Minimum Wage Bill Freezes Tipped Workers At Current Level

BERLIN — As expected, state lawmakers this week passed legislation that will increase the minimum wage in Maryland by degrees over the next several years, but late amendments are expected to make the wage hike more palatable for local businesses.

The General Assembly on Monday passed the Maryland Minimum Wage Act of 2014, which will ultimately increase the state’s minimum wage to $10.10 per hour in phases over the next four years. The bill is now headed to Gov. Martin O’Malley for approval. O’Malley and ranking legislators made the minimum wage hike a priority this year and the bill passed despite fierce debate on a wide variety of issues.

“This year, we are building on this record of strengthening the middle class by raising Maryland’s minimum wage to $10.10,” said O’Malley this week. “We worked hard to bring people together and forge the consensus necessary to make this important progress possible. I commend the General Assembly for giving so many Marylanders the raise they deserve.”

The bill will increase the minimum wage for most state workers from the current $7.25 per hour to $10.10 per hour in increments phased in over the next four years. The original version called for an expedited increase to $10.10, but amendments attached to the legislation stretched out the incremental increases over four years.

In an issue near and dear to the resort area, with its glut of restaurants and hospitality-related businesses, the bill freezes the minimum wage for tipped employees at the current $3.63 per hour, or 50 percent of the current minimum wage. Some legislators wanted the minimum wage for tipped employees increased in kind, but the final version approved this week does not include an increase. Studies have shown tipped employees earn a considerable amount above the current minimum wage when their hourly rate and their tips are factored in. Nonetheless, employers are required to ensure tipped employees earn at least the minimum wage at times when business is slow during the offseason.

In addition, the legislation passed on Monday includes a training wage rate at 85 percent of the minimum wage for workers under the age of 20, which should be welcome news in a resort area whose seasonal workforce is made up largely of young workers and college students. Also, the bill allows amusement park workers to be paid at 85 percent of the minimum wage. The bill also exempts restaurants and other hospitality-related businesses that earn less than $400,000 each year.

The bill was widely lauded by many state and local officials for raising the take-home pay for many workers struggling to make ends meet at the current minimum wage. However, opponents argued the increase will put greater demands on small businesses struggling to just get by as the recession that started six or seven years ago continues to drag on. Maryland Attorney General Doug Gansler said the wage hike will help stimulate the economy by putting more money in the pockets of those struggling to get by at the current rate.

“Boosting the take-home pay for hard-working Maryland families will improve the economy of our state by putting more purchasing power where it can do the most good,” he said. “These are dollars that put food on the table, clothes on children’s backs and roofs over the heads of nearly 500,000 Maryland workers. Most of those who will benefit are women who need this pay hike to better provide for their families and the inclusion of a wage hike for developmental disability workers is a welcome bonus.”

Most Lower Shore lawmakers voted against the legislation, including Delegate Mike McDermott (R-38B), who attempted to get amendments attached during the House deliberations that would insulate many seasonal resort businesses. McDermott said the inclusion of a training wage was particularly troubling because many local employers will hire those under the age of 20 rather than their older counterparts competing for the same seasonal jobs.

“Basically, we got hosed,” he said. “It’s going to be a discrimination issue. When you have 19-year-olds competing for the same jobs as 20-year olds, employers are going to hire the 19-year-old because they can pay them less. It’s a volume thing. You’re going to see discrimination because in a place like Ocean City, there is a high volume of people in this age group competing for jobs.”

McDermott said the minimum wage increase is just another nail in the coffin for small businesses stressed by increased fees and other expenses.

“It reminds me of what they did with the gas tax,” he said. “There are going to be dates circled on the calendar when these mandated increases go into effect, making it more expensive each time for the small business owners. This is going to cost small business owners a lot more money at a time when most are already struggling just to get by.”

Senator Jim Mathias (D-38), who voted against the bill, agreed workers needed to be paid a sustainable wage, but also voiced concern about the impact of the legislation on small businesses in the resort and around the state.

“It’s a worrisome thing,” he said. “I see the balance and the need for our employees. At the same time, we need to make sure businesses can afford this without cutting jobs or eliminating jobs. The recession started around 2007 and the economy is still not very stable. It’s very unsettled locally and we have some of the highest unemployment rates in the state.”

Mathias said setting wage rates should be determined by the private sector business owners and that the market should continue to dictate the pay scale.

“We need to keep a solid small business base and allow employers to hire and sustain employees,” he said. “It should be up to the employers to determine a pay scale that fits their needs. In our area, it’s all about customer service and getting the best employees on the front lines. The best way to get those employees is to compensate them and most business owners understand that and pay accordingly.”

McDermott agreed for the most part, asserting raising the bar for the most basic on entry level jobs will have a trickle up effect for all employees. For example, if a dishwasher in a restaurant now has to be paid $10.10 per hour and the line cook working just 10 feet away now makes $12, that skilled employee can and should see his or her hourly rate increase in kind. McDermott said many in the General Assembly don’t understand the trickle up effect for small business owners.

“The pay scale is going to have to go up for all,” he said. “They either don’t know or don’t care about how this will affect small business. I don’t know which is worse. There are not a lot of people in the General Assembly that have ever had to sign the front of a paycheck, but it didn’t use to be that way.”

Mathias pointed out the hourly wage increase is just one segment of what small business owners have to pay for each employee. He said other contributions such as state and federal withholding and unemployment contributions along with healthcare contributions will be raised in kind.

“The hourly wage is only part of what the employer pays,” he said. “When you increase the wage, you increase the other contributions. When you factor in healthcare, it makes it difficult for a small business owner to pay for each employee and I’m concerned this will cost us jobs.”



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