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Published on March 4th, 2011 | by Len Lazarick

9

Supporters say hiking minimum wage helps economy, opponents say it hurts

By Megan Poinski
Megan@MarylandReporter.com

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.

Sen. Rob Garagiola

Senate Majority Leader Rob Garagiola

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.

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  • http://www.facebook.com/profile.php?id=1171028711 Laura Rowles

    As a “tipped employee” this would be great!! I believe this increase (on both levels) would stimulate the economy. Thank you Senator Garagiola!!!

    • Libertarianism-101

      You should be scolding Sen Garagiola. If the minimum wage increases to 9.75 you’ll see reduced work hours and many of your co-workers will get laid off. You’ll have to be an extremely productive worker to continue pre-wage increased levels.

      A higher wage says to the employer “I must discriminate against low-skilled workers”. So, they only hirer high skilled workers pricing un-skilled workers out of the market increasing un-employment.

      The Sen is beholden to the wrong economic theory (Keynesian theory) that has been disproved But I’m sure you’re a great worker anyway, and good luck with everything, too Laura

  • Pingback: Crosspost: Letter to Sen Norm Stone | Augie – "Citizen Watchdog"()

  • anonymous

    Do we really want to compete with Chinese and Indian labor costs by considering paying hard-working Americans 30 cents? Or if not 30 cents something close? Why would we ever consider competing with countries who pay and treat their employees horrible!? Yes, they might be some of the fastest growing economies in the world but low labor costs is not the reason why. Let’s not fool ourselves. When we elect legislators, sometimes they must do things that are hard right then but better for all citizens in the end. If the minimum wage is increased, it does not mean massive layoffs will occur across the board. Yes, somethings wil have to be cut back on but it is an investment that all business owners, and legislators alike, should understand. I thought it was simple: you pay your employees more, and you get more out of them. A hard working, full time single mother earning the current minimum would qualify for food stamps??? Disgusting.

  • MarylandUberAlles

    Ah the liberals have checked in…. So Laura, be careful of what you ask for as a tipped employee — you may be out of a job or have a serious reduction in your hours if this passes. And seriously Anonymous? You pay your employees more and you get more? You’ve obviously never owned a business…

    When the cost of manufacturing a good or providing a service increases, that money has to come from somewhere – you either have to charge your customer more, reduce your costs elsewhere (i.e. fewer hires, fewer working hours), or settle for less profit (which is totally realistic — there are crap loads of non-profit restaurants and grocery stores around, right?). This is about the liberal desire to re-distribute wealth out of the hands of the risk takers and creators and to squarely swell the rolls of State dependents who OVERWHELMINGLY vote Democratic.

    In the process we are going to drive small margin businesses out of the State and make a climate where only large companies working on economies of scale can justify a presence here. Nobody wants a Wal-Mart next door to them here, but they are also unwilling to do anything that would let a small business owner have a shot at competing. It must be nice to be a liberal and ensconce yourself in a fantasy world where the rules of economics do not apply.

    • Libertarianism101

      I was gonna give it “anonymous” but you’ve already done that. John, that so-called economist you cited clearly is beholden to Keynesian economics which has been dis-proven.

      “MarylandUberAlles” I must say you’re pretty good, sounds like you understand economics, you majored in Econ? lol And if you run for office I’ll support you.

      p.s. THE STATE SENATE MAJORITY LEADER HAS LOST HIS MIND!!!

  • John

    “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.”

    >> That disparity would be better addressed through promoting education and allowing people to move up in wage earnings through skill and merit rather than an outside market manipulation.

    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.

    >> Says the liberal academic vying for tenure… Employee retention is only part of the equation and if every pays the same wage, what’s the incentive for an employee to stay in one job versus the other? There is none.

    “A Mercedes-Benz works better than a Yugo.”

    >> Dumb, dumb, dumb. A Mercedes works better because of the quality processes used in the design and manufacturing of the product; quality is expensive. Not everyone can afford a Mercedes. Changing the minimum wage isn’t going to solve that.

    Anonymous said: Do we really want to compete with Chinese and Indian labor costs by considering paying hard-working Americans 30 cents?

    >> Whether we want to or not, we ARE competing with the Chinese and Indian labor costs. The people who are hurting the most right now are the unskilled workers. The high unemployment rates you hear about on the news? That number is almost exclusively the poorly educated unskilled class. The disparity in wages is not because we are not paying our unskilled workers too little, its because globally, that type of labor is CHEAP. The answer is to assist the workers in moving up the wage scale through education and training — trying to artificially manipulate wages won’t work. The wealthy are mobile and will protect their assets. They will take their companies, their tax revenues, and their jobs for unskilled workers with them to a more profitable climate.

    O’Malley increased the tax on millionaires in Maryland. What happened? A large number of them moved and guess what? The expected revenues to be generated from the tax didn’t materialize. There are economic forces at work that the government cannot legislate away. You can keep ignoring that reality but it doesn’t make it less real.

  • http://www.facebook.com/people/William-T-Newton/719190134 William T. Newton

    SAY WHAT YOU WILL BUT I HAVE ALWAYS VIEWED RAISING THE WAGES OF THE “UNSKILLED” FOR NO REASON AS DE-VALUEING MY OWN WORTH. SAY I MAKE $20 PER HOUR VS. THEM AT $7…..GIVE THEM $1 RAISE SAYS I’M WORTH $19…..QUESTION: DID I JUST GET $1 STUPID-ER?, CAUSE THEY SURE DIDN’T GET THE EXTRA DOLLAR FOR BEING SMARTER-ER…..I AM AGAINST RAISING THE MINIMUM WAGE. WHEN I STARTED WORK IT WAS $1.65 AN HOUR THAT ONLY INCREASED AS I BECAME BETTER AT MY JOB AND INDISPENSABLE. I HAD THAT SAME JOB FOR 13 YEARS AND MADE QUITE A BIT OF MONEY AND IT HAD NOTHING TO DO WITH GOVERNMENT RAISING MY PAY. PS–I’M NOT AFRAID TO USE MY NAME LIKE SOME OF YOU….IT COMES WITH PRIDE. THEN SOME OF YOU MIGHT HAVE GUESSED IT WAS ME BECAUSE OF “CAPS”……

  • http://ianbrettcooper.blogspot.com/ Ian Brett Cooper

    Eric H. Oppenheim is is the Chief Operating Officer for Republic Foods, Inc. where he manages the operations for nineteen Burger King restaurants in the Washington, DC metropolitan area. I will, from now on, be boycotting Burger King.

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