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Maryland elected officials continue to live in a vacuum where artificial wage hikes don’t hurt the economy. Baltimore City Delegates are moving toward killing off the state economy once and for all by seeking to perpetually raise the minimum wage:
Baltimore’s delegation leaders said Thursday that raising the state’s minimum wage by nearly $3 an hour will be the city’s top issue of next General Assembly session.
“This is going to be our new strongest priority,” said Del. Curt Anderson, chairman of the city’s delegation at a news conference at City Hall. The state’s minimum wage has been set at $7.25 per hour since 2009. That means minimum-wage workers earn about $15,000 a year for full-time, year-round work.
It isn’t just delegates who are on board with this, either:
State Senate President Thomas V. “Mike” Miller said Thursday that “it’s time” to raise the state’s minimum wage. He said the measure might be tied to a cut in the corporate income tax rate. Mayor Stephanie Rawlings-Blake said she, Gov. Martin O’Malley and leading Democrat contenders for governor back the hike.
Using data drawn from the March Current Population Survey, we find that state and federal minimum wage increases between 2003 and 2007 had no effect on state poverty rates. When we then simulate the effects of a proposed federal minimum wage increase from $7.25 to $9.50 per hour, we find that such an increase will be even more poorly targeted to the working poor than was the last federal increase from $5.15 to $7.25 per hour. Assuming no negative employment effects, only 11.3% of workers who will gain live in poor households, compared to 15.8% from the last increase. When we allow for negative employment effects, we find that the working poor face a disproportionate share of the job losses.
A further issue with raising the minimum wage is what’s called wage compression:
Simply put, wage compression occurs within a company when the newer (or lesser skilled) workers’ wages rise and the wages of existing (or more experienced) workers don’t. The result is newer (or lesser skilled) workers being paid as much, or nearly as much, as existing or more skilled workers–creating wage compression and what kind of problems a 24% increase at the bottom will cause within a companies’ compensation plans throughout the U.S.
In some cases, if newer (or lesser skilled) workers’ wages are raised above existing (or more skilled) workers, then there is wage inequity.
In either of the above cases–wage compression or wage inequity–when they occur, it creates tremendous problems within a company.
In most cases, it reduces morale, making existing (or more skilled) employees angry that newer or lower-skilled workers are making nearly as much or, in some cases, more than they are.
The net result of wage compression, for employees is going to create a higher expectation of productivity for lower-skilled workers, while higher-skilled but higher paid workers will be let go from the company in order to stabilize revenues and maintain profits. And that exposes the minimum wage proposal as a political tool; creating higher wages for lower-paid workers who are more likely to vote Democrat at the expense of higher-earning workers more likely to vote Republican.
This doesn’t even take into account the cost to state and local governments. Preliminary research shows that the number of state and local government employees who make minimum wage is hard to come by, but the state of Maryland maintains a list of positions that falls under this requirement and it wouldn’t take much imagination to realize that the number of interns and seasonal employees employed by state and local governments at below the proposed new wage would be significant.
Tags: business climate, jobs, Maryland Taxes, minimum wage
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