From the Halls: Unintended Consequences of Maryland’s $15 minimum wage

 

Maryland’s current minimum wage, at $10.10 per hour, is well above the federal minimum wage standard of $7.25 per hour. There has been legislation introduced before the General Assembly that would raise Maryland’s minimum wage to $15 per hour.

The business community agrees that this raise would drastically alter the price of doing business, especially for smaller organizations. In response to these changes, businesses would create solutions to cut their costs by cutting positions. Our legislators need to focus alternatively, on creating quality workforce development and education opportunities to fill the skills gap in industries where workers are most needed.

Cost to small business – real examples from Maryland Chamber of Commerce members (2018)

  • A Garrett County business employs a staff of 30, with eight full-time employees and 22 part-time employees. The average hourly wage for non-tipped/salaried employees is $12.61. If the minimum wage goes up to $15 it will cost the business owner $75,543 per year in additional payroll.
  • Another Garrett County business employs 43 people full- or part-time. The average hourly wage is $10.25. If the minimum wage goes up to $15, it will cost $278,537 per year – a 47-percent increase in payroll.

Cost to employees and programs

  • A University of Washington study found that Seattle’s move toward a $13 minimum wage cost low-skilled workers (those earning under $19 per hour). The number of available working hours dropped by 9.4 percent in three fiscal quarters after the minimum wage reached $13. That adds up to a loss of 3.5 million hours per calendar quarter. (Source: Minimum Wage Increases, Wages, and Low-Wage Employment: Evidence from Seattle, Jardim et al, 2017)
  • In prior hearings, representatives from the Maryland Association of Counties testified: “Many part-time and seasonal employees work in community services, such as after-school activities, summer camps, and community services for vulnerable populations. Accommodating this legislation could result in significant cuts to those programs.”
  • An increase in minimum wage would lead employers to cut jobs, most likely for low-skill workers. Combined with a cut in programs to help the vulnerable, those who need help the most will be the majority of those negatively impacted.

Cost to consumers

  • Increasing the minimum wage artificially alters the price of labor and therefore the price of goods and services.
  • Consumers will see the price of staple goods rise, and those who do not receive a wage boost will lose purchasing power as prices increase.
  • Minimum wage does not increase the value of wages, but rather increases the prices of goods and services.

Rise in difficulty to find entry-level work

  • The most current data from the Bureau of Labor Statistics (BLS, 2017) shows that a majority of minimum wage earners are between the ages of 16 and 24 and work primarily in the hospitality, leisure and food services. These are generally not career positions. They are primarily part-time, summer or entry-level jobs.
  • Business would not be able to afford these lower level positions if required to pay $15 minimum wage.

Too fast too soon

With a rapid increase in minimum wage, businesses need to continuously adjust their pay structure. Minimum wage doesn’t only call for an increase in wages to those making the least. In order to retain talent, businesses need to increase the wages for all levels of expertise. Doing so year after year calls for even more job cuts in order to continue operation.

Competitiveness is key

Maryland’s surrounding states all have lower minimum wages.

  • VA – $7.25 per hour
  • PA – $7.25 per hour
  • DE – $8.75 per hour
  • NJ – $8.85 per hour
  • WV – $8.75 per hour

In order to remain competitive and attract businesses to Maryland, the cost of doing business in the state needs to be achievable. With the recent loss of Amazon HQ2 to VA and NY, Maryland legislators need to be aware of how costly it is for businesses to operate in the state. Increasing the minimum wage even further above the surrounding states will continue to lower our level of competitiveness and put Maryland at a regional disadvantage.

We feel Maryland must support legislation that encourages job creation, fosters innovation, expands workforce development and talent pipeline initiatives and strengthens the overall business climate in the state. Increasing Maryland’s status as a great state for business is of utmost importance and attracting new businesses to operate or expand in Maryland will position the state for economic success. The negative impacts of raising the minimum wage to $15 will cut jobs and create significant barriers to employment, especially for low-skill workers. This will inevitably make it more difficult for long-term success and earning potential.

Vote against an increase in minimum wage

MEMBERS: Read our $15 Minimum Wage Advocacy Kit to activate your voice in the Fight against Fifteen.

JOIN US THIS FRIDAY: Register to testify this week with the Maryland Chamber, click here.


ADDITIONAL CRITICAL ISSUES

The Maryland Chamber is also focused on legislation impacting small businesses.

The recent bill, State Government Regulations Impacting Small Businesses (SB 173/HB 157), aims to reform Maryland’s regulatory process in order to reduce regulatory burdens on small businesses. This bill requires state agencies to:

  • post proposed regulations to their websites to solicit input and public comment from small business and trade associations at least 15 days prior to their submission to the General Assembly for review
  • create an electronic registry for small businesses to receive texts or emails when new regulations are posted
  • provide compliance guides for regulations that will impact small businesses
  • waive a fine or penalty if a violation is corrected within 30 days; consider the ability of small business to pay fines when assessed; and allow the cost of correcting a violation to count towards the amount of the fine or penalty
  • educate their personnel who draft regulations on how to conduct small business economic impact analysis

If passed, this legislation will make it easier for small business to have input on the regulations that affect them. It will also allow them to comply with regulations more easily through clear explanation new regulations, improve the quality of small business economic impact analyses, and shift the emphasis of enforcing regulations from being punitive to helping small businesses comply.

Please download the bill summary from the Maryland Department of Commerce to learn more.

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