Published on March 4th, 2011 | by Len Lazarick9
Supporters say hiking minimum wage helps economy, opponents say it hurts
A proposal to increase Maryland’s minimum wage was both applauded and condemned in front of the Senate Finance Committee by economists, business owners, lobbyists and employees on Thursday.
The bill, proposed by Senate Majority Leader Robert Garagiola, gradually increases the state’s minimum hourly wage from $7.25 to $9.75 by July 1, 2013. It would also increase the current hourly base pay for tipped employees from half of minimum wage – $3.63 – to 75% of minimum wage – $7.31 in 2013. After 2013, the minimum wage would rise by an amount tied to the consumer price index.
Garagiola said that this minimum wage increase will both help the state’s economy and re-center the distribution of wealth.
“The argument is very strong that we need to raise it from the level we’re at today,” Garagiola said. “We’ve seen over the last several decades a growing disparity between high-wage earners and low-wage earners.”
In the 1960s, he said, the minimum wage was set to put people at a certain economic level. If that level had been maintained over the last half century, he said, the minimum wage would currently be $10 an hour. The way it is now, a single parent making minimum wage qualifies for food stamps.
Robert Lynch, interim chairman of the Washington College economics department, said that there are lots of benefits to increasing minimum wage. Recent studies have shown that increasing the minimum wage has no negative effect on businesses, who find it easier to retain employees. With better retention rates, businesses spend less time recruiting employees and training them. Also, Lynch said, the employees are being paid better. Since minimum wage employees are likely to buy vital goods and services in their neighborhoods, those extra funds go right back into the local economy, he said.
“By raising the minimum wage, you can stimulate the economy,” Lynch said.
John Shepley, the co-owner of Harford County nursery Emory Knoll Farms, said that paying employees well really can work. He pays all of his nursery’s employees more than $10 an hour. He said that it makes the most sense to invest in his employees, and he is able to make a profit.
“Paying more for something means that you might get less of it, but it works better,” Shepley said. “A Mercedes-Benz works better than a Yugo.”
Businesses say they cut workers
Other small business owners disagreed. Walt Clocker, who owns Angel’s Food Market in Pasadena, said that he had to lay off employees the last time the minimum wage was increased. The grocery business operates on a very thin margin, and he already has to compete with the large chains. A $1 increase in the minimum wage, he said, means that he needs to sell $100 more in products.
“This is going to make me either hire less employees or work them less hours,” Clocker said. “There is only so much wage money to go around.”
Eric Oppenheim, a Burger King franchisee, recalled painful cutbacks he made when the minimum wage last went up. He said that the amount an employee was paid went up 34%, so he cut back on the number of hours he had employees working by 25%.
Progressive Maryland Executive Director Rion Dennis said that 80% of Marylanders polled at the end of 2010 said they supported a minimum wage increase.
But Sen. E.J. Pipkin, R-Upper Shore, told Garagiola that he had problems with the economic basics of the proposal. If something costs more, he said then the tendency is to use less of it. Besides, he said, he wasn’t convinced that raising minimum wage would be the best way to get Maryland to compete.
“A businessperson who came in here said that he is competing against India and China, where they pay 30 cents. And here we are, ratcheting up our labor costs,” Pipkin said.