Browning: The minimum wage: Timing is Everything and Size Really Does Matter
By Cynthia Browning
I oppose the additional increases in the minimum wage contained in S.23 because this process is likely to hurt some of the people we want to help. This is especially true in slower growing regions of the state like ours, and it will be especially true in the next recession.
There are better ways to be sure that we support working Vermonters at this point in time.
We have raised the minimum wage four times since 2014, from $8.73 an hour to $10.78 in 2019, which increased purchasing power for low wage workers. Under current law the minimum wage will be adjusted for inflation every year going forward.
I voted for these increases in 2014, because it had been a long time since the state minimum wage had been increased and the increases were moderate.
The proposal in S.23 will have the wage go to $15 in steps by 2024. This represents a significant added increase in real costs of labor for businesses.
If wages increase that far that fast, some businesses will not be able to increase prices sufficiently to cover those extra costs due to competition from large corporations and online retailers. They will have to reduce hours worked and numbers of jobs, or substitute machines for people.
This may be particularly true for small businesses, where most Vermonters work. Such cuts in employment will adversely affect some fraction of the low wage workers that we are trying to help.
This will be a particular problem in regions like Bennington County where unemployment is higher than elsewhere. If the legal minimum wage is set too far above the market wage, more hours will be cut and more jobs will be lost.
In addition, if the minimum wage is set high and the economy slows down into a recession, even more jobs will be lost than would otherwise be the case.
Businesses need a period to adjust to the recent increases before more are put in place. We need to be especially sure that all regions in the state can absorb any new increases, and that the economy can be resilient during a recession.
Aside from the inevitable harm to individuals and to economic flexibility, increases in wage income can sometimes lead to the loss of government benefits, so that low wage workers end up no better off. It is possible to put in place funding to offset this "benefits cliff" but that will cost money that is hard to find in the state budget.
Better and more reliable ways to support working Vermonters would be to increase the Earned Income Tax Credit and to increase the subsidies for child care costs. These changes would improve their lives without causing job losses.
The state should also concentrate grants supporting economic development and infrastructure projects in slow-growing regions of the state like ours. Such stimulation of economic activity is the best way to generate wage growth.
In addition to supporting those policy initiatives, I will be seeking to amend S.23 to put in a pause button for recessions, so that we can avoid the damaging scenario of raising the minimum wage into a downturn, which would likely cause more job losses. I will also try to slow down the projected wage increases, so that that businesses have more time to adjust without cutting jobs.
Working Vermonters deserve policies that will really work — policies that are right-sized at the right time. They do not deserve policies based on political rhetoric that are not designed for our economic conditions.
Cynthia Browning represents Arlington, Sandgate and Manchester in the state House of Representatives.
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