House Hearing Today on Minimum Wage Bill that Will Benefit MD’s Workers and Economy

Later today, the House Economic Matters Committee will hold a hearing on legislation that would incrementally raise the minimum wage in Maryland to $10.10 per hour by 2016. The bill would also increase the tipped minimum wage from 50 percent to 70 percent of the full minimum wage. Doing so would provide an immediate benefit to hundreds of thousands of workers in Maryland and their families, as well as benefit Maryland’s economy overall.

As Maryland continues its slow recovery from the Great Recession, an increase in the minimum wage is needed to help workers’ earnings keep pace with a rising cost of living amid declining wages. This is particularly true for Maryland residents in the lowest 20 percent income bracket, where wages have declined by $1.24 per hour since 2009, according to a recent study by the Economic Policy Institute.

But the same study shows that raising the minimum wage would have a widely-shared, real impact on the earnings of Maryland workers. Because this legislation would raise the minimum wage incrementally over a three year period, these benefits would accrue progressively each year. In the first year of enactment, when the minimum wage in increased to $8.20, 257,000 workers would benefit either because their wage is directly increased or because employers are also likely to increase the wages of those making just above the minimum. In 2015, when the minimum increases to $9.15 per hour, 311,000 workers would benefit, while 455,000 workers would bring home higher paychecks when the minimum wage is increased to $10.10 per hour in 2016. In total, Maryland workers would receive $721 million in additional wages over the phase in period.

NUMBER OF MARYLAND WORKERS AFFECTED BY INCREASING THE MINIMUM WAGE TO $10.10 BY 2016

In thousands

Source: Economic Policy Institute

(Click to enlarge)

Further, the EPI study indicates that these benefits would go to a wide variety of working Marylanders. Far from the stereotype that most minimum wage workers are teenagers looking to make a little extra money, 86.7 percent of workers that would benefit from a minimum wage increase in Maryland are at least 20 years old, and 56 percent work full time. The average age of affected workers in Maryland is 33, while teenagers comprise only 13 percent of the workers who would see a raise. Nearly a quarter (23.2 percent) of Marylanders that earn the minimum wage are parents, and 58 percent are women. As a result of an increase in the state minimum wage, 210,000 children would benefit from at least one parent’s increased earnings.

While some might argue that increasing the minimum wage will lead to job losses as businesses cut back on employees and hours to make up for the need to pay workers more, evidence suggests that this is not the case.  Broad reviews of economic research on the relationship between the minimum wage and employment show that increasing the minimum wage either has no impact on employment, or a very small affect on employment that is eclipsed by the positive impact on workers and the economy that occurs when wages increase.

In this regard, increasing the minimum wage not only directly increases the earning of workers whose income is at or near the minimum wage, but will provide a needed boost to Maryland’s economy more broadly. Because low-wage workers are more likely to spend their increased earning on basic necessities, those who will benefit from an increase in the minimum wage are also likely to channel these benefits to the broader economy as well. This is supported by a recent study by the Federal Reserve Bank of Chicago, which shows that when the minimum wage is increased, households with at least one worker making the minimum wage increase their yearly spending.  This also means that these workers will spend their increased earnings locally. Increased wages would generate more than $456 million in new economic activity and would create or support 1,600 new jobs in Maryland as businesses expand to meet increased consumer demand, according to the Economic Policy Institute.

We have previously discussed how an increasing number of policy makers are joining the overwhelming sentiment among Maryland residents and the country as a whole that favors raising the minimum wage. State lawmakers should take advantage of the opportunity to increase the earning power of working Marylanders and benefit the state’s economy.