BERLIN – A potential increase in Maryland’s minimum wage from the current $7.25 per hour to $10 per hour by 2013 could have a devastating effect on small businesses around the state struggling to stay afloat in the current economy, according to the area’s representatives in Annapolis, who said this week they would not likely support the proposed legislation.
Maryland Senate Majority leader Rob Garagiola (D-Montgomery) said this week he intends to introduce legislation that would incrementally increase the minimum wage in the state from the current $7.25 per hour to $10 per hour by 2013. Perhaps closer to home, the salaries of tipped workers, including restaurant servers, bartenders and bussers, for example, would increase from 50 percent of the minimum wage, as they are currently, to 70 percent over the same time period.
The intent is to put more money in the pockets of the state workers, which, in turn, would help stimulate the economy through increased consumer spending. According to the advocacy group Progressive Maryland, the minimum wage hike would affect 320,000 Marylanders now making minimum wage and result in $1 billion in new consumer spending.
However, local lawmakers view the proposed wage hike as another burden on small businesses struggling to stay afloat and simply make payroll during the current recession.
“They key to small business is stability,” said Senator Jim Mathias (D-38) this week. “Another increase in the minimum wage during this economic downturn could be devastating for many of our small businesses.”
Freshman Delegate Mike McDermott (R-38B) agreed the proposed minimum wage hike to $10 per hour, an increase of over 25 percent, in two years, could cripple local small businesses, particularly in resort areas that rely on a temporary, seasonal workforce.
“Can you imagine what that would do to Ocean City and all of those entry level and seasonal jobs?” he said. “That’s not a jobs creator, that’s a jobs killer.”
Mathias said the state is struggling with runaway unemployment figures and agreed increasing the mandatory wages for employees could have a counter effect to jobs creation.
“This could result in the loss of a lot of jobs,” he said. “Right now, there are a lot of people making nothing an hour and we need to get them back working an earning a wage. This appears to fly in the face of job creation.”
McDermott said increasing the minimum wage would have an adverse trickle-up effect for the pay scales for employers, creating greater problems for small businesses.
“Most small businesses couldn’t afford to pay their starting employees $10 an hour and that would drive up the salaries of experienced, trained employees even higher,” he said. “The people that have been working for a particular company for several years would have to be paid $15, $18 or $20 an hour if the entry level positions paid $10 an hour.”
He said while the intent was admirable, and did not entirely dismiss the potential economic stimulus provided by a better paid workforce, McDermott said the proposed minimum wage hike indicated some state lawmakers are out of touch with the difficulties facing many of Maryland’s small businesses.
“I appreciate trying to help people and that’s important, but this would be like adding another fee for small businesses,” he said. “I think it shows a real lack of understanding for what is going on in the real world. If you’ve been working in government for a long time, you’ve probably never signed a paycheck or filled out a payroll.”
For his part, Mathias said the private sector is better equipped to determine fair wages for its employees.
“I prefer to let the free market determine fair wages,” he said. “This sounds like a pretty dramatic increase to me and on the surface, I don’t think I could support it.”
According to Progressive Maryland, raising the minimum wage in the state is especially important in the current economic climate. With the recession hitting higher wage occupations such as construction and manufacturing, for example, more Maryland families are relying on lower wage service jobs to make ends meet. Even after the minimum wage was last increased in 2007, the current rate of $7.25 per hour has not kept pace with the increased cost of living. If the minimum wage was tied to the consumer price index, as the proposed bill would do, the minimum wage would already be at $10 per hour, according to Progressive Maryland.
Nonetheless, the Maryland Chamber of Commerce opposes the proposed wage hike and is encouraging state lawmakers to focus on ways to improve the state’s business climate, not harm it further.
“Small businesses in Maryland are facing enough challenges,” said Maryland Chamber President and CEO Kathy Snyder this week. “During difficult economic times, we shouldn’t be imposing additional costs onto small businesses that are already struggling.”