MONTPELIER — The gears of the state economy were under a microscope late last week as lawmakers held hearings on a proposed increase in Vermont’s minimum wage from $10.50 to $15.00 per hour.
Appearing Thursday before the Senate Economic Development Committee were Mat Barewicz, the Department of Labor’s economic and labor market information chief, and Lindsay Kurrle, the department commissioner.
Barewicz, an economist with about two decades of study and work experience, started by saying much of the material the committee has seen does not tell the whole story.
“Having witnessed the summer study committee, having seen the materials that have been presented, my fear is that … it does not seem that both sides of the equation are getting fully vetted,” he said.
He cited a statistic that half of those living at or below the federal poverty level report no income from a job on their taxes, meaning raising the minimum wage won’t help these people, and it may make it harder for them to find work.
He said the widely held notion that if the minimum wage is raised then more people enter the workforce is not entirely true. In the past four years, the minimum wage has risen from $8.73 an hour to $10.50 today, but over that same period the labor force participation rate has been flat or declined.
“There is a signal that we don’t really know how a minimum wage impacts the economy,” he said.
Another popular belief is that productivity in the economy has grown but wages have not, so a wage hike is in order. Barewicz warns these gains could have more to do with advancing technologies than an underpaid workforce.
“When it comes to those economic models, my fear is that technology is increasing at such a rate that increasing the minimum wage is going to encourage employers to adopt technology at a more rapid rate,” he said. “And the businesses that are best equipped to adapt are the larger ones.”
Observers of the state’s economy suggest that Vermont has need of skilled workers. Studies suggest there is a high concentration of very high-skilled workers, a high concentration of low-skilled workers, and then employers struggle to fill the gap in the middle.
“There are dollars right now in the economy that are up for grabs for people with skills,” Barewicz said. “So we are trying to figure out how we can get more skills to the individual and entry-level positions.”
He noted an unusual trend in unemployment statistics: There is a disproportionately high number of underemployed workers relative to the number of unemployed.
The Department of Labor’s U-3 criteria, those active in the workforce who cannot find work, is about half of the U-6 number, which is those with work looking for more.
“What I’m highlighting in this table is the ratio between the U-6 and the U-3 is greater than 2 to 1. And if you look back in time, that has historically not been the case during economic good times,” Barewicz said.
Some worry that a high number of underemployed people are going to get hurt the most if entry-level jobs become harder to get via a minimum wage increase.
Even for the existing jobs, an hourly wage increase does not necessarily translate into an annual increase, Barewicz said.
“What I’m concerned about is annual income, I’m not concerned about hourly income,” he said. “Because as I just discussed, hours can be shifted or cut, positions can be removed, shifts can be shortened.”
He suggested the committee proceed with caution, saying that some information “indicates that the policy has not had the intended impacts, whether it’s the part-time work that’s increasing, whether it’s people wanting full-time work, or increasing workforce participation rates.”
Committee member Sen. David Saucy, R-Rutland, suggested a rise in the price of goods and services resulting from wage increases also needs to be watched carefully.
“Also remember though, any rise in prices if you are on the upper-income level, it’s not going to impact you as much as those on the lower income levels,” he said.
Some members of the committee are still afraid that to leave the minimum wage where it’s at will also do harm.
“My fear, frankly, is that we’ve had all kinds of evidence that people are not sharing at all in the gains over the last 30 years and that as a result of that the state is attempting in other way to make a difference,” committee member Sen. Philip Baruth, D/P-Chittenden, said.
Proponents of the minimum wage hike include the National Employment Law Project. According to the group’s calculations, for an adequate standard of living the average rural Vermonter for 2017 needed at least $16.26 per hour, and one working adult in a family of four needs $20.05.
In 2017, 106,640 Vermont jobs fell between the then-$10.00 minimum wage (it’s $10.50 this year) and $15.00, according to Labor Department statistics.
Gov. Scott recently indicated to WCAX that he does not think a $15 minimum wage hike would be be good for the state.