July 28, 2016 – The Greater Baltimore Committee remains opposed to a bill before the Baltimore City Council that would increase the minimum wage in the city to $15 per hour, even though an amendment adopted by a committee hearing the bill would shield some small businesses from the requirement.
Regardless of the amendment or any others the GBC remains opposed to the bill primarily because the city would become an island surrounded by nearby counties where the minimum wage is currently pegged by state law at $8.75 per hour.
“A $15-per-hour-minimum wage in Baltimore will create significant challenges for many businesses and put Baltimore at a serious competitive disadvantage for new and expanding business,” said Donald C. Fry, President and CEO of the Greater Baltimore Committee.
Businesses that do not fall under the small business amendment, which would exempt businesses that employ 50 or fewer workers or have less than $500,000 in gross annual income, would encounter a number of personnel, financial and strategic challenges.
The challenges include high labor costs that would make it less appealing to establish or continue business operations in Baltimore City.
Some existing businesses may choose to move across the city line to Baltimore County or to another neighboring county that is unlikely to raise the minimum wage beyond the state requirement.
Faced with increased labor costs, companies that choose to stay in the city will look to offset those costs by increasing prices on their product or service, workforce reductions, benefit cuts, or through a combination of price hikes and cost cuts.
In addition, a $15-per-hour-minimum wage may result in hurting the very workers that the bill’s sponsor seeks to help: low-wage workers.
In fact, a June analysis of the proposed bill by the Baltimore Bureau of the Budget and Management Research notes a growing body of research that indicates low-skilled workers and those ages 16-24 are most likely to experience job losses from minimum wage increases.
Also, a growing trend in some industries is to replace low-skilled workers with automation, such as in the fast food industry which is experimenting with replacing counter clerks with touch screen order kiosks. The GBC believes a $15-per-hour-minimum wage would likely fuel this trend in Baltimore City.
Workers who live outside the city may also compete for jobs paying the $15-per-hour-minimum wage, potentially displacing low-skilled city residents from jobs they might otherwise get. This would also result in a loss of “piggy-back” income tax to Baltimoreas workers who are employed in the city but live outside it would “carry” those incomes back to their home jurisdictions.
The GBC is also concerned about the significant effect the bill, if approved by the City Council and mayor, would have on the city’s budget.
The recent fiscal analysis of the bill by the Bureau of the Budget and Management Research has determined that a $15-per-hour-minimum wage would cost the city $150 million in additional employee wages between 2018 and 2021.
In addition, a $15-per-hour-minimum wage would trigger “draconian job losses” and push the unemployment rate in the city to between 8.2 percent and more than 10 percent, according to the city analysis.
“This would return the city to the unemployment levels of the Great Recession and virtually all of the jobs lost would be youth, young adults and unskilled jobs,” the city analysis states.
This possibility is deeply concerning to the GBC for a number of reasons. These include the emotional and financial cost such large job losses would have on individuals, families and communities, the negative effect it would have on the city’s business climate, and the damage it may cause to Baltimore’s reputation regionally and nationally.
“Baltimore needs more jobs and appropriate training programs for low-skilled workers to develop career paths in the workforce,” Fry said. “Unfortunately, a $15-per-hour-minimum wage for Baltimore looks like it would be a job killer.”
The GBC therefore recommends that the Baltimore City Council vote down the bill as well as any proposals for a minimum wage that is lower than $15-per-hour but still higher than the wage increases set by the state.
The GBC believes that the city and its residents would be best served by the City Council taking a prudent policy approach which lets the state’s increased minimum wage rate plan take effect until July 2018 when it will top out at $10.10 per hour.
This would allow the city and businesses time to adjust to the state’s phased-in wage increases and evaluate how it affects operations, economic growth and job creation.
“The timing for this bill isn’t right,” Fry said. “The bottom line is there are too many potential negative consequences when it comes to jobs and business growth at a time when Baltimore needs to encourage more of both.”