Members of Portland’s business community urged city officials Thursday to take a cautious approach in considering whether to establish a local minimum wage that’s higher than those set by state and federal law.

Mayor Michael Brennan announced the proposal to raise Portland’s minimum wage Wednesday in his second annual State of the City address. He said it’s aimed at reducing the wage gap in the city.

“We want people of all income levels to have the opportunity to live in the city,” he said in an interview Thursday.

Portland would be the first community in Maine, and one of only nine cities or counties in the U.S., to set a minimum wage above the federal and state levels of $7.25 and $7.50, respectively.

Brennan said Thursday that he isn’t proposing a specific minimum wage for Portland. Instead, he will assemble a working group to study the issue and send a recommendation to the City Council.

“I would hope we would have something by the end of the year available for public discussion,” Brennan said.

That deliberate approach was welcomed by the business community, said Chris Hall, chief executive officer of the Portland Regional Chamber.

“The conversation (about wage inequality) is unavoidable,” Hall said. “It sounds like the mayor wants to set up a structured process to look at this, so it doesn’t turn into a food fight.”

Hall said a good place to start is determining which businesses in Portland – if any – pay the minimum wage.

A person working a 40-hour week at Maine’s minimum wage earns $15,600 a year. The Maine Department of Labor estimates that 3 percent of the state’s workers who get paid on an hourly basis work at minimum wage, said Julie Rabinowitz, the department’s spokeswoman.

Nearly half of the minimum-wage workers are in the food service industry, including waiters and waitresses, who also receive tips as income. More than half of the minimum-wage workers are younger than 25, Rabinowitz said, and 36 percent don’t have high school diplomas.

According to 2012 estimates by the U.S. Census Bureau, 4,600 working Portland residents earn less than $25,000 a year, including 1,400 people who make less than $15,000. Meanwhile, 1,873 residents make more than $100,000.

Brennan said 46 percent of Portland residents older than 25 have undergraduate or graduate degrees, which is higher than the national average, but “there’s a lot of underemployment in the city.”

THE IMPACT ON BUSINESSES

Increasing the minimum wage in Portland would force restaurants to give raises to some of their highest-paid employees, said Steve DiMillo, owner of DiMillo’s on the Water.

Although the wait staff and bartenders can be paid as little as half the state minimum wage – $3.75 – they earn upwards of $20 an hour when tips are included, said DiMillo, who analyzes wages annually.

“The end result is, it doesn’t give me enough money to increase the pay of a cook” or a dishwasher, he said.

Cooks at DiMillo’s average $13.50 an hour, while dishwashers start at $8 an hour and average $10.25, he said.

Eight U.S. cities and counties have set minimum wages above state and federal minimums, according to the National Employment Law Project. In California, where the state minimum wage is $8 an hour, San Francisco has a minimum wage of $10.74 an hour, while San Jose’s minimum is $10.15.

San Jose’s minimum wage has come under fire from the Employment Policies Institute, a nonprofit group that opposes minimum wage increases.

Last week, the institute, led by the conservative Washington, D.C., lobbyist Richard Berman, released a report detailing the negative economic effects of the increased wage.

The group surveyed 163 restaurants and found that 40 percent incurred $10,000 to $69,000 in additional costs. As a result, two-thirds of the businesses increased prices, while nearly half reduced staffing and hours.

Twelve businesses closed, and 30 percent limited future expansion plans, the report said.

‘NOT LEAVING PEOPLE BEHIND’

Brennan tried to blunt that line of attack in his speech Wednesday night by pointing to Portland’s “unprecedented” development boom of hotels and both market-rate and affordable housing.

In 2013, the city had a nearly $60 million increase in private investment over 2012, from $32 million to $91 million, he said. Another $150 million in development is under consideration.

Meanwhile, Portland’s unemployment rate is 4.8 percent, compared with the state’s unemployment rate of 6.1 percent and the national rate of 6.7 percent, he said.

“We’re moving forward and we want to make sure we’re not leaving people behind,” Brennan said Thursday.

Mary Allen Lindemann, who co-owns Coffee By Design, said the company starts its baristas at $8 an hour. With tips included, the front-of-house staff can make $11 to $13 an hour.

Lindemann said a higher minimum wage would likely cause her to re-evaluate her product pricing and increase the pay of all of her employees, including production workers, whose starting pay is higher than that of baristas.

Although raising wages is an important step to make it easier for people to live in Portland, creating more affordable housing must also be part of the discussion, Lindemann said. “You have to look at both together,” she said.

Brennan said Thursday that the city has been creating affordable housing, as well as market-rate housing, which could ease the pressure on the rental market that is driving up rents.

Brennan is also calling on the city to look at all of its land holdings to decide which spaces are worth preserving and which ones could be developed into affordable housing.

Randy Billings can be contacted at 791-6346 or at:

rbillings@pressherald.com

Twitter: @randybillings