MONTPELIER — Gov. Phil Scott vetoed legislation Monday night that would have raised the state’s minimum wage to $12.55 an hour by 2022, anchoring his veto to concerns around the economic impacts of a mandated minimum wage hike.
“It’s critical to recognize that we share the goal of Vermonters making more money,” Scott said in a statement explaining his veto. “I also believe Vermonters should keep more of what they earn, which is why I can’t support policies that increase the costs of living.”
Passed as a compromise between the Vermont House of Representatives and the Vermont Senate earlier this year, S.23 would have raised the state’s minimum wage from $10.96 an hour to $11.75 in 2021 and $12.55 in 2022.
The bill would have also required incremental increases to the minimum wage according to a percentage of the Consumer Price Index, a commonly used measurement for gauging the average costs of goods and services used by U.S. households.
Critics of the proposed minimum wage hike argued smaller businesses, especially in Vermont’s more rural areas, would struggle with the mandated wage hike, making them less competitive with businesses in neighboring New Hampshire, where the minimum wage remains at the federal level of $7.25 an hour.
New York, meanwhile, already has a minimum wage of $11.80 that will rise to $12.50 at the end of the year in counties outside of New York City’s metropolitan area.
In a brief for the legislature, Vermont’s Joint Fiscal Office estimated the minimum wage increases proposed under S.23 could result in the loss of 90 jobs in 2021 and 280 jobs in 2022.
In the long term, the Joint Fiscal Office placed those losses as high as 500 jobs as a result of an increased minimum wage, with a 0.08 percent loss in Vermont’s Gross Domestic Product (GDP).
According to that same report, 40,000 people in Vermont currently work for wages lower than the $12.55 an hour minimum wage proposed under S.23, and its approval would have earned Vermonters $121 million more in wages in 2022 than in 2020.
The proposed minimum wage increase would have shrunk the amount of federal funds diverted to the Vermont economy through federal benefits and increased federal taxes, with the Joint Fiscal Office suggesting those losses would have reached $39.1 million in 2022.
Between increased tax revenue and decreased benefit payments, the net gain to state coffers, according to the Joint Fiscal Office, would have been $9.4 million.
The Joint Fiscal Office’s report suggested a higher minimum wage could lead to reduced hours for part-time employees and indirectly increase consumer prices in Vermont as a side effect of a higher cost of doing business.
In his statement issued Monday evening, Scott, echoing sentiments made in his budget address, said he feared the costs of a higher minimum wage would be felt more severely in rural parts of the state, “worsening economic inequity between counties.”
“From workforce declines to overall economic recovery – or lack thereof – most of the state has simply not kept pace with Northwestern Vermont, particularly Chittenden County,” Scott said. “A statewide mandated wage increase would exacerbate this regional economic inequity.”
It remains to be seen whether the Vermont Legislature will attempt to override Scott’s veto of S.23.
While S.23 passed through the Senate with a veto-proof super majority, moderate Democrats hesitant over the economic impacts of a wage hike kept S.23 from passing with the 100 votes needed for a hypothetical veto override attempt in the House.
Franklin County’s two senators, Sens. Randy Brock and Corey Parent, both voted against the bill alongside Republican counterparts from Rutland and Caledonia counties and Grand Isle County Democrat Sen. Dick Mazza.
Sen. Bobby Starr, a Democrat who represents Montgomery and Richford as a part of the Essex-Orleans senate district, voted in favor of S.23, while Sen. John Rodgers, another Democrat representing the Essex-Orleans district, was absent during the vote.
From Franklin County’s delegation to the Vermont House of Representatives, only Rep. Mike McCarthy, D – St. Albans, voted in favor of a minimum wage increase.
The bill had been a priority for Democratic leadership in both houses of the Vermont Legislature, which, after struggling to agree on a minimum wage hike in 2019, hammered out a compromise this year that set S.23’s proposed wage increase to $12.55 by 2022.
In a statement issued following the announcement of Scott’s veto, Senate leader Tim Ashe wrote that, “for those working full-time at the current minimum wage... the Governor’s veto just wiped out nearly $5000 of income...
“The Governor’s veto signals that his use of the word ‘affordable’ has no meaning, most certainly not to the tens of thousands who will struggle to get by as a result of this action,” Ashe said. “Some will be tempted to view this in terms of a disagreement between the Legislature and the Governor.
“Make no mistake, this is a battle between the Governor and the tens of thousands of Vermonters who don’t seem to fit into his hollow affordability slogan.”
Scott previously vetoed legislation raising the minimum wage in 2018, citing similar concerns with the economic impacts of a higher minimum wage.
Earlier this year, Scott vetoed legislation creating a mandatory paid family leave program, another priority sought by leading Democrats.
An attempt to override Scott’s veto of a paid family leave bill failed last week by a single vote in the House.