Uncertainty over implementation of new wage law has businesses in Maine’s largest city on edge

A wage ordinance approved by Portland voters on Nov. 3 could dramatically increase pay during the COVID-19 pandemic, a move that businesses say will cause more of them to curtail operations or shut down entirely.

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“The immediate concern is whether the hazard pay provision takes effect this December or January 2022,” David Clough, state director for the National Federation of Independent Business in Maine, told The Center Square by email.

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“The impact of the hazard pay provision taking effect next month will be catastrophic in the midst of the current public health emergency that is expected to last into 2021,” Clough said. “Labor costs will rise sharply.”

Small businesses will face difficult choices about whether to raise prices, lay off workers, reduce overall hours or shut down, Clough said.

“With employers, employees and customers struggling to manage the extraordinary financial impacts of the pandemic, small businesses and their workers will become like passengers on the Titanic who are suddenly flung into the frigid North Atlantic Ocean,” Clough said. “Survival will depend on a ton of luck.”

Portland, like the rest of Maine, currently has a $12 minimum wage – which took effect Jan. 1 and ties the state for fourth highest in the nation.

Under the Portland minimum wage ordinance – which was placed on the ballot by the political action group People First Portland – the hourly wage will increase by $1 starting in 2022, until it reaches $15 an hour in 2024, the Portland Press Herald reported.

People First Portland is a movement of the Southern Maine Democratic Socialists of America.

The measure also includes a time-and-half mandate during declared emergencies, potentially introducing an $18 an hour minimum wage as soon as next month.

Sixty-two percent of Portland voters cast ballots in favor of the measure.

Although Portland officials, including Mayor Kate Snyder, said the ordinance won’t take effect until January 2022, labor lawyers and the Southern Maine Democratic Socialists of America have maintained businesses must comply with the time-and-a-half hazard pay provision as soon as December, due to the current pandemic, the Herald reported.

During a Nov. 17 panel discussion on the measure held by the Portland Regional Chamber of Commerce, some employers said they would start paying the $18 wage next month for fear of potential legal action if they don’t, the Herald reported.

Clough noted that no matter when the hazard pay takes effect, it would apply any time a local or state emergency lasted more than a day, and that on top of hazard pay, overtime pay would skyrocket.

“The passage of this along with several other ordinances is an example of legislating by initiative run amok,” Clough said. “It bypasses the deliberative process of a city council, receives very little scrutiny and neither the public nor city councilors were given the formal opportunity to seek answers to questions or comment for the record on potential effects. The Maine legislature passed a law in 2019 ( LD 1209) to require legislative hearings on citizen initiatives involving state law.”

Clough added that Portland may be the first municipality in the nation to adopt a hazard pay ordinance so far-reaching. In Rockland, voters also approved a $15 minimum wage, but without the hazard pay provision.

“Affected employers, employees and customers will now become part of a potentially very expensive experiment,” Clough said. “What’s next? Locally mandated employee benefits? Locally mandated control of workplaces? Does ‘home rule’ become ‘home unruly’? Maine currently has very limited preemption of local labor law ordinances.”

The challenge of paying for a higher minimum wage exists regardless of whether it’s a local, state or federal wage rate.

“The effects of increasing the minimum wage to $15 will be less dramatic,” Clough said. “More gradual increase in prices charged customers. More gradual pay raises for non-minimum wage workers. More adjustment of business costs overall. However, small business owners cannot control what customers are willing to pay, so the business may be forced to operate with a thinner margin, which makes the business more vulnerable to failure. The coronavirus pandemic has painfully highlighted how vulnerable many small businesses are.”

Higher wages ultimately can reduce the number of jobs available, Clough said.

“Raising the wage floor pushes up other workers who will expect higher pay,” Clough said. “As jobs become more expensive, employers may become more selective in hiring, or look for ways to cut their workforce by automating tasks, making customers do more self-service, or pushing more work onto the remaining workers.”

When jobs become more expensive, it doesn’t make communities more prosperous or merchandise less costly, Clough said.

“Customers, especially those with limited or fixed income budgets, will look for affordable options and stay within their means,” Clough said. “Employers will make adjustments to keep afloat. Some workers may find their family income under the higher wage rates cause the family to lose state or federal income-sensitive benefits. The family could be worse off under locally mandated wage hikes.”

“Apart from being a beautiful city and great tourist destination, Portland could become an easy place for experimentation in left-leaning ideas,” Clough said.

Tags: States, News, Wage, Maine, Business

Original Author: Sarah Downey, The Center Square

Original Location: Uncertainty over implementation of new wage law has businesses in Maine’s largest city on edge

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