Vermont is one step closer to a $15 minimum wage following a narrow yes vote in the House on Tuesday, and business owners say the development has them worried, despite the likelihood of a veto by the governor.
The 77-69 vote saw mostly Democrats and Progressives voting in favor of the bill. After the Senate passed S.40 in February, the House gave its go-ahead for the bill, adding final approval through a voice vote on Wednesday.
Despite the Legislature’s move to incrementally increase the current $10.50 minimum to $15 by 2024, a spokesperson for a local independent business owners advocacy group fears the worst.
“Affordability was the theme at the outset of the current legislative session. Passing a $15 minimum wage without addressing the benefits cliff sends the wrong message to Vermont business owners,” Shawn Shouldice, state director of the National Federation of Independent Business (NFIB), said.
“This proposal will make it harder for small-business owners here to grow their businesses. [It will] impact employees’ jobs and ultimately hurt the state’s economy,” she said.
When the legislative session began in January, Gov. Phil Scott made a strong appeal to achieve a balanced budget without increasing taxes and fees. While the Democrat majority generally seemed to supportive, some Democrats pushed for a fast-track to create a $15 minimum wage.
“Some lawmakers seem hell-bent on enacting bills that place huge costs on the backs of small Vermont businesses and residents,” Shouldice said.
The wage hike isn’t all businesses have to fear. Also on Tuesday, the Vermont Senate approved H.196, a bill that would entitle employees to as much as 12 weeks of paid parental or family leave. If passed into law, employees could get 70 percent of wages for up to 12 weeks of combined parental leave — or otherwise six weeks of family leave.
Scott has opposed the bill as too costly for Vermonters and is expected to veto paid family leave, in addition to the minimum wage bill. Workers will pay for the program via a 0.136 percent payroll tax.
“This will actually hurt all workers, who are forced to pay for that program,” Shouldice said. “It also puts a huge burden on small businesses that will struggle to handle the workload with so many absences. There are higher costs to the small-business owner who must pay for temporary workers or train replacement employees for specialized jobs.”
A recent study of Seattle’s wage increase conducted by the National Bureau of Economic Research seems to back up Shouldice’s concerns. It found that a $15 minimum wage resulted in fewer hours and less pay for the people it’s intended to help. The minimum wage increase also led to a reduction in entry-level positions.
“This leaves unskilled or inexperienced workers unable to get their first job,” Shouldice said. “Do we want to send small businesses and homeowners fleeing to other states? Making Vermont affordable is key to its success. … Policymakers need to encourage entrepreneurship, attract companies to the state, develop and attract a workforce and make it clear that Vermont is affordable and open for business.”
According to an Ethan Allen Institute issue brief written by David Flemming and Rob Roper, Vermont is currently tied with Arizona for the sixth highest minimum wage in the U.S. “We have seen how a $15 minimum wage can hurt workers in a robust economy like Seattle,” the EAI brief states. “The challenges and potential impact are far greater for Vermont.”
Businessman and Rotary Club District 7850 governor Eric Danu owns Countryside Carpet and Paint, an independent business located in Middlebury, with six employees. A member of NFIB since 1988, Danu isn’t happy about a $15 minimum wage. He noted that other than NFIB’s lobby efforts, there are no unified voices in Montpelier for small business owners like himself.
“Don’t get me started,” Danu told True North. “I don’t think a $15 minimum is a good idea. It sets a precedent now for the legislature to raise the minimum wage when it likes.”
Danu believes a $15 minimum wage will also dampen worker incentive.
“A minimum wage was supposed to be a starting position. A $15 wage takes away the incentive for individuals improve themselves as workers,” he said.
Another downside Danu sees from the business owner’s perspective is “salary envy.”
“If the minimum wage escalates, if people make more at the bottom, then workers on the next rung up will think they deserve an increase, too,” he said. “It’s not just the idea of bringing people up from the bottom. I believe it slights the efforts of the other workers.
“If they’re making, say $16 or $18 an hour, they’re going to see that they’re not getting a ‘no incentive’ raise, so should they be getting more, too? It creates problems for the business. A minimum wage was conceived as a starting position — this wage increase takes away any incentive for an individual to improve his or herself as a worker.”
Not all business owners are glum about the wage hike. Automobile dealer Tom Denecker, co-owner of Denecker Chevrolet in Middlebury, said there’s an upside to a $15 wage in terms of hiring and retaining employees interested in their job duties.
Well, to begin with, the $15 minimum wage increase isn’t going to take place until 2024. And by then, I believe, $15 will be a fair wage for employers and certainly beneficial for the employee,” Denecker said.
Like many other Vermont business owners, Denecker said employee turnover is an issue. He argues an increase in the minimum wage will help him retain workers in the long run.
“Believe me, it’s no fun to have some workers constantly thinking about their next job because they can’t live on the wages they’re making at their present job,” he said.
“The minimum wage issue affects the longevity of the employee and it affects on-the-job performance, in that some don’t feel good about what they’re doing. Then we have to go through the aggravation of looking for replacement employees on a chronic basis. That’s why a low minimum wage never moves the needle forward. So, I think this might help. It may help us keep some people with an appreciation for their job.”
Denecker said his auto and truck dealership is a member of the Vermont Vehicle and Automotive Distributors Association (VADA), which represents the interests of the automotive industry in the state. While VADA has no official statement about the minimum wage increase, the organization has supported Scott in his bids for lieutenant governor in 2010 and as governor in 2016.
S.40 now heads back to the Senate for a review and vote on the House’s changes. If the Senate approves, the bill moves on to the governor’s desk.
Lou Varricchio is a freelance reporter for True North Reports. Send him news tips at email@example.com.