affects the the so-called benefits cliff, which is when welfare benefits drop suddenly as a person’s income increases. He said the cliff could be especially serious for families who receive child care financial assistance.

“You see a dip, it’s really more of a down-slope, and creates an area where their wages are not increasing as fast as the lost benefits,” he said. “And so there’s actually a disincentive to take a higher paying job or work more hours.”

Some of the benefits programs suspected to need to readjust to a wage hike include Medicaid, Reach Up, energy assistance, and earned income tax credits.

Rep. Kevin Christie, D-Hartford, suggested those who need the most help could get hurt by this.

“This is an important cliff — it affects the families at the very lowest end of the financial spectrum,” he said. “That decreasing aid up to that 200 percent [of the federal poverty level] is really [going to hurt].”

The JFO report details how about 90 percent of the state’s employers are comprised of 20 or fewer staff. This account for 33 percent of all private sector jobs and 30 percent of private sector total wages.

This is important because when the minimum wage was being discussed over at the Senate Economic Development Committee, Mat Barewicz, the Department of Labor’s economic and labor market information chief, told them that small companies are going to struggle meeting this law. He also said that larger companies will be more inclined to move towards advanced automation technologies to replace human staff.

Rep. Thomas Stevens, D-Waterbury, the committee vice chair, wondered if negative consequences of raising the wage would be especially challenging for small businesses.

“What numbers here can we look at that might illustrate the potential effect … simply the number of lost jobs isn’t enough to say that this will have a negative impact on the general store or the supermarket. Is there anything in this report that talks about the impacts on smaller businesses?” he asked.

Manchester replied that restaurants, retail, childcare and other small employers might get hit the hardest, but the report offers no forecast on how many businesses might close.

“A number of these industries could be adversely impacted,” she said.

Leonard said the high minimum wage in Seattle, which went from $9.60 to $13 in just 21 months, is a useful case study for Vermont to consider.

A 2017 study of Seattle’s wage increase by the National Bureau of Economic Research concluded that “the second wage increase to $13 [had] reduced hours worked in low-wage jobs by around 9 percent, while hourly wages in such jobs increased by around 3 percent.”

“Consequently, total payroll fell for such jobs, implying that the minimum wage ordinance lowered low-wage employees’ earnings by an average of $125 per month in 2016,” the report adds.

Leonard said that while Seattle is an important comparison, “the Seattle raise was a very quick and steep rise.”

Michael Bielawski is a reporter for True North Reports. Send him news tips at bielawski82@yahoo.com and follow him on Twitter @TrueNorthMikeB.

Image courtesy of Michael Bielawski/TNR
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9 thoughts on “Joint Fiscal Office points to economic losses from $15 minimum wage

  1. In Townshend, the Listers know me quite well. I’m an agitator for my rights. Note the Listers are voted into office by the public for a term. They are paid by the town. You’d think being from the community, they would be community oriented—WRONG. They have to be educated by someone / someplace to do their “duty”.

    They get their “duty (expertise)”, from classes at the VT Property Tax Dept. SO in reality being elected and paid by the towns, they really dance to the VT Tax Dept and when “schooled” loose reality of the local town and the citizens and enforce VT Tax Policy. They are Zombiefied, anti-common sense anti-resident. It’s all for the educational system (80+% of taxes). If the town such as Townshend “gives” in excess of the State regs, the town has to send a “fine” to the state. Townshend had to send $100K to the state , being fined last year. That’s the taxation of 33 1/3 properties at 3K each. A waste. Your neighbor Lister isn’t your friend.

    But there are some people (new Listers) that attended the VT Tax classes as realized what the tax Dept told the Listers. Some quit knowing it wasn’t anything fair. In reality, the Tax Dept said was to tax excess the people excessively. You get more money. If they grieve, the values don’t get reduced much….via the Listers, BCA Board & State Appraiser. There are land mines in place to discourage.
    grievance. TRUE!

    Yet, if you can’t pay your taxes, does the school system obtain the property? This is going on throughout the state. I have facts. Note, nobody “owns” their property, the town does. You pay “rent”, if incapable it reverts to the town. If the town goes bankrupt, the state owns it. Warranted Deed is BS, only allows you to be on the land and keep certain people off at your discretion.

    Sorry folks, that’s VT living. And now they want to take your guns. What are they afraid of?

  2. You have to wonder where Vermont is going? According to Forbes: Nowhere anytime soon.

    https://www.forbes.com/places/vt/

    “At $31 billion, Vermont has the smallest economy in the U.S. Its five-year average unemployment rate of 4% was the fourth lowest among states, but Vermont suffers from business costs that are 12% above the national average. ***The state’s economic outlook is also weak—projected to be the second worst in the U.S. over the next five years.*** Income growth is also expected to badly lag the rest of the country. Vermont is the leading producer of maple syrup in the country.”

    But hey, you’re the leading producer of maple syrup!

