With entry-level workers now making $15 or even $18 or $20 at many large companies, a wage increase to $12 or $13 is no longer relevant to many large employers.
“I don’t know of anyone in our organization who does construction work who is paying less than $15 an hour,” said Matt Musgrave, the head of government relations for the Associated General Contractors of Vermont. He has talked to members in advance of the 2020 legislative session, and said he hasn’t found any who want the organization to get involved in the wage debate.
“We’re already there,” Musgrave said. “We’re already competitive with other industries to attract talent because there is a scarcity.”
When lawmakers were debating a proposal last year to increase the wage to $15 an hour by 2024, legislative hearings drew a broad range of business interests. Gov. Phil Scott and some business owners argued that an increase would harm Vermont companies and lead them to eliminate jobs.
Proponents of that wage increase have since scaled back their ambitions to $12 or $13 over the next two years. The hourly minimum is now set at $10.96 an hour, and is set to rise each year based on the inflation rate.
The number of people who would be affected has been scaled back too.
Darn Tough Vermont, the sock company based in Northfield, is increasing its startling salary to $15 an hour on Jan. 6, said CEO Ric Cabot. Many of Vermont’s other large employers, like Flex-A-Seal in Williston, King Arthur Flour, Ben & Jerry’s, and Against the Grain, said they don’t have anyone on staff making less than $15 an hour.
“I don’t see much of an effect on Ben & Jerry’s Vermont operations, since we pay a minimum of $17.78 an hour,” said Laura Peterson, public relations manager for Ben & Jerry’s, North America. The company has ice cream plants in Waterbury and St. Albans and an office in South Burlington. She noted that the company’s scoop shops, which are franchises, might pay less than that.
Scott hasn’t said whether he’ll oppose the lower proposed increase. He’s waiting to see what lawmakers pass, said his communications director, Rebecca Kelley.
“His concerns have been that a mandated increase would result in increased costs for consumers, fewer hours and job losses, all negating the intended benefit,” she said. “As the Legislature discussed last year, you also have to consider costs of addressing pay compression. The governor will view any proposal through the lens of these concerns.”
Two distinct classes of wage-earners
There’s a sharp divide between the wages available at Vermont’s larger companies and those at smaller companies, especially in retail and food service. The nature of that divide is illustrated at Danforth Pewter in Middlebury, where everyone in manufacturing and the office makes at least $15 an hour, but associates at the company’s nine retail stores make only around $11.25 an hour. Danforth is opening a 10th store in Connecticut this spring.
Bram Kleppner, Danforth’s CEO, said company officials talked last year about trying to raise pay for everyone to at least $15 an hour by 2023.
But the company didn’t make as much money as hoped this year, and probably won’t make it to that goal, said Kleppner.
“Our pace of getting everyone to $15 an hour, say, is really dictated by cash; when we have the cash to allocate towards it, we’ll go as quickly as we can,” said Kleppner, who has long advocated for progressive policies at work.
Last year, when lawmakers were talking about a wage of $15 per hour, they estimated 90,000 workers in Vermont would be affected. There are no estimates yet on how many people would be affected by the smaller increase.
“The working poor are in jobs at Rite Aid, CVS; cleaning companies; delivery drivers; retail shops, ski areas, etc.,” said Tom Torti, president of the Lake Champlain Chamber of Commerce. “These still comprise the bulk of Vermont jobs – we just don’t hear about them as much.”
Many of them are also part-time workers who are just starting out, said Jim Mazzonna, who co-owns Debanvilles Store in the tiny Northeast Kingdom town of Bloomfield. The store is just steps away from New Hampshire, where there is no state-mandated minimum wage, just the federal minimum of $7.25.
“I had many jobs in my life I could not live off but helped me understand how to strive for a career,” said Mazzonna, who also works full time in IT at St. Johnsbury Academy.
Mazzonna added that a 20% wage increase would force employers to raise other wages concurrently, effectively mandating a 30% increase overall.
“In our opinion, we cannot pass a 30% increase to our customers as the area of our state will not sustain it. We have the pressure of tax-free New Hampshire 100 yards away from our dooryard,” he said.
Complex factors at play
House Speaker Mitzi Johnson has said she will support an increase to between $12 and $13 an hour over two years. Lawmakers plan to look closely at how the smaller wage increase will affect what the state pays for health workers at nursing homes, residential care homes, and assisted living centers.
One group opposing the smaller proposed wage increase this year will be Vermont Retail and Grocers Association. Association President Erin Sigrist said some of her group’s members, too, have already exceeded at least the $12 or $13 mark for starting pay. But Sigrist noted that many retailers in rural Vermont are still paying much less than that. Of the association’s 750 members, Sigrist estimated 20% to 25% pay the minimum wage or close to it.
“Those stores out there in small towns and maybe northern Vermont or the Northeast Kingdom that don’t get the foot traffic and don’t have the revenue to pay the $12 or $13 an hour, those are the ones that are going to be impacted the most,” Sigrist said.
Sigrist noted that the benefits cliff — the point at which people balk at making more money because they would lose state benefits like the child care subsidy — plays a role too.
“I have several members who have shared with me that they have offered some of their best employees a raise or management position, and those employees have declined that opportunity or position because they would lose benefits,” she said. “How are we fixing that issue?”
Proponents of a minimum wage increase have discussed the issue of the benefits cliff at length. The wage increase vetoed by the governor in 2018 included provisions that would help people retain child care reimbursements if their wages increased, said Sen. Michael Sirotkin, D-Chittenden. Sirotkin is chairman of the Senate Committee on Economic Development, Housing and General Affairs, which has taken the lead on the issue of the minimum wage.
“That continues to be part of the bill,” said Sirotkin.
Sirotkin added that addressing income inequality has been a priority for him since he was appointed to the Senate in 2014.
“There is still a significant problem with income inequality in our state as well as our country,” he said. “The minimum wage is one specific policy that can have some meaningful impact on that right away. Then we need to deal with issues such as housing costs and child care costs.”
That goal has Mazzonna worried.
“The state of Vermont’s paid economist advised our great legislators and committees to leave this alone, and they have ignored that,” he said. “The folks (some) who are legislating in Montpelier do not recognize the deep impacts of this move and already are posturing for other tax revenue streams to compensate for the aging population/declining income.”
Not all jobs should be considered careers, and they don’t all need to produce living wages, Mazzonna said.
“Many people have lost this basic understanding and have conflated too many things together to tell a story that does not represent the real world,” he said. Efforts to raise the minimum “will continue to destroy the fabric of small business in Vermont – one of the things touted as the strength of our state.”
