On January 1, Maine’s minimum wage will increase from $11 to $12 per hour — the last of three scheduled $1 increases approved by voters in a 2016 referendum. The new year’s increase will boost wages for nearly 171,000 workers, delivering raises worth nearly $158 million.
That’s according to figures released recently as part of a new analysis by the Economic Policy Institute.
Here’s the breakdown:
- Direct pay raises for about 102,900 Mainers: Roughly 17 percent of Maine’s workforce — about 102,900 Mainers representing one in six workers — will receive a raise as a direct result of the increase. These are workers who currently earn less than $12 per hour. Year-round workers in this category can expect an average annual wage increase of $1,266, according to EPI. All told, these low-wage workers will take home $130 million more in 2020.
- Indirect wage increases for 68,000 more Mainers: Roughly 11 percent of the workforce — about 68,000 more Mainers who currently earn $12 an hour or slightly more — will see their wages go up as employers boost pay to remain competitive in their ability to attract and retain workers. These Mainers are forecasted to take home an additional $28 million next year.
In total, 28 percent of Mainers can expect to see a pay increase as a result of the higher minimum wage in 2020.
Among workers who will receive a raise are roughly 15,000 tipped workers. The tipped minimum wage will increase from $5.50 to $6 per hour on January 1. Maine law allows employers to pay a lower base wage to tipped workers, so long as those employees earn enough in tips to cover the difference. If they don’t, the employer is obligated to ensure they earn at least the full minimum wage.
The federal minimum wage has not been increased since 2009, when it was set at the current rate of $7.25. Since that time, the cost of living has gone up 19 percent making it more and more difficult for workers covered by the federal minimum to make ends meet.
A key feature of Maine’s 2016 voter approved referendum to increase the minimum wage is a mechanism to ensure that Maine’s minimum wage continues to keep pace with rising costs of living. Between 2018 and 2020, the voter approved law raised Maine’s minimum wage incrementally from $7.50 per hour to $12 per hour.
Starting in 2021, the minimum wage will rise each year at the rate of inflation, rounded to the nearest nickel. This policy, known as indexing, means the minimum wage will rise to help the lowest-paid Mainers keep up with increases to the cost of living. For example, the Congressional Budget Office projects that the annual rate of inflation will be 2.4 percent in 2020. Under this scenario, Maine’s minimum wage would increase by the same rate, rising to $12.30 per hour in 2021.
MECEP’s prior research on Maine’s minimum wage increases to date points to a number of benefits, including reductions in the number of children living in poverty and larger earnings for low-wage workers.