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rate of $7.25, four states have rates below the federal rate, five states haven’t adopted a minimum wage and one state repealed the state’s minimum wage and left the reference to the federal rate.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.