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Higher wages to hit home

Minimum wage increase will cost employers $61M

Friday, Jan. 27, 2006

When Maryland’s new minimum wage of $6.15 kicks in Feb. 16, Marge Thomas will face some tough decisions.

Goodwill Industries of the Chesapeake, a Baltimore-area job training and employment services company where Thomas is president and CEO, employed 300 people in 2004 and provided training to more than 4,000. Faced with having to pay many employees $1 more per hour, Thomas is not sure if she can keep up those numbers under Goodwill’s $25 million annual budget.

‘‘It could have an impact on hiring,” Thomas said. ‘‘There will be a ripple effect, since it wouldn’t be fair to pay people now making above the minimum wage at the same level as those making the new minimum wage.”

The higher pay for the state’s roughly 55,000 private workers who earn the minimum will cost Maryland businesses an additional $61 million in wages and payroll taxes annually, according to the state Department of Labor, Licensing and Regulation. The bulk of those businesses are in the hospitality, leisure and retail industries.

‘‘I don’t think you will see large numbers of layoffs among Maryland retailers, but some jobs could remain unfilled,” said Thomas S. Saquella, president of the Maryland Retailers Association. ‘‘They may not hire as many high school students in the summer.”

Some business owners say the increase will have little impact. Gallery Flowers & Gifts in Silver Spring, which has maintained an annual revenue growth rate of 20 percent since forming in 1999, won’t really be affected because employees are paid above the bare minimum, said Emile Ghandour, president. Ditto for Bozzuto Landscaping Co. of Laurel, said E.J. Martinez, business development manager.

‘‘We couldn’t compete if we kept our wages at the minimum level,” Martinez said.

The minimum wage was last increased on the federal level in 1997. An hourly wage of $6.34 today would have the same buying power as $5.15 in 1997, according to the U.S. Department of Labor.

The General Assembly last year passed a bill to increase the minimum wage, but Gov. Robert L. Ehrlich Jr. (R) vetoed it. The Democratic-controlled legislature overrode the veto earlier this month.

In remarks last week during an Annapolis forum sponsored by the Maryland Chamber of Commerce, Ehrlich said business interests ‘‘don’t have the votes” in the General Assembly to keep laws such as the minimum-wage hike from passing.

When he vetoed the bill last year, Ehrlich said the measure would put Maryland businesses at a ‘‘competitive disadvantage when competing to attract and retain businesses,” as some nearby states have lower minimum wages. However, Washington, D.C., and 17 states besides Maryland have raised the minimum wage above $5.15 in recent years. The District set a $7 level, while Delaware’s is at $6.15.

Three neighboring states — Pennsylvania, Virginia and West Virginia – have held to the federal level. But the Pennsylvania governor and lieutenant governor recently called for lawmakers there to raise the minimum wage to $6.25, effective this month, and $7.15 in January 2007, according to news releases from the governor’s office.

State Senate President Thomas V. Mike Miller Jr. (D-Dist. 27) of Chesapeake said it was important to give the lowest-paid workers a raise, especially with increases in prices for food, housing, gasoline and other goods over the past decade. He disputed that increasing the minimum wage would harm businesses.

‘‘We haven’t passed a single bill that adversely affected” Maryland businesses, he said.

Economists differ on what impact raising the minimum wage has on jobs.

For example, the Employment Policies Institute of Washington says an increase cuts the number of jobs available for low-skilled workers. But another Washington think tank, the Economic Policy Institute, says the federal increase in 1997 did not result in lost jobs for this group.

The federal minimum wage today is only 32 percent of the average private-sector wage, the lowest since 31 percent in 1949, according to the Economic Policy Institute. The minimum wage was at 50 percent of the average private-sector wage in 1969 and 40 percent in 1998.

At a glance

*Number of U.S. states⁄ districts with a minimum wage higher than or the same as Maryland’s new one at $6.15 per hour: 18.

*Number of states with a minimum wage equal to federal standard of $5.15: 24.

*Number of states lower than federal standard: 8.

*Number of states with no minimum wage: 6 – Alabama, Arizona, Louisiana, Mississippi, Tennessee, South Carolina.

*State with highest minimum wage: Washington, $7.63.

Source: U.S. Department of Labor