HHS Item 1
December 7, 2016
Worksession 3
MEMORANDUM
December 5, 2016
TO:
FROM:
Health and Human Services COf\mm'tte
Josh Hamlin, Legislative Attorn .
Gene Smith, Legislative Analys
SUBJECT:
Worksession 3:
Bill 12-16, Human Rights and Civil Liberties - County Minimum
Wage - Amount - Annual Adjustment
Bill 12-16, Human Rights and Civil Liberties - County Minimum Wage - Annual
Adjustment, sponsored by Lead Sponsor Councilmember EIrich, and Co-Sponsors
Councilmembers Leventhal, Riemer, Navarro and Hucker, was introduced on April 12. A public
hearing on the Bill was held on June 21 and Health and Human Services Committee worksessions
were held on July 11 and July 18,2016.
Bill 12-16 would:
increase the County minimum wage by a certain amount;
require the Chief Administrative Officer to adjust the County minimum wage rate
each year; and
generally amend the laws governing the minimum wage
Background
In 2013, the Council enacted Bil127-13,1 which established a County minimum wage for
private sector employees working in the County, unless the State or federal minimum wage is
higher. The County minimum wage established under Bi1l27-13, as amended, is phased in over
several years. The rate was set at $8.40 per hour effective October 1,2014, and increased to $9.55
per hour on October 1, 2015.
It
is $10.75 as of July 1 of this year, and will go to $11.50 per hour
on July 1,2017. The County minimum wage does not apply to a worker who is exempt from the
State or federal minimum wage, is under the age of 19 years and is employed no more than 20
hours per week, or subject to an "opportunity wage" under the State or federal law. Employers of
tipped employees may include
in
the computation of their wage amount a "tip credit" not
exceeding the County minimum wage less $4.00 per hour.
In 2014, the Maryland General Assembly enacted a law raising the State's minimum wage
from $7.25 to $10.10 per hour over four years, with incremental increases to $8.25 in 2015, $8.75
in 2016, $9.25 in 2017, and $10.10 in 2018. The federal minimum wage is $7.25 hour and has not
The County minimum wage law has been amended twice since being established by Bill 27-13. BillS9-14
modified some ofthe effective dates for increases, and B
ill
24-1S modified the method for calculating the "tip
credit" allowed to employers of tipped employees.
I
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changed since 2009.
2
There is a nationwide effort to increase the minimum wage at the federal,
state, and local levels to $15 per hour, which has thus far had some success.
3
California and New
York
4
have enacted statewide laws that will increase the minimum wage for at least some workers
to $15 per hour over a period of years. In the November 2016 election, voters in Maine, Arizona,
and Colorado all voted to increase the minimum wage to $12 an hour by 2020, and Washington
State voters approved a raise to $13.50 an hour by that year. Also in Arizona, voters in the city of
Flagstaff approved an additional minimum wage initiative to increase the minimum wage in
Flagstatrto $15.00 an hour in 2021 and index the minimum wage to increases in cost-of-living
thereafter.
The New Jersey legislature passed a bill increasing the minimum wage there to $15 per
hour, but the bill was vetoed by Governor Chris Christie. s The Massachusetts legislature is
weighing a measure to increase the minimum wage to $15 per hour for some or all workers.
6
In
this region, the District of Columbia enacted a law increasing the minimum wage to $15 per hour
earlier this year, and Baltimore City is currently considering a similar bill.
State laws:
Under California's new law,
7
beginning January 1, 2017, the minimum wage for employers
with at least 26 employees will increase annually until it reaches $15 per hour by January 1,2022:
• January 1,2017 through December 31, 2017: $10.50 per hour;
• January 1,2018 through December 31,2018: $11 per hour;
• January 1, 2019 through December 31,2019: $12 per hour;
• January 1, 2020 through December 31, 2020: $13 per hour;
• January 1,2021 through December 31,2021: $14 per hour; and
• Beginning January 1,2022: $15 per hour.
For employers in California who employ 25 or fewer employees, the same phased increases
begin a year later, in 2018, and culminate in a $15 per hour minimum wage beginning January 1,
2023. The minimum wage will then be indexed annually for inflation (national CPI) beginning the
first January 1 after small businesses are at $15 per hour. The indexing may result in increases of
o
percent (but no decreases) with a ceiling of 3.5 percent per year. The law also includes so-called
"off-ramp" provisions that allows the governor to pause any scheduled increase for one year if
certain economy or budget conditions are met.
