Wages spike could harm economy

By LINDSAY KURRLE
Commissioner, Vermont Dept. of Labor
As the Commissioner of the Department of Labor and the former owner of a small gas station and convenience store, the conversations on minimum wage are something I’ve followed and evaluated closely for years, understanding both the impact on hard-working Vermonters and small businesses.

I don’t know anyone involved in these discussions that disagrees with the intent of the legislature’s proposal to add another increase to minimum wage. 

Higher wages for working Vermonters is something everyone can support. 

The vital question is whether their proposal, overall, will have a more positive or negative impact.

It’s important to note that Vermont’s minimum wage is currently scheduled to increase every single year, in perpetuity, to keep pace with increasing costs of living. 

This automatic increase is based on specific economic indicators, so it’s supported by growth of the economy.

In contrast, the legislature’s proposal mandates a specific and arbitrary increase to $15 an hour — a magnitude the legislature’s economist characterizes as “unchartered territory,” meaning it’s the most significant jump on record. 

The facts have made it clear: Mandating an artificial increase to the minimum wage, on top of already scheduled increases, is not the right approach to help working Vermonters or strengthening our economy. 

Here are a few reasons why:

Given the goals of this legislation are to increase the total income of working Vermonters, let’s start there. Studies of artificial hikes to the minimum wage show these increases have reduced employment for entry-level and low skill workers. 

In Seattle, a study conducted by the University of Washington, found low-wage jobs declined by 6.8 percent when the minimum wage was significantly increased. Perhaps most shockingly, because of a 9 percent reduction in hours, total net income for low-wage employees fell by $125 per month, or $1,500 annually. 

Put simply — the data shows minimum wage hikes lead to lower incomes, fewer hours and less jobs.

The Legislature’s own analysts also say their proposed artificial increase will result in thousands of job losses. They also predicted it will result in higher prices for consumers and estimate 2,000 families with 3,000 children will lose their child care financial assistance due to their proposal.

Each of these things will harm the very people this bill claims to help.

Further, given the “unchartered territory” we’d be entering, the negative impact on our small businesses is concerning, especially considering 90 percent of all Vermont businesses have fewer than 20 employees.

A minimum wage hike that is faster than the current annual increase will hurt mom and pop shops in rural Vermont. 

This will be worse along the eastern border of our state where Vermont’s minimum wage would be 107 percent higher than New Hampshire’s. Small businesses in this region – already struggling against our sales and income tax free neighbors—would be unable to compete. Maybe the Burlington area could afford an artificial minimum wage spike, but most communities in Vermont cannot.

Finally, there are numerous unanswered questions. For example, how would another increase in the minimum wage effect our non-profit organizations, schools and jobs for youth?

Vermont already has the 6th highest minimum wage in the country. Despite already having one of the highest minimum wages in the country, problems of poverty and wage inequality continue to grow. Given the risks to workers, consumers and the economy, we need to understand the impacts before we go further. And – having just been through four years of legislatively imposed hikes and with another increase set for next year – we have the opportunity to do that. 

It is the priority of the Department of Labor to help Vermonters towards a path of long term and sustainable employment.

We can achieve this and economic prosperity for Vermonters by investing in workforce development, training and education and by helping workers get the skills and credentials they need to fill the hundreds of jobs that are open that pay well above minimum wage.

Let’s work together to create a true improvement by investing in workforce development, education and training, without making the challenge bigger for low-income workers and our economy as a whole.

 

Lindsay Kurrle is a small business owner and the Commissioner of the Vermont Department of Labor.