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Editorial: Gov. faces minimum-wage dilemma

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Posted on May 6, 2019 |
By Angelo Lynn



Here’s the dilemma for Gov. Phil Scott as Vermont’s Legislature prepares to send him a bill to raise the minimum wage to $15 per hour by 2024: the legislation helps those workers who need the most help, yet would likely hurt key sectors of the economy causing Vermont to lose more jobs.

For a governor who has made growing jobs and creating a business-friendly environment two of his primary goals, raising the minimum wage to $15 per hour doesn’t fit those objectives.

But, from the governor’s perspective, two factors weigh in favor of him letting the expected bill become law without his signature:

• Few argue that the current minimum wage of $10.78 is a livable wage. According to Vermont’s Joint Fiscal Office the current "livable wage" for a full-time worker in Vermont who has health insurance through their employer, splits expenses with another adult, and has no children, is $12.71 per hour in rural areas or $13.97 per hour in urban areas. The Legislature's JFO also estimates that about 66,440 Vermont jobs, or 22 percent of all jobs in the state, would be directly impacted by the bill.

• It appears to be popular among Vermonters and the Democratic-controlled Legislature has enough votes to override a Scott veto if the party hangs together.

But Democrats face obstacles as well. State fiscal analysts predict that the proposed minimum wage bill would have a negative effect on Vermont's gross domestic product, and produce job losses of 1,850 annually. Businesses in the hospitality, food and retail sectors would be hit hardest, including industries that hire large number of seasonal employees, like the ski industry.

Bill Stritzler, CEO at Smugglers Notch resort, testified in committee that his resort has about 400 employees, a third of whom are seasonal and earn the minimum wage. “Our greatest fear is the ability to manage in bad times,” Stritzler said, as reported by VTDigger, adding that there were “many predictors of recession within the next year or so,” and “even the most liberal economist would not suggest pay increases seven times the inflation rate during a recession.”

Farmers have also been worried about the impact on their business as it relates to driving wages higher from the base that the minimum wage sets, even though agricultural workers are exempt from minimum wage law in Vermont. Other businesses, however, would have to compete against neighboring New Hampshire where the minimum wage is the same as the federal government: $7.25 per hour — half what Vermont’s will soon be.

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For perspective, federal minimum wage was first set in 1938 at 25 cents and has been increased sporadically, reaching its peak buying power in 1968 at $1.60 per hour, a wage that in today’s dollars would amount to $11.55. About 30 states have created their own minimum wage standards, while 20 states abide by the lower federal standard.

Vermont updated its minimum wage law in 2014, increasing it from $8.73 to $10.50 by 2018, then adjusted yearly based on the Consumer Price Index, a measure of inflation. If Vermont did nothing but keep its annual inflationary adjustment, economists estimate Vermont's minimum wage would increase to $12.04 by 2024.

The current bill that passed the Vermont Senate would raise the minimum wage gradually to $15 in these steps: $11.50 in 2020; $12.25 in 2021; $13.10 in 2022; $14.05 in 2023; and $15.00 in 2024, then increase annually according to inflation. That’s a five-year increase just shy of 40 percent.

The amount of the increase is what shocks some economists. “The proposed minimum wage increase is outside the bounds of anything that has been done or studied,” said state economist Tom Kavet in a VTDigger report. “It’s not study-able… Until the wages are in place, we can’t really know what the impacts are.”

That uncertainty might help Gov. Scott if he chooses to veto, as Scott needs to convince just eight Democrats or Independents to join 43 House Republicans to reach a 51-vote threshold. Democrats need a two-thirds majority in the 150-member House to override a gubernatorial veto.

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The danger Democrats face is to have over-reached by pressing too far too fast on too many bills. Currently there are close to $100 million in new taxes and fees that could reach the governor’s desk, including $78 million for the paid family leave bill; $8 million in new taxes on remote software; $5.7 million in the fee bill; $4.5 million in the revenue bill; and another $22 million split among about four major bills and several smaller bills. Add a 40 percent hike in the minimum wage and the governor starts to have a compelling story to defend a veto, or two — a prospect that might encourage Democrats to give a little as the session winds down over the next two to three weeks.

Angelo Lynn

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