Minimum Wage Increase and Indexing

Increasing the minimum wage to ten dollars per hour would enable low-wage employees to be fairly compensated for their hard work. It would also help boost the economy by getting income into the hands of those most likely to spend it, thereby creating additional demand that businesses sorely need during this shaky economic recovery.

Inflation indexing guarantees low-wage workers a wage that keeps pace with the rising costs of goods and services and provides a sustainable solution to the problem of declining real wages for the lowest-paid workers.

The Problem    

People making minimum wage earn only about $15,600 a year.  A living wage for a single parent with one child is more than double our minimum wage of $7.50.  It is nearly impossible for families or individuals to survive on minimum wage work.  If a family living on minimum wage spent $500 per month on rent, $60 per week on groceries, $60 per week on gas, that would leave only $64 per week for other expenses, including savings.

The minimum wage, unlike Social Security and many tax code provisions, is not required by federal law to be adjusted for inflation every year, therefore its buying power is constantly decreased.  More and more Maine households are relying on low-wage jobs to make ends meet. One in three Maine workers is employed in industries that pay, on average, below $30,000 per year. Eighteen percent of jobs don’t pay enough to lift a family of four out of poverty, much less meet their basic needs. Despite working harder and more productively, Maine’s low-wage workforce has been growing for decades and the recession has accelerated this trend.

Why Pass it

1.Maine workers and businesses have a shared interest in improving wages at all income levels. Making work pay is not only the right thing to do, it makes sound economic sense. A minimum wage that keeps pace with the increasing cost of living is an important step toward greater long-term stability for families and the overall economy.

2.Consumer spending drives economic activity in Maine and the United States. When working people have more money, they spend more, resulting in more economic activity, which is good for business and good for jobs. At a time when working Mainers face increased economic hardship and businesses are short on customers, now is the time to implement policies that will boost Maine’seconomy. Increasing Maine’s minimum wage and indexing it to inflation will promote greater prosperity now and in the future.

3.Maine state legislators have their salaries indexed to inflation.

Addressing Common Concerns

1.Higher wages do not result in job losses and may actually contribute to increased employment. Decades of research reveals that minimum wage increases do not lead to job loss, even during periods of high unemployment. In some instances, minimum wage increases actually increase employment and productivity. For example, states that raised their minimum wages above the decade-long $5.15 federal level in the early 2000s had stronger employment and small business trends than states that didn’t.

2.Minimum wage workers are adults and heads of households: Nationally, 76% of workers earning at or near the minimum wage are adults over age 20. This figure may be slightly lower in Maine given a reliance on seasonal workers.

Sources and Links to more information

Maine Center For Economic Policy: http://www.mecep.org/view.asp?news=1498

Economic Policy Institute:

http://www.epi.org/publication/minimum-wage-workers/

http://www.epi.org/publication/increasing_the_minimum_wage_is_smart_for_...