Caution warranted on minimum-wage issue

The issue of raising the minimum wage appears to be gaining traction as a cause likely to be championed in the 2014 session of the Maryland General Assembly.

Already the issue, which was decisively rejected by state lawmakers during the 2013 session, is percolating with gusto among national and state public policy advocates.

Fresh legislation to raise the federally-mandated minimum wage from its existing $7.25 per hour to $8.20 per hour has been proposed in Congress and President Barack Obama has called for a national minimum wage of $9.00 an hour.

Two Maryland counties – Montgomery and Prince George’s – have approved a substantial increase in the minimum wage to $11.50 per hour by 2017 and the Washington, D.C. District Council has preliminarily approved similar legislation.

These three jurisdictions together would effectively create a regional island of 2.5 million residents where businesses must pay the highest minimum wage in the U.S. surrounded by states that currently adhere to the federal minimum wage of $7.25.

To call attention to the minimum wage issue, at least two D.C. council members have vowed to spend a week living on a minimum wage and a state delegate who is running for Maryland attorney general plans a media event where she will go shopping with a low-wage worker.

What’s going on here? That’s a question many in Maryland’s business community are asking as they try to figure out what Maryland lawmakers might do as they begin the 2014 General Assembly session amid unilateral action by two Maryland counties to raise the minimum wage and drum beating for a statewide increase.

Most business leaders appear to favor a national approach to the minimum wage issue, but are not optimistic that Congress is up to it.

In any case, enacting legislation on a fundamental labor-market issue dictates caution over haste. As Congressman John Delaney, a former CEO who supports the bill now before Congress, told Greater Baltimore Committee members last week: “There is a lot of momentum for the minimum wage and there is potential that it be done in the wrong way,” said Delaney. “So I think it has to be done in the right way.”

While there are many nuances related to minimum-wage policy, following are a few basic observations about the issue.

Experts estimate that approximately 5 percent of the nation’s hourly workers are at or below the minimum wage. That’s true for Maryland as well, where 67,000 of 1.3 million hourly employees in the state work for a minimum wage or less, according to the federal Bureau of Labor Statistics.

Nationally, more than 70 percent of minimum-wage workers are young, ages 16-24. More than 75 percent are white. Half are women and 64 percent are part-time workers. More than half work in the leisure and hospitality sector, 16 percent work in retail jobs and 9 percent are employed in education and health services, according to the minimum wage Fact Tank at www.pewresearch.org.

The Congressional legislation proposes a 39 percent minimum-wage increase in three years to $8.20 per hour, to $9.15 a year later, and to $10.10 in two years, after which increases would by tied to the Consumer Price Index.

The new Montgomery-Prince George’s laws set hourly minimum wages at $8.40 in October 2014, $9.55 in 2015, $10.75 in 2016 and $11.50 in 2017, which amounts to a 150 percent increase over the next four years.

In the Maryland General Assembly’s 2013 session, legislation was proposed in both houses to raise Maryland’s minimum wage to $8.25 this year and ultimately to $10 per hour in 2015. Both bills died in committee. Nevertheless, minimum-wage legislation is anticipated in the 2014 session. Some lawmakers speculate that the minimum wage could very well be one of the top issues debated in Annapolis this year.

Currently, 19 states have minimum wages that are more than the federal minimum. Other than in D.C., no mid-Atlantic states have higher minimum wages. Elsewhere, minimum wages that exceed the federal mandate range from $7.35 per hour in Missouri to $9.19 in the state of Washington, according online data trackers.

Supporters of minimum-wage increases contend that putting more money into the pockets of low-wage workers will stimulate the economy and improve quality of life. Business advocates traditionally decry minimum wage hikes as mandating significant new business costs that will hurt the economy more than it helps by, among other things, decreasing employment.

Maryland General Assembly legislative analysts projected that the 2013 legislation would have generated $2.1 million in additional staffing costs at state agencies and “minimal” additional tax revenues to the state’s general fund.

Expert researchers elsewhere are divided on the issue of whether increasing the minimum wage damages the economy or stimulates it.

At least one acknowledged expert – Harry J. Holzer, former chief economist at the federal Labor Department during the Clinton Administration – recently urged caution amid the current spate of minimum wage advocacy.

Holzer, now a professor of public policy at Georgetown University, generally supports “modest and periodic” increases in the federal minimum wage, which tend to not damage employment, he wrote in a December 9 commentary in the Washington Post.

“Some of the recent actions to raise wages, however, give cause for concern. Many proposed increases are very large and very local,” wrote Holzer, warning of potential employment losses and a “greater risk that employment growth will shift across a municipal or state border.”

Holzer also warns that there are risks associated with increasing the minimum wage in today’s weak job market as opposed to enacting such a policy in a strongly or rapidly improving job market.

Holzer’s warnings, which inject a voice of reason into an otherwise emotionally charged issue, are worth remembering during any policy debates in Annapolis over the minimum wage.

Donald C. Fry, president & CEO of the Greater Baltimore Committee, writes a monthly column for The Daily Record. His e-mail address is donaldf@gbc.org.

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