AUGUSTA — Rep. Mike Carey, D-Lewiston, wants to raise the state’s minimum wage each year to match the cost of inflation. The reason, he says, is simple.

“When basic goods cost more because of increased prices, basic wages should also go up,” he said.

But trade groups and the Maine State Chamber of Commerce oppose the measure. On Friday, the groups told the Legislature’s Labor Committee that Carey’s bill would hurt Maine businesses, as would a similar proposal from Rep. John Tuttle, D-Sanford, that would raise the current minimum wage of $7.50 an hour by 50 cents over the next two years.

Gov. Paul LePage agreed. On Friday, the administration, through testimony from the Bureau of Labor Standards, said the state’s economy was too fragile to increase the burden on businesses. Mike Rowland told the panel that the administration would prefer that Maine’s minimum wage conform with the federal rate of $7.25 an hour.

According to the U.S. Department of Labor, 17 states have a minimum wage higher than the federal rate of $7.25. Twenty-three states have a wage tied to the federal rate, including New Hampshire. The rest of New England is higher than the federal minimum. Maine’s rate is the fourth lowest of those five states.

Vermont, one of 10 states that uses the CPI mechanism that Carey’s bill proposes, pays $8.15 an hour.

Business groups such as the Maine Restaurant Association and the Maine Innkeepers Association said that the state’s higher minimum wage was one of the reasons for the state’s poor business climate.

Peter Gore, with the state chamber, said raising the minimum wage would particularly hurt small businesses and their opportunities for growth.

But Democrats and labor groups argued that Carey’s bill would give businesses  predictability while putting more money in the hands of people who were most likely to spend it.

Garrett Martin, an economist with the Maine Center for Economic Policy, a progressive advocacy group, said increased spending would help spur economic recovery.

“Decreased spending indicates decreased demand, which makes it difficult for local businesses to maintain, let alone grow, their business,” Martin said, adding that an effective way to increase consumption is to increase incomes for working families who put money into the local economy by purchasing items that they currently can’t afford.

Martin also attempted to dismiss “myths” that raising the minimum wage would result in job losses by citing research from Alan Krueger, a renowned economist who once served as the chief economist in the U.S. Department of Labor under President Bill Clinton.

But Dick Grotton, of the restaurant association, said automatically raising the minimum wage would alter the dynamic between employer and employee.

“It robs the employee of the personal satisfaction of earning a wage over the minimum rate,” Grotton said.

“The market determines the wage,” he said.

Grotton acknowledged that his organization has never supported raising the minimum wage.

“There’s always someone at the bottom of the ladder,” he said. “We keep raising the benefits.”

The state has raised its minimum wage 30 times since 1959 and nine times since 1996. In 2008 the Legislature raised the rate to $7.50, the current rate.

Recent proposals to increase it were stalled amid concerns about the recession.

Gore, with the state chamber, said Friday that those concerns remain during the economy’s slow recovery. He argued that now was “precisely the worst time” to increase the minimum wage.

It’s unclear which side of the debate will prevail in the Legislature. Carey acknowledged that his proposal would trigger initial opposition, but he said he was confident that his argument would change their minds.

“While many business owners may initially have a knee-jerk reaction to paying employees more when profit margins are already tight, doing so is a smart investment,” he said.

smistler@sunjournal.com