Vermont Lowers Wage Standards

Tax payers in Vermont may end up paying twice for corporate subsidies: once to the company for creating jobs and then a second time through public assistance to workers at subsidized companies making below the state’s living wage. 

In early June Vermont Governor Peter Shumlin signed a bill that lowers the wage standard in qualifying regions for its primary subsidy program, the Vermont Employment Growth Incentive (VEGI).  Qualifying regions are defined as those labor market areas (LMAs) where the average annual unemployment rate is higher than the state’s.  This encompasses 16 out of Vermont's 20 labor market areas.  In these areas wage standards were lowered to 140% of minimum wage, or $12.81 per hour at the current minimum wage of $9.15. 

For the remaining four LMAs the wage standard remains at 160% of the minimum wage, or $14.64 an hour.  Vermont’s minimum wage is scheduled to increase in stages over the next three years, up to $10.50 in 2018. 

This is a shift from the governor’s original proposal to lower the wage threshold to $13/hr – the living wage as established by the VT Joint Fiscal Office – across the entire state.  The lower wage threshold as passed was part of a compromise which involved scrapping a provision that would have lowered job creation standards for manufacturing companies. 

The bill also authorizes subsidy awards in excess of the threshold established by the standard net fiscal benefit test to businesses locating in high unemployment areas.  Additionally it allows VEGI recipient businesses to apply for an extension if they believe they will not meet their job targets in the first two years of the award period.

These are precisely the kinds of changes that over time can shift a program away from its original targeted purpose, diluting its impact and turning it into a windfall for low-road employers.