OCEAN CITY – Tourism officials discussed this week the negative effects a proposed minimum wage increase would have on the summer resort.
During this week’s Tourism Commission meeting, a discussion evolved over Ocean City tourism officials’ opposition to the minimum wage bill that was brought before the Senate on Tuesday.
“There are five different bills being heard tomorrow, the Governors Minimum Wage Bill is the main one that everyone seems to be focusing on,” Executive Director Ocean City Hotel-Motel-Restaurant Association (HMRA) Susan Jones said.
Maryland’s minimum wage is currently $7.25 per hour. For tipped workers, such as waitresses, the minimum wage is lower at 50 percent of the full minimum wage, or $3.63 per hour.
The Minimum Wage Bill will incrementally raise Maryland’s minimum wage to $10.10 per hour by 2016, and at that time minimum wage will be based on the Consumer Price Index (CPI), so that it keeps pace with the rising cost of living.
The bill will also raise the minimum wage for tipped workers from 50 percent of the minimum wage to 70 percent.
“We wrote a letter against supporting that bill … and we talked a lot about the devastating effects,” Jones said. “We are not opposed to some sort of increase but it needs to be logical.”
Maryland Tourism Development Board Chairman Greg Shockley, who has the opportunity to discuss the minimum wage bill with Gov. Martin O’Malley, says the governor is looking to lift the economy with the bill.
The legislation aims to raise pay for more than 536,000 working Marylanders and inject approximately $492 million into Maryland’s economy and create an estimated 4,280 jobs.
“The bill was not thought out that well,” Shockley said. “After the hearings, it will be bombarded with amendments, and the CPI happens after the third year so once it achieves $10.10 it will be driven by the CPI in the fourth year, so if the CPI is two and half percent that year minimum wage increases two and half percent. It can only go up. It cannot go backwards.”
The tip credit is what was driven home during his conversation with O’Malley, Shockley said.
“It was somewhat educational for the governor,” he said. “Maryland has the highest tip credit now as is … so we are already paying a higher rate, and there is some hope he will lock in that rate and at most go to 50 percent. At 50 percent we would be paying servers $5.00 an hour.”
Shockley explained if the tip credit is 50 percent a standard $3 million operating restaurant would pay about a $58,000 increase to servers alone, plus at least a $10,000 increase to kitchen staff. If the tip credit is raised to 70 percent, a restaurant will pay about an $112,000 increase.
“The state average is about $15 to $17 an hour in tips for a server. The top end of that is if they don’t make minimum wage we [restaurant owners] have to pay taxes to bump up their wage to get them to minimum wage,” he said. “It is a rare occurrence for myself [Shockley owns Shenanigans Irish Pub] and probably 80 percent of the restaurants because most of the servers do hit that $3 minimum wage.”
Shockley furthered, if the minimum wage is raised to $10, the servers will have to make an additional $7 an hour to meet minimum wage, which is difficult to manage year-round working in a seasonal resort.
“It is not going to help the servers but he [O’Malley] listened to us, so we will see,” he said.
Michael James, Carousel Hotel and Resort managing partner and Ocean City Economic Development Committee (EDC) Chairman, pointed out Ocean City should be considered for some kind of exemption from the bill.
“The hit on Ocean City is going to be huge if we don’t get some kind of stratified legislation,” he said.
In Annapolis, State Senator Jim Mathias said there was a hearing on minimum wage bills in the House on Tuesday that lasted for six hours with a similar hearing set for the Senate on Thursday. From the beginning, Mathias has generally been opposed to a major overhaul of the state’s minimum wage structure because of its potential impacts on small businesses and seasonal businesses.
“I’ve been working with the leadership to make certain they understand how challenging this can be for small businesses,” he said. “The important thing to remember is this is not just the wage, but also the withholding. It can be an enormous burden on small businesses already struggling in this economy.”
Having been a small business owner on the Boardwalk for years, Mathias is well versed on the resort community’s concerns over the planned increase in wages.
“I understand the issue,” he said. “I bring a lot of small business experience to the table. I truly believe successful businesses want the brightest and the best, and they realize the pay has to be commensurate with that. I’m doing everything I can to convince them that a major increase in the minimum wage is not a great idea right now in this economy.”