    #47 in Business Costs
    #28 in Labor Supply
    #44 in Regulatory Environment
    #44 in Economic Climate
    #49 in Growth Prospects
    #23 in Quality of Life

    Projected Annual Job Growth
    0.6%
    Unemployment
    3.1%
    Median Household Income
    $55,176
    Household Income Growth
    2.3%
    Right to Work State
    No
    Union Workforce
    11.5%

    Poverty Rate
    11.9%

    Net Migration (2016)
    -1,900

    While you’re at it take a peak across the river to see how thing COULD look:

    https://www.forbes.com/places/nh/

    • VT being a great maple sugar producer, well I believe that’s going to change.
      1. Sugar maples in Longmeadow MA and Worcester MA have scummed to a beetle, none left.
      2. Taking Route (either 111 or 114) north out of Island Pond, a Canadian outfit has over 18 miles of pipelines gathering sap. They have many trucks to transport. They have a plant at the old Ethan Allen furniture factory to process. They produce thousands(?) of gallons of syrup a day. Figure it goes to Canada. Seeing the sap lines is amazing. They added 9 miles last year.

      In the stores, you’ll see many Canadian Maple Syrup products.

      The small producer in VT will survive, but the trend is that VT will NOT be the major of syrup. The northern parts of VT has more sugar maples than the south.
      Go look for yourself.

        • Look at IL as well, another Liberal state. I’m presenting to the readers in general the trends. There’s a lot of info out there, and I see it first hand.

        • I have property in VT since 1953. Of late, taxes have gone through the roof, I file a grievance each allowable time an d have a state appraiser evaluate. The system is all BS, against the property owner.I hang on because of family history and the local people.

          Regarding my property assessment, the Listers come up with a “Test Force we feel evaluation” to raise my value (not in the Listers handbook which states “Fair Market Value 51 times). They violate their guidelines. The BCA Board said I had “potential” (nothing of value) to maintain property values (ref in the woods on a dirt road with no views), but I had potential for it.

          I have a few choices:
          1) keep and maintain and fight them every two years
          2) Sell to NYC Blacks or Mexicans and load up the schools and perhaps increase crime. School system would like more kids to justify their existance.
          3) Sell my property to a non-profit like The Nature Conservatory, the town wouldn’t get tax money.
          4) Sell the property to another town, no taxes for the town I’m in, being government property
          5) File a Land Patent wherein I own the land outright, not the town or state. No one can trespass or ever seize. I’ve thoroughly researched it.
          6) With my knowledge and recruit prominent people establish an organization to fight local taxes in the state. Look at the court decision Ames v Town of Danby: Ames v. Town of Danby, 136 Vt. 78, 385 A.2d 1075 (1978), This alone helps people out, if they knew for Fair Market Values. I’ve seen where Bradford valued a property at $160K, it was sold for about $70K (Fair Market Value). The town got excessive money. Found out fighting my tax assessments.
          7) want more info, so mention herein. VT Watchdog via Bruce Parker wrote two articles about my situation.
          8) There are ways to fight these idiots, and at their own game.

          Tom

    • Your analysis of the VT status didn’t include that on a list of the 50 states (not 57 as BO said), VT was / is (#49, 47, 48) most heavily taxed. Only NY was the worse.
      Also:
      Forbes ranks Vermont 48th for business climate
      http://truenorthreports.com/forbes-ranks-vermont-48th-for-business-climate

      Also:
      Authors of ‘Rich States, Poor States’ blast Vermont energy policy
      http://watchdog.org/288183/rich-states-poor-states-authors-vermont-energy/?roi=echo3-41842949645-40457175-d40ab55861ab4df5143fbfc4ef592ceb

      Also:
      2017 State Business Tax Climate Index
      http://taxfoundation.org/article/2017-state-business-tax-climate-index

      Also Tax Happy VT
      https://www.forbes.com/forbes/welcome/?toURL=https://www.forbes.com/sites/patrickgleason/2016/04/03/vt-taxhikes/&refURL=https://www.google.com/&referrer=https://www.google.com/

      I’m not that religious, but god how low can you go:
      Vermont ranks 49th in ‘Rich States, Poor States’ report
      http://www.vermontbiz.com/news/june/vermont-ranks-49th-rich-states-poor-states-report

      Socialism at it’s best.

  3. . This is so blatantly obvious. You raise minimum wage, prices of everything increases. Jeez, even this discussion over the past several weeks has resulted in increased prices of gas, food, and who knows what else, oh yea, insurance. Prices increase due to overhead increase, profits down, lay people off, increase prices to keep from going out of business, try and conform with new government guidelines, go out of business, lay everyone off, but you are no longer paying unemployment tax so pass it on to the taxpayers. Over and over and over again. Oh, and did I mention, taxes, fees and whatever covered up bill they send and demand to pay is so the state/gov can meet the huge pensions they have promised their employees. You are struggling to keep a roof over your head and food on the table, yet they keep taxing you for their personal “perks”. How is that representing the “people”? Term limits. Disclosure.

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