Mainers’ wages have risen in recent years thanks in part to increases in the minimum wage approved by voters in 2016. Those increases have led to raises for tens of thousands of Maine’s workers, putting more money into family budgets and Maine’s economy. MECEP’s prior research on Maine’s minimum wage increases points to a number of benefits, including reductions in the number of children living in poverty and larger earnings for low-wage workers.
Now, Maine has a chance to build on that success by continuing to raise the wage floor to provide more workers with a living wage.
LD 1279 —“An Act to Increase the Minimum Wage,” by Rep. Benjamin Collings — would raise the minimum wage incrementally to $16 per hour by 2025. Under this proposal, an estimated 351,000 Mainers would see a wage increase, with an additional $820 million in wages paid out each year to low-wage workers by 2026, with an average wage increase of roughly $2,500.1
This would certainly be a significant increase to workers’ paychecks, and the additional wages would put a living wage within reach for most Maine families. According to the Massachusetts Institute of Technology, a living wage for a family of two adults with one child in Piscataquis County, the most affordable area of the state, was already $15.63 per hour in 2020. In Cumberland County, the living wage for the same family is $18.80 per hour.2
It is reasonable to ask whether Maine could sustain a $16 per hour minimum wage by 2026. The most recent academic research suggests it can. Economists use a measure called the Kaitz Index to determine how much impact a minimum wage law has on the local wage market. The Kaitz Index is calculated by dividing the minimum wage by the median hourly wage for full-time, year-round workers.
For example, MECEP estimates that the median hourly wage for full-time, year-round workers in Maine will be $25.04 per hour by 2025. A $16 per hour minimum wage would be 64 percent of this amount. Recent research on the minimum wage has confirmed that a Kaitz index at this level is within the state’s ability to support without significant job losses.3
Maine lawmakers should enact LD 1279 to raise the state’s minimum wage to $16 by 2025. However, the Labor and Housing Committee should examine the effect of raising the minimum wage on other costs in the state budget. For example, this increase should be accompanied by an increase in the MaineCare reimbursement rates for care workers, to ensure that jobs supported with public reimbursement have adequate state support.
Raising Maine’s minimum wage will will help hundreds of thousands of families and kick of a virtuous cycle of people-powered prosperity and growth as those workers spend more in the local economy. Lawmakers should seize this opportunity to continue building on the success of Maine’s minimum wage, and get our state closer to an economy in which all workers earn a living wage.
Notes:
[1] MECEP analysis of US Census Bureau, American Community Survey, 2019 public-use microdata. Includes workers earning up to 125 percent of the state minimum wage.
[2] This calculation relies on both parents working full time, year-round. See Amy Glasmeir, Living Wage Calculator. https://livingwage.mit.edu/states/23/locations
[3] Arin Dube and Atilla Linder, “City Limits: What Do Local-Area Minimum Wages Do” National Bureau of Economic Research, Working Paper 27928, Nov 2020. https://www.nber.org/system/files/working_papers/w27928/w27928.pdf
