Wage Hike Poses Economic Threat as Job Growth Struggles

Issues & Policies

Have state lawmakers finally realized that increasing the minimum wage, when not dictated by the market, hurts the economy?
Earlier this month, on a 7-6 party line vote, the legislature’s Labor and Public Employees Committee approved HB 6208, which raises the state’s minimum wage, currently $10.10 per hour, in equal steps over the next five years until it hits $15 per hour by 2022.

2016 New England Job Growth

Connecticut ended 2016 with a net loss of 200 jobs, the first year since 2009 without employment gains.

The minimum wage would then be subject to annual automatic increases linked to the consumer price index.
The business community and municipalities opposed the bill, arguing Connecticut’s lackluster recovery from the recession means this is not the time to add to the cost of creating jobs.
Connecticut ended 2016 with a net loss of 200 jobs, the first year since 2009—the heart of the recession—the state did not post employment gains.
We were the only New England state that lost jobs last year and our post-recession job recovery rate—just 74%—is the slowest in the region.
Massachusetts leads the region, recovering over 300% of lost jobs, followed by New Hampshire (194%), Vermont (152%), Rhode Island (132%), and Maine (106%).
Connecticut’s 4.7% unemployment rate is also a full percentage point higher than the New England average of 3.7%.

Unintended Consequences

Proponents of increasing the minimum wage routinely claim providing higher wages to entry-level workers will stimulate the economy by causing an increase in local spending.
They forget that requiring businesses to pay more money doesn’t mean they actually have that money to pay out.
When the market doesn’t call for increased wages, it means businesses must cut somewhere in order to comply with the law.

Lawmakers should be doing everything they can to drive job growth—not making creating jobs and providing state services more costly.

Often, employee hours are reduced, non-wage benefits are cut back, and more opportunities to automate are pursued by the business.
In fact, Connecticut has raised its minimum wage each of the last four years, yet the projected stimulus of these increase have yet to materialize.
There is some indication state government is starting to understand that increasing the minimum wage has a negative impact.

Fiscal Impact

An analysis of the minimum wage bill by the nonpartisan budget office showed the proposed increase costing the state Office of Early Childhood an additional $2.3 million in fiscal year 2019.
That increases to about $7.3 million by FY 2022.

Minimum Wage Hike Fiscal Impact

Proposed minimum wage hikes could cost state taxpayers almost $9 million by 2022.

The Office of Early Childhood provides funding, standards, and regulations for the state's early care and education programs —services many deem critical for children who must overcome barriers and disparities to receiving an education.
Increasing the minimum wage means the cost of providing these important services will become more expensive.
Given the state's fiscal issues, fewer services will be provided and painful cuts will have to be made.
Connecticut businesses, unfortunately, know that pain all too well.
An increase in the minimum wage is a bad idea for Connecticut.
Lawmakers should be doing everything they can to drive job growth in the state—not doing things that make creating jobs and providing state services more costly.

For more information, contact CBIA’s Eric Gjede (860.480.1784) | @egjede


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