Shawn Shouldice: Governor and Legislature set to break deal with small business

Editor’s note: This commentary is by Shawn Shouldice, the Vermont state director for the National Federation of Independent Business.

The centerpiece of President Obama’s “inequality agenda” is a proposal to raise the federal minimum wage from $7.25 per hour to $10.10 and an automatic annual increase tied to inflation. It isn’t going anywhere in Congress, but a number of governors have picked up the flag and they’re charging ahead. Gov. Peter Shumlin, who joined the president recently at a minimum wage rally in Connecticut, is among them.

But what the governor isn’t discussing is his willingness to break the 2007 agreement he made with Vermont’s small businesses. Advocates on both sides, then, wanted to move away from the annual debates over minimum wages and as a result agreed to an automatic inflator, establishing that in no one year would there be a minimum wage increase of more than 5 percent.

Every year since 2007, Vermont’s minimum wage has automatically increased with inflation. We currently have the third highest minimum wage rate ($8.73) in the country, with only Washington at $9.32, and Oregon at $9.10, being higher. Despite arguments by proponents, Vermont is not an outlier, but rather has been a leader on this issue; states match the federal rate of $7.25, four states have rates below the federal rate, five states haven’t adopted a minimum wage and one state repealed the state’s minimum wage and left the reference to the federal rate. Three states have scheduled future increases that would exceed Vermont’s current rate: New York to $8.75 on Dec. 31, 2014, and to $9 on Dec. 31, 2015; Connecticut to $9 on Jan. 1, 2015; and California to $9 on July 1, 2014 and to $10 on Jan. 1, 2016.

Raising the minimum wage might not affect larger corporations, but it sure would hurt the smaller businesses that already provide more jobs to Vermonters than big businesses and also help to eliminate barriers to employment for many Vermonters who need entry-level jobs to gain experience that ultimately enables them to climb the economic ladder.

 

More than 95 percent of employers in Vermont are small businesses. According to the U.S. Census Bureau, percent of all businesses in Vermont have fewer than 20 employees. Many small businesses, like family restaurants and Main Street retailers, are heavily dependent on entry-level, hourly workers. Most already pay more than the state minimum wage of $8.73 per hour, but many, out of necessity, pay less.

The governor’s and the Legislature’s proposal flagrantly breaks our agreement by inflating wages for small employers beyond agreed upon limits. This comes at a time when Vermont’s economy is growing at less than 1 percent annually. It would also come as health care premiums and out-of-pocket costs are rising and just ahead of a 15 to 18 percent payroll tax increase that will almost certainly be floated as a way to finance the governor’s new health care system.

Further, the Legislature’s lead economist, Tom Kavet, recently reported the governor’s proposal will result in 250 fewer jobs and a $30 million annual cost increase to Vermont employers. This, combined with higher health care premiums, co-pays and deductibles, higher property taxes, and higher health care taxes due to single payer, is unreasonable and unsustainable for small business. Raising the minimum wage might not affect larger corporations, but it sure would hurt the smaller businesses that already provide more jobs to Vermonters than big businesses and also help to eliminate barriers to employment for many Vermonters who need entry-level jobs to gain experience that ultimately enables them to climb the economic ladder.

Comments

  1. J. Scott Cameron :

    Good article Shawn, but I don’t think you are going to convince the Governor, the legislature or the advocacy organizations with facts, nor will you shame this Governor or legislature into compliance by pointing out that they broke their promise.

    One statement in your article is either wrong, or perhaps you just miss-spoke. You said “Most (employers) already pay more than the state minimum wage of $8.73 per hour, but many, out of necessity, pay less”. No employer can legally pay less than the state mandated minimum wage.

    The conundrum is that working people do need to earn more than the minimum wage to have a decent life, whether in Vermont or elsewhere. Raising the minimum wage to $10 or whatever will help a little, but let’s be real: at the end of the day the working poor are still struggling. Plus, as legislative leaders pointed out recently at the Chamber of Commerce breakfast in Montpelier, raising the minimum wage means that more of the working poor will lose eligibility for state funded programs such as food stamps, rent subsidies, medicaid, etc. How cruel for the legislature to boast that it can and will take away much needed benefits from the working poor as justification for shifting expenses onto small businesses.

    There is no simple answer, and the problem is that our elected leaders either believe or pretend to believe that there is one. Shifting money from businesses (primarily small businesses in Vermont) to employees while at the same time reducing benefits for the poor and raising taxes and other expenses on small businesses is not the answer. Creating a stable, dependable and predictable climate for business will encourage growth and the creation of good jobs that require skilled people and pay well. New York State is doing just that while Vermont is moving in the exact opposite direction. There is little reason for anyone to start or expand a business in Vermont, and many incentives to leave the state.

    Economic literacy should be a required subject in public schools. No one should be allowed to hold political office without demonstrating a basic understanding of economic principles.

    • Chris Barbieri :

      Maybe I missed something, but if the minimum wage goes up to $10.10, then everyone making $10.00 per hour will want $12.50, those making $12.50 will want $15.00 and the domino effect will be far more on business than just the minimum wage earners. This is just another nail in the coffin of trying to run a business, small or otherwise business in Vermont.

      • Howard Ires :

        If people had more money to spend it would be easier to run a business, not more difficult!

  2. Ann Meade :

    Another sky is falling scenario. If you can’t run a business and pay a decent wage something is wrong with your business model and your conscious.

    • Keith Stern :

      Not necessarily true. Some businesses have a tighter markup situation such as small grocery stores and hardware stores or any other that are competing with chains and/or NH stores. At some point even the most loyal customers will leave. This isn’t the business owner’s fault, just a victim of economic reality.

  3. Jed Guertin :

    The NFIB is nothing more than a front for conservative and big business agendas. Funding comes from ALEC, Koch Bros, Rove etc. A voice for small business it isn’t. Here’s a different view of the NFIB.

    http://www.sourcewatch.org/index.php?title=National_Federation_of_Independent_Business

  4. Hunt Melville :

    The comments on this page (except Chris’s) do much to explain why our politicians are anti-business. They’re simply reflecting the ignorance of the majority of the people who elected them. Businesses would make more money if they paid people more? And I suppose citizens would have more money if they paid more taxes… BTW it’s conscience, not conscious.

    • Paul Lorenzini :

      exactly

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