Complications: Weak economy, looming sequestration
An issue that periodically surfaces both nationally and in Maryland is the minimum wage — as in calls to raise it. Legislation introduced in this General Assembly session by Sen. Robert J. Garagiola (D-Dist. 15) of Germantown and Del. Aisha N. Braveboy (D-Dist. 25) of Mitchellville would boost the state’s current minimum wage of $7.25 an hour to $10 in 2015.
Proponents say an increase in the minimum wage would put an additional $778 million in the pockets of about 536,000 workers in Maryland. That, they say, would generate nearly half-a-billion dollars in economic activity and lead to almost 4,300 new jobs. Women, who tend to hold more of the lower-paying jobs, would benefit most by a rise in the minimum wage.
Surprisingly, advocates also say older workers are much more affected than teens by an increase in the minimum wage. Some 86.9 percent of workers who would see their income go up are at least 20 years old, according to the nonpartisan Economic Policy Institute, which issued a report on the minimum wage recently.
Maryland’s current rate matches the federal minimum wage of $7.25. Eighteen states exceed the federal rate, which was last raised by Congress in 2007 — from $5.15 an hour throughout two years. Interestingly, as the New York Times noted in a story in June, the national minimum wage, adjusted for inflation, was highest in 1968 when it stood at $1.60 an hour, or roughly $10 an hour in 2012 dollars.
Still, there are some compelling arguments against raising the minimum wage, particularly at a time when the economy continues its slow grind toward recovery from the deep recession that struck in 2006-07.
Many economists believe that raising the minimum wage costs the economy thousands of jobs. The argument goes: If a company’s budget is $70 an hour, and the minimum wage is $7 an hour, then it can hire 10 employees. But if the minimum wage were, say, $5 an hour, it could hire 14 employees, or 40 percent more. Also, opponents say the higher the minimum wage goes, the more likely companies will outsource jobs overseas to places where workers are paid considerably less money.
There are other reasons for opposing an increase in the minimum wage, as well. Small businesses, many of which struggle to make ends meet, would be hit particularly hard. Also, nonprofit charitable organizations could feel the impact disproportionately. For some larger firms, a rise in the minimum wage could be an incentive to mechanize more of the work that lower-paid workers now handle. Additionally, a higher minimum wage could give foreign companies an advantage in the global marketplace.
For consumers, a lower minimum wage can keep prices down. And, of course, there’s the case that minimum wage laws are a government intrusion into the marketplace and that workers always have the option of declining the low-wage jobs.
When all the arguments are considered, however, the most powerful remains that the economy is still fragile. Accentuating the problem is the threat of sequestration in Washington that could lead to layoffs in the federal workforce. That double dose of fiscal reality, coupled with the state’s ongoing struggle to convince employers that it is business-friendly, makes it a bad time to raise Maryland’s minimum wage.