Because of a competitive labor market, many Maine businesses are already paying well above the state’s new minimum wage of $14.15 an hour. The change was also expected because of a 2016 state law tying minimum wage increases to the federal cost-of-living index. The index rose 2.4% from August 2022 to August 2023. Robert F. Bukaty/Associated Press

As the new year arrived Monday, Maine’s minimum wage increased to $14.15 an hour.

The state’s 2023 minimum was $13.80 an hour. Portland’s minimum wage also is increasing, from $14 to $15 per hour in 2024.

Supporters say the statewide increase is a small step toward a living wage for hourly workers. Opponents, however, say it will add yet another cost that businesses will pass on to consumers.

Both sides note that in an increasingly competitive labor market, many employers already are paying well above the minimum.

According to the Maine Center for Economic Policy, there were about 68,000 hourly workers in the state earning less than $14.15 and an additional 59,000 employees earning just over the minimum wage who likely will see a boost in pay because of the competitive labor market.

“The minimum wage is really the floor, so when we raise it, it lifts everybody,” said Andy O’Brien, spokesperson for the Maine AFL-CIO, a federation of unions. 

The 127,000 affected workers represent about one in five payroll employees in the state, the Maine Center for Economic Policy said. That is a smaller fraction than the one in three originally projected when the referendum passed in 2016.

“Maine’s stronger labor market has helped push wages up for more workers,” James Myall, an economic policy analyst for the center, said in a blog post. Myall said that so many workers benefitting from the increase is a sign that the policy is working as intended. Maine’s unemployment rate remains historically low, he added.

Businesses, though, are feeling the effect of the rising cost of doing business, said Nate Cloutier, director of government for HospitalityMaine, the trade association representing the state’s lodging and restaurant businesses.

The rate hike was based on the consumer price index, so the hike was anticipated and gave business owners time to plan, Cloutier said. Still, businesses are in a tight spot, he said.

“Right now, it’s certainly an employee’s market. … It’s in the best interest for the employer to be offering a wage as high as they possibly can,” Cloutier said.

But most of their member businesses operate on a 2% to 3% profit margin, and as costs go up across the board, it’s hard to manage without passing the costs on to consumers. Either that or reduce their employees’ hours or operating hours. Sometimes it’s a mix of all three.

“Businesses are having to be extra judicious on expenses, they’re having to put everything they can toward a good wage for prospective employees,” he said.

In 2016, Maine passed a referendum laying out a schedule to increase minimum wages for four years, and then pegging future increases to the federal cost-of-living index. Between August of 2022 and August of this year, that index rose 2.4% for the Northeast.

Additionally, the new “tip wage,” or service employee minimum wage, goes up to $7.08 per hour in 2024. This means that service employees must receive at least a direct cash wage of $7.08 per hour from the employer. And the employer must be able to show that the employee received at least the minimum wage of $14.15 per hour when the direct wage and tips are combined at the end of a work week, according to the Maine Department of Labor.

The minimum salary threshold for exempting a worker from overtime pay also changes. Starting Jan. 1, the new minimum salary threshold is $816.35 per week or roughly $42,450 per year. The salary threshold is only one of several factors an employer can consider when determining whether an employee is exempt from overtime pay.

Maine is one of about 20 states raising the minimum wage in 2024.

Rhode Island’s current $13 minimum wage will jump by $1 to $14 an hour on Jan. 1. In Vermont, the minimum wage will reach $13.67 – climbing $0.49 from the current $13.18 wage. Connecticut will raise its minimum wage from $15 an hour to $15.69.

Massachusetts’ minimum wage will remain at $15 an hour in 2024, although there is a campaign to hike the wage again, to $20. New Hampshire continues to have the lowest minimum wage in New England, matching the federal wage of $7.25. State lawmakers have defeated multiple attempts to increase it in recent years.

The federal minimum wage was last changed in 2009.