Listen to this articleBy Mike O’Halloran
National Federation of Independent Business
As the Maryland General Assembly considers increasing the state’s minimum wage to $15 an hour, HB664 with a hearing Tuesday, the low wage workers those bills are intended to help may end up out of a job.
The latest minimum wage research shows there is a tipping point where the resulting job losses are so significant, that people at the low end of the pay scale are hurt far more than they are helped. It’s incumbent upon lawmakers and the governor to consider the unintended consequences of such a policy.
Seattle, an early adopter of a $15 minimum wage, released a study in 2017 after that city’s incremental increase to $13 per hour. It found nine months after that second of three wage bumps, about 5,000 low-wage jobs disappeared, the number of hours worked by low-wage workers dropped by 3.5 million hours, and their wages dropped by $6-million.
A study released in December on California’s minimum wage hikes over three decades found there was a measurable decrease in employment among affected employees, and that each 10% increase in minimum wage led to a nearly 5% reduction in employment in industries with a higher percentage of minimum wage employees.
And, a new 2018 report on why teen unemployment has continued to rise, by CORRECTION George Mason University’s Mercatus Center, shows increases in minimum wage were the main reason. The research determined “No evidence was found to suggest that higher minimum wages for teens lead to higher future earnings; if anything, the evidence points to the opposite effect.”
Greater costs, higher taxes
If the bill for a $15 minimum wage passes in Maryland, small business owners face greater costs than higher wages of employees who fall below the new minimum. To keep morale and productivity from dropping, they will likely have to raise the pay of workers in a range above that. There is also the 7.56% payroll tax an employer must pay for the added wages. Many small businesses operating on a thin profit margin may simply not be able to afford these added costs.
These significant costs for Maryland small businesses, combined with recent increases in labor costs from the mandated paid leave law, leave those employers in a difficult position. They may not be able to raise prices on goods or services if the marketplace doesn’t tolerate it. That leaves the elimination of jobs and reduced hours for lower level employees.
To determine how a $15 minimum wage will impact Maryland, NFIB used a regional economic modeling firm, REMI, which has performed policy impact studies for at least 28 states and many universities. The resulting NFIB Research Foundation report shows Maryland would see private sector employment reduced by 99,000 jobs over a decade, and real output reduced by over $61 billion. Most of the job losses take place in the small business sector.
When reviewing this legislation, it is critical that state lawmakers ensure that Maryland small businesses, their employees, and the state economy will continue to prosper by considering these unintended consequences.
Mike O’Halloran is the state director for the National Federation of Independent Business which represents 3,000 small businesses in Maryland.
Small businesses are on shoe-string budgets as it is and asking for $15.00/hour for a job whose actual value is far less is economically ignorant at the least and arrogant at the most…
Maybe those who want to pay $15.00/hour should start their own small business and do so and watch what happens…
They will be out of business in short order as they have to raise prices to cover the wages and health insurance and any other benefits… Or hire fewer people or automate where possible… Also, laying off people happens… All to pay that $15.00/hour “living wage”…
Earning a profit isn’t evil… It’s how a business owner pays the wages, taxes, premiums, unemployment tax, Federal, State, Municipal taxes, various fees, services, etc.
I hope that it explains things…
It explains things from your point of view. My husband was a contractor in the 1980’s and 90’s. He manged to pay people at least $15 an hour and that was 30 years ago.
The Seattle study, conducted at the University of Washington, is well known to be fatally flawed because it ignored the thousands of workers who moved from low-wage to higher-wage jobs. The study considered them to have lost their jobs when in fact they saw a raise.
I don’t know about the other “studies” reported here, but it seems to me that if you’re going to claim that studies show something you need to make sure that the studies you use are legitimate.
You took the words right out of my mouth! “Studies” can always be manipulated to the outcome you want it to have. It would be interesting to know who sponsored/funded those “studies.” Employers need to understand that when you pay more you get more – generally speaking. When you pay more you have a larger field to choose from and finally Walmart can ‘afford’ to pay workers more and stop listening to greedy board members and shareholders who have no idea what it’s like to live pay check to pay check.