Baltimore Business Journal: Let the state control the minimum wage in all of Maryland

Baltimore City Hall

Editor’s note: The following commentary appeared on on February 6, 2017.

Delegate Dereck E. Davis, Chair of the Economic Matters Committee in the Maryland General Assembly, recently introduced legislation that would give the state sole domain over setting the minimum wage and benefits. This idea has a lot of merit and is widely supported by the business community in Greater Baltimore and statewide.

The business community has widely held that the best venue for establishing hourly wage legislation is at the federal level. Passage of minimum wage and labor laws were first enacted by the federal government to prevent exploitation of employees.

Minimum wage was intended to be just that – a minimum wage that an employer paid. This served to aid individuals entering the labor market for the first time or employees that possessed limited education and job skills.

We frequently hear that employees can’t support a family on minimum wage. Unfortunately, we lose sight of the basic fact that minimum wage was never intended to be a family sustaining wage or a living wage. It was a tool to provide opportunity for those whose education and skills were evolving and served as an entry level for a potential career.

The last time the federal minimum wage was raised was in 2009 – eight years ago. At that time the federal minimum wage was increased to $7.25 per hour.

Unfortunately, based upon the current state of affairs in Congress, reliance on the federal government to address the need to raise the minimum wage is misplaced. Budget stalemates, “kicking the can down the road,” shutting down government, and failure to address infrastructure funding for more than 20 years demonstrates a polarization among the political parties that suggests that addressing minimum wage at the federal level is no longer likely.

The federal inertia has led to 29 states, the District of Columbia and about two dozen cities and counties raising the minimum wage on their own, according to the Pew Research Center.

Like other states which have also boosted the minimum wage, Maryland took this step, in large part, because the minimum wage debate has no traction in Congress.

Maryland enacted legislation in 2014 which incrementally raises the required minimum wage beyond the federally required $7.25 per hour to $10.10 per hour by July 1, 2018. Currently the minimum wage rate in Maryland is $8.75 per hour.

Maryland’s approach was smart. It gave employers ample time to take into account budget considerations and plan for pay increases. Also the incremental step increases were applied statewide, thus providing a level playing field for all employers.

As far as anyone can tell, this steady, predictable and statewide rollout has not caused any major disruptions, such as companies leaving the state or laying off workers.

As noted above a national movement to increase the minimum wage has expanded to states and major cities and municipalities. Just last year the Baltimore City Council sought to enact legislation phasing in the minimum wage to $15 per hour.

Although the legislation was defeated, there is strong sentiment from some city elected officials to enact such legislation. There are a number of problems and unintended consequences that would result from passing increased minimum wage legislation in Baltimore City alone. Employers and economic growth leaders in Baltimore City would be placed at a competitive disadvantage to surrounding counties. Economic development and job creation is a “competitive sport” and saddling one jurisdiction with a negative job creator – an increased minimum wage – significantly harms the growth potential of that jurisdiction.

Imagine if Baltimore were to enact legislation requiring a $15 per hour minimum wage. The city would become an island surrounded by Baltimore County and other jurisdictions with no plans to raise the minimum wage, making the cost of doing business more costly in the city.

This likely would result in some businesses relocating outside the city limits or shutting down altogether if the higher wage requirement undermines profitability. The result: Job and tax losses for the city.

Now you’ve got disruption. But there’s more. What are employers with businesses in multiple jurisdictions to do? Are they to pay their Baltimore City hourly workers $15 per hour while other such employees in neighboring jurisdictions, employed by the same company, received $8.75 or even $10.10 per hour?

For this reason minimum wage and benefit legislation is best handled at the state level. In fact, until the last 10 years or so, minimum wage and benefit legislation in Maryland was always left within the purview of the state level, not the local government level.

Delegate Davis’ bill strives to restore the tradition of leaving wage and benefit laws in the hands of the state to ensure businesses have a statewide competitive environment and a level playing field for their respective jurisdictions.

Other areas pertaining to employment are handled exclusively at the state level, specifically workers compensation and unemployment.

Recently a number of members of the Baltimore City Council announced with some fanfare that they oppose the proposed legislation that would effectively prevent cities and counties in Maryland from raising the minimum wage beyond that approved by the state.

Some of these council members argued the bill is intended to take power away and “tie the hands of local governments.”

Despite such posturing, the state bill is not meant to subvert local elected leaders from serving their constituency and is not being secretly pushed by corporate interests.

On the contrary, the proposal is aimed at preventing a host of unintended consequences and economic turmoil in local jurisdictions across the state. It should be noted that the bill only applies to private sector businesses and would permit local governments to raise the minimum wage for their public employees in their jurisdictions if they so desired.

It also does not prevent a county government from coming to the Maryland General Assembly and seeking to increase minimum wage levels in a particular jurisdiction because of exigent circumstances.

The legislation strictly holds that such decisions are made at the state level rather than through a patchwork of local laws and ordinances.

The proposal’s intention is to ensure stability and predictability in Maryland’s economic ecosystem overall – but most notably for the many companies, hospitals, universities and others who employ hourly workers and have operations in multiple jurisdictions.

As was noted in the Greater Baltimore Committee report Gaining A Competitive Edge , business thrives on predictability and certainty. Also, public policy changes must consider the increase such legislation has on the cost of doing business if we are to have a competitive business environment.

Allowing Maryland’s 24 subdivisions to set wage and benefit laws would increase the cost of doing business and create a hodgepodge of local legislation.

As Delegate Davis noted at the Greater Baltimore Committee’s recent 2017 Maryland General Assembly Legislative Forum, such a scenario would be chilling to the state’s business climate, making it “impossible to compete” outside of Maryland and “difficult to operate” in the state.

To prevent such havoc, the business community needs to strongly encourage state legislators to back legislation that rests the authority to raise the minimum wage solely to the state.

Once that is accomplished it may be prudent for elected officials and business leaders to discuss taking another look at the minimum wage or other ways to address perceived inequities.

This is a commonsense approach. It would provide the many vital businesses and other employers with the stable and predictable ecosystem they need to thrive and protect Maryland’s competitive edge.

Donald C. Fry is President and CEO of the Greater Baltimore Committee and a frequent contributor to the Baltimore Business Journal.

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