Editor’s note: This commentary is by Cara Sullivan, who is the director of the American Legislative Exchange Council Task Force on Commerce, Insurance and Economic Development and the author of the report, Raising the Minimum Wage: The Effects on Employment, Businesses and Consumers.Â
[O]n Jan. 1, the state minimum wage in Vermont increased by 42 cents to $9.15 per hour. Between now and 2018, the state mandated wage floor will increase another three times until it eventually reaches $10.50 per hour.
Despite the argument that a higher minimum wage is necessary to help the least fortunate, minimum wage hikes — especially to levels as high as Vermont’s future $10.50 per hour — actually threaten inexperienced, young and undereducated workers by removing current job opportunities and jeopardizing future earning potential.
As employers compensate for the increase in labor costs caused by a minimum wage hike, they are forced to decrease other production costs. In order to do this, employers often reduce hours, benefits, or training, slow hiring and expansion, or invest in labor-reducing technologies. ATMs have replaced many bank tellers; automated gas pumps have replaced gas attendants in jurisdictions where they are not legally mandated; and some businesses are investigating ways to leverage robotic technology, such as robotic bellhops or beer bottle sorting.
Minimum wage jobs are not intended to support a family, and a vast majority of minimum wage earners are not sole earners in families with children.
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Such technology can eliminate job opportunities, particularly for occupations consisting of routine tasks — the jobs most likely to be held by less experienced and less educated individuals. The more expensive it is to hire humans, the more sense it makes for employers to invest in people-replacing technologies.
Minimum wage jobs provide the first rungs of the career advancement ladder by providing inexperienced individuals an opportunity to gain skills such as responsibility, work ethic and punctuality. Although some of the hard skills learned at a minimum wage job may not follow an employee throughout their career, one’s ability to act in a professional manner is essential to securing the future job placements that will build a career. For many young people looking for a job, the primary value that employment provides is on-the-job training, rather than the pay. More than 60 percent of young employed earners  are enrolled in school during non-summer months, and for 79 percent of them, it is a part-time job.
Fifty-five percent of all Americans start their careers within $1 of the minimum wage, and Vermont’s recent increase may rob many young residents of the opportunity to build the skill set necessary for a successful career. Of the Vermont residents between the ages of 16 and 24 looking for work, 13.1 percent cannot find it. By increasing the minimum wage, Vermont is preventing its inexperienced, young and undereducated residents from finding entry points into the job market.
Minimum wage jobs are not intended to support a family, and a vast majority of minimum wage earners are not sole earners in families with children. Individuals under age 25 represent about half of all minimum wage earners, and the average annual household income of these young minimum wage earners is $65,900. Minimum wage earners age 25 and older have an average annual household income of $42,500.
Vermont residents need ways to support their families and prosper, but increasing the minimum wage is not the policy solution to deliver these results. Policymakers should resist calls to increase the minimum wage and instead look to expand employment and entrepreneurial opportunities in Vermont.