8
Once the $15 per hour minimum wage has been
reached, the "off-ramp" provision expires.
A chart showing the federal minimum wage rates from 1938-2009 is at
http://www.dol.gov/whdlminwagelchal1.htm
3
A
summary ofjurisdictions approving some form of$15 minimum wage is at
2
hlli?j!w!ywJlelMrgL~Q!.1te!!tf!!l2!m!.dslpR-Minimurn- Wa~:'year-EJ)d-15.pdf
In March 2016, the Center on Wage and Employment Dynamics (CWED) prepared a Policy Brief examining
potential impacts of a $] 5 per hour minimum wage in New York. That Policy Brief can be accessed at:
http://irle.berke\ey.edu/cwedlbriefs/2016-0I.pdf
5
http://www.nj.comipolitics/index.ssf/20 16/08/chlistie vetoes democrats 15
an
hour minimum wage.html
4
6
http;.lL~,!,w_w.rnetrowestd_'illyne2Y.~.con11sutjc'e!20 16J)60~LNEWS/160607750
71LI1Q.~I/leginfo.l~.§latL1re..:ca.gov/f~cesl~illNavCIient.xhtml?bi11 id=2m~.Ql@SB3
8
Economy conditions:
the Governor has the ability to pause an increase if seasonally adjusted statewide job growth
for either the prior 3 or 6 months is negative and
retail
sales receipts for the prior 12 months is negative.
Budget conditions:
The Governor has the ability to pause an increase if any year from the current budget year to 2
additional years is forecasted to be
in
"deficit" when including the next scheduled increase. A "deficit" is if the
2
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The New York law, enacted as part of the State's budget, does the following:
• For workers in New York City employed by large businesses (those with at least 11
employees), the minimum wage would rise to $11 at the end of2016, then another $2 each
year after, reaching $15 on
12/3112018.
• For workers in New York City employed by small businesses (those with 10 employees or
fewer), the minimum wage would rise to $10.50 by the end of 2016, then another $1.50
each year after, reaching $15 on
12/3112019.
• For workers in Suburban New York City (Nassau, Suffolk and Westchester Counties), the
minimum wage would increase to $10 at the end of2016, then $1 each year after, reaching
$15 on
12/3112021.
• For workers in the rest of the State, the minimum wage would increase to $9.70 at the end
of2016, then another 70 cents each year after until reaching $12.50 on
12/31/2020
-
after
which it will continue to increase to $15 on an indexed schedule to be set by the Director
ofthe Division of Budget (DOB) in consultation with the Department of Labor.
• Beginning in 2019, the State DO B Director will conduct an annual analysis ofthe economy
in each region and the effect of the minimum wage increases statewide to determine
whether a temporary suspension of the scheduled increases is necessary.
Minimum wage legislation in the region:
The District of Columbia enacted a law in June increasing the minimum wage to $15 by
2020. The law passed unanimously, and was signed by Mayor Muriel Bowser on June 27.
It
would
raise the District of Columbia minimum wage - currently $11.50 - in annual increments until it
reaches $15.00 by July 1, 2020. Beginning on July 1, 2021, the minimum wage will increase
further based on the increase in the Consumer Price Index for All Urban Consumers for the
Washington Metropolitan Statistical Area. The DC bill will also increase the tipped minimum
wage from the existing $2.77 per hour, where it has been since 2005, in annual increments of 56
cents (55 cents in 2020) to $5.00 on July 1,2020, again with annual indexing in successive years.
9
The City Council of Baltimore is considering a bill that would raise the City's existing
minimum wage of$8.25 per hour to $10 in January 2017, and then by $1.50 a year until it reaches
$15 by 2020.
10
After reaching $15 per hour, the minimum wage will be adjusted each year to
match increases in the cost ofliving using the Consumer Price Index for Urban Wage Earners and
Clerical Workers (CPI-W). The Baltimore Bill also includes the gradual elimination of the lower
minimum wage for tipped employees (often called the "sub-minimum"), so that by July 2025,
employers would be required to pay tipped employees the full minimum wage. The bill would
phase-out the sub-minimum wage for tipped employees by increasing it from the current sub­
minimum wage (under Maryland law) of $3.63 per hour as follows:
• January 1,2017: $4.50 per hour
• July 1,2017: $5.25 per hour
• July 1, 2018: $6.00 per hour
operating reserve is projected to be negative by more than 1 percent of annual revenues, currently about $1.2 billion.
The budget off-ramp can only be used twice.
