O’Malley Minimum Wage Hike Passes Out of Economic Matters Committee
Governor Martin O’Malley’s push to raise the state’s minimum wage to $10.10 an hour jumped its first hurdle yesterday by passing the House Economic Matters committee. The committee approved HB 295 with amendments by a vote of 13-8. The bill now moves to the full House.
The bill, if passed would raise the minimum wage in three phases. Beginning July 1, 2014 the minimum hourly rate would rise to $8.20 per hour, then rise to $9.12 beginning July 2015, then finally to $10.01 in July 2016. After that Commissioner of Labor and Industry may adjust the wage according to the Consumer Price Index of the Washington-Baltimore Metropolitan area, if the CPI decreases the minimum wage remains at the same rate as the previous year.
The bill also mandates employers pay tipped employees and hourly wage of 70 percent of the minimum wage. Legislative analysts estimate that to be $5.74 per hour.
The bill’s fiscal policy note, reports that only 67,000 workers in Maryland earned equal to or less than the federal minimum wage in 2012. Maryland’s labor force in 2012 according to the Bureau of Labor Statistics was 3.1 million; meaning a hike in the minimum wage will affect only 2 percent of all Maryland workers. The report also noted that half of all those earning at or below the federal minimum wage were younger than 25 and 21 percent were teenagers.
Increasing the minimum wage will also put upward pressure on state expenditures. Legislative analysts estimate the bill will require an additional $500,000 in extra staffing costs for the Department of Labor Licensing and Regulation. These costs will increase over time. The effects of the law on state employees will also require and additional $10.6 million over the next five years.
Legislative analysts relied heavily on the left leaning Economic Policy Institute for its analysis on small business. EPI is heavily funded by labor unions and its board of directors lists the heads of the country’s major labor unions, including the AFL-CIO, CWA, UFCW, and SEIU. Citing heavily from EPI, the analysis ticks off the numbers of workers who will benefit and what they would receive, while dryly noting that small businesses will see increases in labor and payroll costs.
According to analysis by the Heritage Foundation:
- Studies find raising the minimum wage does not reduce poverty. It is a completely ineffective anti-poverty policy.
- The primary value of minimum-wage jobs is that they are learning jobs. They teach inexperienced employees basic employment skills that make them more productive and enable them to earn raises or move to better jobs.
- Over half of all Americans started their careers making within $1 of the minimum wage. Few stayed there long.
- Two-thirds of minimum-wage workers earn raises within a year—without the government’s help.
- Correctly adjusted for inflation, the minimum wage currently stands above its historical average since 1950.
- The minimum wage hike sponsored by some Members of Congress and supported by President Obama would raise the minimum wage to an unprecedented level—one-seventh above its inflation-adjusted all-time high.
- This would cause employers to reduce hiring, leaving fewer people employed. Macroeconomic modeling shows the proposed minimum wage increase would eliminate 300,000 jobs. That means fewer opportunities for unskilled workers to get started in the labor market and move their way up.
- When businesses have to pay higher wages, businesses hire higher-skill workers, freezing the least productive, most disadvantaged workers out of the job market. Consequently minimum wage hikes harm the very people that proponents of the laws most want to help.
Amendments to the bill include exclusions for Six Flags amusement park, and maintain current law that exempts certain restaurants and establishments with less than $250,000 in gross income, and lowering the amount employers must pay tipped employees. Indexing the wage to the CPI may not survive the full House, or the Senate when it takes up the bill.