Why $15 minimum wage is bad for business

Blog post by Christine Ross

Christine Ross, the president and CEO of the Maryland Chamber of Commerce, has 20 years of leadership experience in the business community. She is a visionary coalition builder guiding the Maryland Chamber’s efforts to improve competitiveness, attract and retain talent, grow jobs, engage the community and provide legislative advocacy.

You can’t open the newspaper or go online without seeing the latest headlines on arguably the most debated topic this session—$15 minimum wage. Representing nearly 4,500 businesses across the State of Maryland, the Maryland Chamber of Commerce knows all too well that businesses, of every size, are waiting with bated breath to hear the outcome of this highly contested piece of legislation.

Businesses have told us directly that increasing Maryland’s minimum wage from the current $10.10 to $15 per hour would be devastating. One hospitality business located in Western Maryland, with over 1,000 employees, would take a hit—to the tune $805,000 per year—in increased labor costs. The increase would affect 140 of its low-skilled, entry-level employees at a current pay ranging from $10.10-$14 per hour.

This business is conveniently located near the borders of both Pennsylvania and West Virginia, with minimum wages of $7.25 and $8.75 per hour, respectively. Direct competition just 10 to 15 miles away puts them at a distinct disadvantage. Because of the lower minimum wage, these hotels and restaurants offer rooms and dining at a lower cost, forcing potential patrons to choose Pennsylvania and West Virginia over Maryland.

Other, smaller businesses in the same area have considered moving operations across state lines if the minimum wage increases to $15. The cost of doing business is significantly cheaper, and moving is a better option than shutting their doors for good.

Western Maryland businesses aren’t the only ones feeling this way. The Maryland Chamber represents over 3,500 small businesses. These statements about moving and closing shop are not false cries—they are reality.

Manufacturing company Toroid Corporation, located in Salisbury, is also considering the move.

To quote Toroid President and CEO Katarina Ennerfelt. “It’s a very short-sighted solution to a bigger problem. I’ll have to take from the benefit package or somewhere else to offset an increase in minimum wage to $15. It would cause a 45 percent increase over my whole payroll. Delaware is only five miles away and Virginia is 40 miles. We have plenty of options to move our business if $15 minimum wage is passed.”

Furthermore, employers cutting hours, or jobs altogether, to keep their costs stable will only increase the burden on those that this new wage seeks to help—as those with lower skills will be the first to lose out.

I believe those who feel a $15 minimum wage will be beneficial are misinformed. A poll by Gonzales Research & Media Services just this week showed that support for this wage increase decreased dramatically after candidates were informed of the higher prices for goods and services and loss of jobs for low-skilled workers that would result.

There are companies in Maryland that are able to afford to pay their employees a $15 per hour wage, and I support their choice to do that. But the decision should be just that, their choice. It should not be a mandate that will force others that cannot afford the overall increase in costs—not just the wage rate, but related costs for worker’s compensation, unemployment insurance and other payroll-related assessments—to go out of business.

Instead of raising the minimum wage, we should support education and workforce development initiatives that advance workers out of entry-level, minimum wage jobs—which they were never meant to maintain throughout their careers. Investment in these programs is much more sustainable in the long-term. A minimum wage worker flipping burgers is still going to be a minimum wage worker flipping burgers with this legislation. It’s not higher wages these workers need, it’s a higher skill-level that will allow them to progress into a stronger, more profitable position.

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