By David Flemming
If some legislators get their way, Vermont will adopt a $15 minimum wage as soon as Jan. 1, 2019.
The six Vermont legislators comprising the Minimum Wage Study Committee met for the first time on Thursday to research and discuss the potential impacts of such a policy. The Committee will meet four more times before Dec. 1, and will make a recommendation when the full legislature returns in January.
Raising the state minimum wage seems like a simple concept. However, it soon became clear that actually doing so would have serious consequences.
Bennington County Representative Brian Keefe (R-Manchester) worried that a standard minimum wage covering the entire state would cause more unemployment in low income areas than in those areas that can afford to pay higher incomes. For example, Bennington County’s Median Household Income is below $50,000 while Chittenden County’s is over $63,000.
Then again, constructing a minimum wage that allowed for geographical flexibility has its own problems. Legislative Counsel Damien Leonard explained how New York’s uses a stratified minimum wage that varies based on industry, area of the state, and number of employees. As a result, New York has 21 different calculations for the minimum wage. This led Representative Jean O’Sullivan (D-Burlington) to exclaim, “I don’t know how anyone does business there!”
So, a uniform minimum wage in Vermont might cause the most unemployment in the areas with the lowest incomes. On the other hand, a minimum wage that attempts to be flexible enough to consider industry, geography, and size of company could create uncertainty in the business community and potential legal problems for businesses that have no idea which minimum wage applies to them.
The Legislature’s Economist Tom Kavet noted the difficulty in calculating the macroeconomic impact of a historically higher minimum wage on Vermont: “$15 is outside the range of what has been studied or experienced elsewhere.” Kavet expressed his wish for “better data collection,” especially in regards to “hours worked per employee.” Without more detailed data, if employers compensated for higher labors costs by cutting back all employees’ hours instead of letting some employees go, Vermont’s job totals would look exactly as they had before the minimum wage increase – although workers would certainly be negatively impacted in either case.
But Vermont does not collect “hours worked” data (only four states do), so it will be difficult to judge the real impact of an increased minimum wage.
Armed with ‘hours worked’ data, Vermont could better understand the impact of the higher wage and, hypothetically, slow down or stop increases if employers began to cut back on hours. But collecting new data presents problems as well. Not only would employers be paying higher costs for employee labor, they would also have to pay the cost of collecting and reporting the employee hours information to the state. Call it adding insult to injury – or task to tax.
No matter how you cut it, a $15 minimum wage will make it more difficult and expensive for employers to hire workers. Beyond that basic unpleasantness, it is clear from the first day of debate that the unforeseen and unintended consequences of mandating such a policy will be significant.
The Minimum Wage Study Committee: Sen. Michael Sirotkin (D-Chittenden), Chair, Rep. Helen Head (D-South Burlington), Vice Chair. Members: Rep. Brian Keefe (R-Manchester), Rep. Jean O’Sullivan (D-Burlington), Sen. Brian Collamore (R-Rutland), and Sen. Ann Cummings (D-Washington)
David Flemming is a policy analyst for the Ethan Allen Institute. Reprinted with permission from the Ethan Allen Institute Blog.