Maine’s minimum wage will increase to $14.65 an hour next week, but some of the gains for the state’s lowest-paid workers will be offset by required contributions to the new Paid Family Medical Leave Act, also scheduled to go into effect Jan. 1.

Maine’s current minimum wage is $14.15 an hour, an increase from $13.80 set in 2023.

For a full-time, year-round worker, the increase is equivalent to slightly more than $1,000 annually.

Portland and Rockland, which have their own minimum wage ordinances, will also see hourly increases from $15 to $15.50.

According to the Maine Center for Economic Policy, there are about 37,000 hourly workers in the state earning less than $14.65 hourly and an additional 50,000 employees earning just over the minimum wage who likely will see a boost in pay because of the competitive labor market.

The 96,000 affected workers represent about one in six payroll employees in the state, which is one of the smallest impacts of a minimum wage increase in the state in years, according to James Myall, a policy analyst for the Maine Center for Economic Policy.

“Wage growth has been unusually strong for Mainers in low-income occupations in recent years, resulting in fewer Mainers than ever earning at or near the state minimum,” Myall said in a blog post. “Nonetheless, the fact that tens of thousands of workers are impacted demonstrates the need to maintain a robust minimum wage so that no one is left behind.”

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 2023 and August this year, the index rose 3.6% in the Northeast – a much bigger increase than the 2.4% between August 2022 and 2023.

Minimum and lower-wage workers are particularly vulnerable to inflation, especially the cost of housing, said Patrick Woodcock, president and CEO of the Maine State Chamber of Commerce.

Housing is the largest component driving up the consumer price index, Woodcock said, and has been “the biggest burden on people’s paychecks.”

Looking to 2025, housing needs to be a priority for Maine lawmakers, he said, because labor availability continues to be a major challenge for businesses and raising minimum wage can only do so much if people can’t afford to live in the state.

“We absolutely need to get a hold of the housing situation in Maine,” he said.

A BURDEN FOR BUSINESSES?

Additionally, the new “tip wage,” or service employee minimum wage, goes up to $7.33 per hour in 2025. This means that service employees must receive at least a direct cash wage of $7.33 per hour from the employer. And the employer must be able to show that the employee received at least the minimum wage of $14.65 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 Maine Center for Economic Policy estimated that about 9,000 tipped workers in the state will see their hourly wages increase.

While more money is a win for workers, some fear the increase in payroll costs will be yet another burden for a hospitality industry that is already struggling.

Costs for labor and food have increased between 30 and 40% over the last few years, and it has become increasingly challenging for businesses to adapt, said Nate Cloutier, government affairs director for HospitalityMaine, the trade association representing the state’s lodging and restaurant businesses.

“Restaurants operate on slim 3-5% profit margins, and increased costs need to be absorbed somewhere – whether it’s through increased menu prices, reduced hours, job cuts, or closures,” he said. “Maine is in the minority of states that automatically ties annual increases to inflation, a policy that creates challenges for small and seasonal businesses, especially during periods of economic volatility.”

Starting Jan. 1, the minimum salary threshold for exempting a worker from overtime pay will increase slightly, to $845.21 per week, or $43,951 per year. Court action recently blocked a federal rule that would have raised that threshold even more.

The federal minimum wage was last changed in 2009.

FAMILY MEDICAL LEAVE

While many workers will see their paychecks increase, they’ll also see some new deductions.

In 2023, the state created a paid family and medical leave program that, starting in 2026, will allow eligible workers 12 weeks of paid time off for family or medical reasons, including illness, to care for a relative or the birth of a child.

The financial contributions kick in at the start of 2025 and are effectively a 0.5% income tax for individual workers and a 0.5% tax on overall payroll for employers.

A worker earning $31,000 – just above the annual minimum wage salary – would pay about $3 per week or $155 a year.

A business with 100 workers earning an average of $31,000 a year would pay $300 a week and $15,500 a year.

The chamber has pushed back on some components of the Paid Family Medical Leave Act, including taxing employers and employees who already have a family and medical leave program and do not intend to use the state system.

Woodcock, the chamber president and CEO, said the new law, combined with the new increased minimum wage, expected tariffs and other pressures of inflation “adds to a lot of uncertainty of the future.”

Editor’s Note: This story has been updated to reflect that court action blocked a federal rule that would have increased the minimum salary for exempting workers from overtime pay.