Minimum wage hike would boost economy or destroy jobs, friends and foes say

March 10, 2013 at 10:08 pm

By Becca Heller
Becca@MarylandReporter.com

Minimum wage $10 now (by mag3737/flickr)

(by mag3737/flickr)

An initiative to raise minimum wage to $10 an hour in two years promises to be among the most controversial economic issues debated at the Maryland General Assembly this year.

Sponsored by Sen. Rob Garagiola, D-Montgomery, and Del. Aisha Braveboy, D-Prince George’s, the initiative would reshape the state’s job market for low-income workers.

“This is an anti-poverty bill,” said Garagiola at Thursday’s Senate hearing. “If we raise working families’ wages, we’re going to improve their quality of life, and there will be less reliance on state government.”

Burden falls on business; proponents tout increased consumer spending

Though the government would take credit for raising wages, the financial burden would fall to state businesses.

“It’s not like this money comes from the government,” said Kathy Snyder, president of the Maryland Chamber of Commerce. “The money comes from our businesses. And if [the businesses] don’t have increased sales, where’s the money going to come from?”

Proponents for the bill believe that the burden will be balanced out by newly empowered consumers who will be spending more money locally.

“When you increase wages for more than 500,000 Marylanders, we’re putting cash in their pockets,” said Garagiola. “Some studies show that it can help inject nearly half a billion dollars into the Maryland economy.”

Sen. Rob Garagiola

Sen. Rob Garagiola

Small business vs. large corporations

Many small business owners are not ready to gamble their livelihood on conjectures that consumers will spend their money locally, however. Family-owned grocery stores, especially, would take a hit due to the number of employees that are paid minimum wage.

“Our average annual profit is $70,000,” said Lou Santoni, owner of Santoni’s Catering and Marketplace. “This bill alone will cost us $163,000 a year. And that’s not even including the sick leave bill that’s down the road as well.”

Reports have shown, however, that 70% of all low-wage and minimum-wage employers are large employers including Walmart, Pizza Hut, Taco Bell, and other corporations.

“Corporate profits are up and wages are staying stagnant,” said Matthew Hanson, a spokesman for the Raise Maryland campaign. “So it’s not like these large employers can’t afford to pay more, it’s that they are making a choice not to pay more.”

Some argue that the bill abandons the concepts of free market enterprise and competition that have been such essential elements of the U.S. economy.

Competition will set wages

“Free market and competition has driven our industry to where we are in our average hourly wage,” said Rob Santoni, owner of the Santoni Super Market in Baltimore, MD. “To keep the best workers and keep them happy, you will pay what your competition pays. We should not have to be mandated by the state.”

Others feel that it’s simply fixing a problem that doesn’t exist. Bernie Saleanik, owner of All Sports Photo, relays a conversation he had with people seeking employment at his local photography business.

“I tell them I can’t pay you what the union paid you; I can only pay you a certain wage,” Saleanik said. “And you know what they say to me? They say: ‘Are you kidding? If I don’t work at all, I can get subsidized housing, I can get food stamps, I can get life insurance and medical insurance, daycare, you name it. I got about 9 or ten things I can get if I don’t work at all. Why should I work? I don’t need a minimum wage.’”

“That’s what you got going on right now. That’s reality,” said Saleanik.

Low-wage workers appeal to legislators

Several low-wage workers came in to represent themselves and pledge support for the bill. The picture they painted of low-wage work and welfare-living was distinctly different from the cushy life that Saleanik described.

“I live with my daughter and my two grandsons. I help take care of them,” said Lana Stuart, an associate at WalMart who explained that she struggled to raise her family on her $8.80 hourly wage. “My oldest grandson would like to be a doctor someday. And I want to help him to reach his dream. I urge you to vote to raise the minimum wage to help build a better future for people like me to build a better future for our families.“

Many small business owners argue that this bill, rather than helping workers like Stuart, could actually lead to fewer jobs and force businesses to fire employees just to be able to pay the proposed $10 wage.

“Dramatically raising the cost to hire and train entry-level employees will reduce job opportunities in Maryland—it’s simple economics,” said Michael Saltsman, research director for the Employment Policies Institute. “Maryland’s entry-level job seekers need more opportunities, not the empty promises of policies like minimum wage hikes.”

Still, proponents of the bill remain steadfast in their belief that this hike in wages would not only be the fair thing to do for low-income workers, but also act as a stimulant to Maryland’s still struggling economy.

“Raising the minimum wage will help small businesses like my members by putting more money in the pockets of Maryland’s workers, which will boost spending and job creation on Main Street,” said a statement by Margot Dorfman, chief executive officer of the U.S. Women’s Chamber of Commerce, which represents 500,000 business owners nationally and 7,500 members in Maryland. “While some try to portray a minimum wage increase as a fight between business and workers, raising the minimum wage is in reality good for both.”

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  • Barry mothdinkle

    working 40 hours a weeks, $10/hour = $20000/year pretax, in round numbers. who can live on that? I propose that we raise the minimum wage to 15, or even $20/hr. Then poor, uneducated, unskilled, low-productivity people will really be living large… especially when their workplace closes (what will a happy meal cost when the guy who cleans the can costs $20/hr?) and they go back on unemployment at $9/hour?

    • Pablo

      That increase in wages would be passed on directly to the consumer and these workers (consumers) would then have to pay more for their inflated products, which would basically put them right back where they were. Let the free market determine wages. You obviously don’t run a business.