By Bill Moore
Last week, the Senate Committee on Economic Development, Housing and General Affairs held a hearing on S.23, An Act Relating to Increasing the Minimum Wage. The Central Vermont Chamber of Commerce has a keen interest in the measure and submitted our thoughts to the Committee.
In 2014, the business community agreed to stepped increases in the minimum wage from $8.73 an hour to the current $10.78, followed by indexing the minimum wage annually thereafter.
S.23 proposes raising the minimum wage to $11.50 on Jan. 1, 2020, and then annually until it reaches $15.00 on Jan. 1, 2024. Following those increases, the legislation calls for increases in the minimum wage of 5 percent or the percentage of increase of the Consumer Price Index, whichever is smaller.
The Central Vermont Chamber of Commerce opposes this bill and respectfully urged the committee to reject it.
Minimum wage jobs 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 or intended to provide a permanent wage. The minimum 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. In fact, the market is already driving the wages earned by Vermont’s workers. The most current data available shows that only 10 percent of all Vermont workers earned less than $10.45 per hour in 2016, at a time when the minimum wage was $9.60 per hour.
A study by the U.S. Department of Labor showed that the median hourly wage across all occupations in 2016 was $18.23 per hour while the mean hourly wage stood at $22.90.
According to a 2016 study by the Heritage Foundation, “Starting wages of $15.00 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,” the study adds.
The same report indicates that by 2021, the proportion of wage and salary workers directly affected by a $15.00 minimum wage could actually cost the state approximately 11,000 full-time equivalent jobs. The Legislature’s own economic analysis clearly indicates that the potential job loss caused by increasing the minimum wage to $15.00 per hour will be at least 3,000.
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 cost of goods and services sold in Vermont. Businesses will not absorb the increases and consumers will feel the burden of increased prices.
It is time to take a different approach to raising wages.
Automatically increasing wages does not address the core issue. What can be done to improve skills, creating a workforce that possesses the necessary tools to move away from low wage jobs?
Education and training are the keys to success. We must be educating students to be prepared for the jobs of the twenty-first century. Moving students who may not be college-bound into technical training and apprenticeships is vital. Strengthening the Community College of Vermont (CCV) and Vermont Technical College (VTC) and Career Education Centers will present better opportunities for those looking for high paying careers.
Vocational/technical education at the secondary level needs to become a more accepted strategy for many students. Ironically, it is often parent expectations that stand in the way of a child entering this type of career track. We must educate parents about the value of a vocational/technical education, and of the earnings opportunity and career tracks found in those occupations.
Students should be exposed to vocational/technical options in at least the 10th grade — earlier, if possible. Now it is offered only to juniors and seniors. These things are all related.
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 $15.00 per hour.
We believe that raising the minimum wage to $15.00 is bad public policy.
The state should not be in the business of eliminating jobs. The state should be creating an economic climate that leads to the creation of new jobs. Additional job creation will also drive up wages in a competitive market.
Bill Moore is president and CEO of the Central Vermont Chamber of Commerce.