Rising inflation will drive Maine’s minimum wage up 60 cents an hour next year, as many employers offer better pay to attract desperately needed workers.

Starting next year, the lowest employers can pay most workers will be $12.75 an hour, a rate pegged to increasing living costs in the state.

The wage hike is higher than some expected but comes at a time when most jobs, even low-skilled entry-level positions, advertise starting wages much higher than the state’s mandated wage.

“No one who works full time should live in poverty,” said Maine AFL-CIO Executive Director Matt Schlobohm in a statement.

The organized labor coalition was a major supporter of the 2016 law that increased the minimum wage by $4.50 over four years and pegged new annual rises to the consumer price index.

“This cost-of-living increase means that workers have a little more dignity and a little more money in their pockets to support their families and spend in the local economy,” Schlobohm said.

But the coming wage increase was a surprise to Peter Gore, executive vice president of the Maine State Chamber of Commerce. It could mean trouble for some employers that have to adjust their wage scale – and business operations – to compensate for the increase.

“I think for a lot of businesses, especially smaller employers in rural areas, they are going to have to take a look at their business plans and decide how to proceed,” Gore said.

Many employers, particularly in southern Maine, already pay considerably more per hour than than the coming minimum wage.

The statewide median hourly wage last year for all occupations was $19.45 an hour, according to the Maine Department of Labor. The median wage for the lowest 25 percent of wage earners was $14.39 per hour.

Only in three of 23 broad occupation categories – food preparation and service, sales, and personal care – did the lowest-paid workers make less than next year’s wage.

Even if wages are higher than the minimum, such a sudden increase will put additional pressure on small-business owners already dealing with scarce labor and rising business costs, Gore said.

“How will businesses be able to adjust for this? There is only so much money we can charge for a hamburger and french fries and still have people buy the product,” he added. “Today we know the minimum wage is going to increase 60 cents; we don’t know what the impact will be in small businesses. It will vary by business sector and geographically.”

Maine’s minimum wage increased from $7.50 to $12 with the 2016 passage of a then-controversial referendum that also pegged annual minimum wage increases to the cost of living.

The first of those mandated increases occurred last year, when the wage increased by about 1.25 percent, to $12.15 an hour.

Next year’s wage increase will be a 5 percent bump. It is aligned with a surge in the consumer price index for urban wage earners in the Northeast. That figure rose an average of 3.4 percent every month compared with the same time the year before, the biggest increases in the past five years, according to the U.S. Bureau of Labor Statistics.

Under next year’s wage adjustment, the subminimum wage, which applies to tipped workers, will increase to $6.38 per hour. Employers have to prove that tipped workers make at least the full minimum wage through a combination of their wages and gratuities from customers.

The new wage also means the overtime threshold for salaried workers will go up, to about $38,250 a year. People at or below that income are eligible for overtime pay.

The coming change will make Maine’s minimum wage the third-highest in the six-state New England region. Massachusetts raises its wage to $14.25 an hour in 2022, and Connecticut’s goes up to $14 an hour. Vermont will have a $12.55-per-hour wage, Rhode Island a $12.25-per-hour wage, and New Hampshire’s will remain at $7.25 an hour, the federal minimum, according to the Economic Policy Institute.

Considering how much inflation has increased in the past year, the new minimum wage was not surprising, said Retail Association of Maine President Curtis Picard.

“It is part of the higher cost that everyone has been facing in the last 12 months,” Picard said. “This isn’t the only factor. There have been so many things happening economically because of the pandemic – supply issues and a workforce shortage – and there is an uncertainty with school and child care. All of that is impacting the economy in different ways, and it is being reflected in different areas of the economy.”

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