FAQs & Figures
What about the Economy and the "Impact"?
17. Won't increasing the minimum wage lead to inflation with prices going up and mean that people end up no better off than before?
18. If wages go up, won't businesses just leave Vermont and go elsewhere?
19. If
the minimum wage is increased, couldn't that lead to businesses having
to fire workers in order to pay those that are left more? And if
employers have to pay more, won't they just hire less people, meaning
that more people will be unemployed?
Won't increasing the minimum wage make it harder for Vermont businesses to compete with New Hampshire and other border states?
No.
A 1992 study by Princeton University economists examined changes in
employment at 410 fast food restaurants on the border area of New
Jersey and Pennsylvania before and after New Jersey increased its'
minimum wage from $4.25 to $5.05-a 18.8% increase. Their study found no
significant differences in employment in these businesses after New
Jersey raised the minimum wage.
Soon there will be a Job Gap Study that determines livable wage amounts for Maine and New Hampshire, and will provide us with much more information on this issue. Preliminary results show that Maine's livable wage levels are comparable to Vermont's. Perhaps, instead of competing among the northern New England states, we could work to pass minimum wage rates that are similar across the region.
If wages go up, won't businesses just leave Vermont and go elsewhere?
In
general, this is not a big concern. Interestingly, even some business
groups are beginning to recognize that wages must go up. One member of
the Central Vermont Chamber of Commerce recently said, "From our view
point, the economy is not doing well in Central Vermont. We need to
raise the wage structure in the area." (Times-Argus, 9/16/99)
The reason why businesses won't simply leave is that the vast majority of low wage jobs are in industries-particularly the retail and service industries-that are geographically dependent. This means that the food has to be cooked here, and offices cleaned here. The business can't be moved far away. Since a minimum wage increase effects all businesses equally, few, if any jobs should be lost or businesses closed.
Nationally, 76% of low-wage jobs are in the geographically dependent service industry. 24% are in manufacturing, which is more mobile, but typically manufacturing already pays well above the minimum wage.
While there is often much exaggeration in the dire predictions of businesses, a certain amount of concern is deserved, particularly along the border with New Hampshire. New Hampshire is currently conducting a Job Gap Study, which will look at what livable wage rates are there, and provide more information on how to deal with this problem. In any event, this problem should not be used as an excuse for businesses to not pay livable wages. Do we want to race to the bottom, or pull everybody up?
If the minimum wage is increased, couldn't that lead to businesses
having to fire workers in order to pay those that are left more? And if employers have to pay more, won't they just hire less people, meaning that more people will be unemployed?
If
the minimum wage was raised as high as $8.50 an hour, there could be an
extremely modest impact, on the order of 1% to 3% "dis-employment."
Dis-employment is when people get laid off or businesses reduce hiring
due to higher wages. At lower levels, such as increasing the minimum
wage to $7.00 an hour, there is no expected impact.
The same businesses that now hire low-wage workers will still need those jobs done, and the same pool of workers will still apply for those jobs-except now they will be working for livable wages. Oregon's experience in raising the minimum wage shows this. Between 1997 and 1999 Oregon raised its minimum wage from $4.75 an hour to $6.50 an hour. A recent study by the Oregon Center for Public Policy found that "Oregon's 'highest in the nation' minimum wage continues to raise wages for former welfare recipients and other low-wage workers without harming their employment opportunities. The increase has reversed years of declining wages for welfare recipients and other low-wage workers."
FAQs & Figures
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