9
http://lims.dccouncil.us/Legislation/B21-07
J
2?FromSearchResults=true
10
https:llbaitimore.legistar.comlLegislationDetail.aspx?ID=2692688&GUID=FOB89A4C-DD59-42FF-B459­
5B40DD8E8391 &Options=ID%7CText%7C&Search=minimum+wage
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July 1,2019: $7.50 per hour
July 1,2020: $9.00 per hour
July 1, 2021: $10.50 per hour
July 1,2022: $12.00 per hour
July 1,2023: $14.00 per hour
July 1,2024: $15.00 per hour
July 1,2025 and thereafter: Full minimum wage
The Baltimore bill would also eliminate some exemptions under the City's existing law, and amend
the enforcement provisions of the law. The bill was substantially amended in Committee,
including extending the period of increases to reach $15 per hour in 2022, and exempting certain
businesses. The amended bill went to the full City Council, but did not have the eight votes needed
to pass. It was sent back to committee, but is expected to be considered again after the new City
Council is seated.
1I
Bill 12-16
Bill 12-16 would extend the incremental increases set in County law to go up to $15 per
hour effective July 1, 2020. Under the Bill's transition provisions, the County minimum wage
would increase to $12.50 in 2018, $13.75 in 2019, and $15.00 in 2020. Additionally, the Bill
would require, beginning in 2021, annual adjustments to the minimum wage by the annual average
increase, ifany, in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI­
W)
for the previous calendar year.
Legal Authority
Montgomery County can set its own minimum wage by law even though the State of
Maryland has a minimum wage law. In
City of Baltimore
v.
Sitnick,
254 Md. 303 (1969), the
Maryland Court of Appeals upheld a city ordinance establishing a minimum wage standard that
was higher than the State standard.
In
that case, the plaintiffs argued that State law had preempted
the field of minimum wage. In rejecting that argument, the Court held that the City of Baltimore
could pass its own minimum wage law based on the city's exercise of concurrent power because
the city law did not conflict with the State law.
Fiscal and Economic Impact
The OMB and Finance Fiscal and Economic Impact statement is at ©5-12. OMB estimates
a total fiscal impact in fiscal years 2018 through 2022 of $6,483,575. This estimate is based on
pay increases to employees on the minimum wage/seasonal salary schedule, assuming the current
number of hours worked by affected employees. The Office of Finance notes that "there is no
consensus among economists on the effects ofthe minimum wage on enforcement," and concludes
that it is uncertain whether increasing the minimum wage would either increase or decrease
employment among low-wage workers.
II
hrrp:llwww.baltimoresun.com/news/marv!and/baltimore-city/bs-md-d-millimum-wage-final-vote-20 160815­
4
story.html
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Public Hearing
Forty-one people testified at the June 21 hearing, presenting a number of perspectives on
the Bill. The Bill's supporters pointed out that the cost of living in Montgomery County is high,
with a family of four needing $79,000 per year to independently maintain a modest standard of
living (see ©13-14, SEIU and ©15-16, Community Action Board). Several supporters also
requested an amendment to the Bill to increase wages paid by employers to tipped employees (see
©17-18, Progressive Maryland and ©19-20, UFCW1994). Supporters also said that increasing
the minimum wage results in benefits for business, such as increased employee retention and
productivity, which offset the additional fiscal burden (see ©21-23, AFL-CIO).
The Council heard from workers making at or near minimum wage and advocates of the
positive effects of an increase in workers' lives (for example, see ©24-25, (Felix Kala), ©26,
(Mekdes Sisay), and ©27-28, (CASA». The benefit of increased money earned through higher
wages circulating in the local economy was also cited in support ofthe Bill (see ©29, Boaz Young­
EI)
Opponents questioned whether it is necessary to legislate now a series of increases that
would not begin until 2018 (see ©30-33, GGCC). Others questioned the adequacy of the Fiscal
Impact Statement's estimate of the costs of an increase to the County (see ©34-35, GBCC). The
Council heard from a small business employing home health aides
to
provide in-home care to
seniors that rising labor costs would burden the business and result in seniors not getting needed
care (see ©36-37, Wendy Johnson). The disproportionate impact of minimum wage increases on
small businesses and young workers were also raised in opposition to the Bill (see ©38-39, Stacey
Brown). Emily Bruno of Denizens Brewing Co. said the implementation of a $15 minimum wage
would particularly threaten the viability of new businesses (©40-43).
The Maryland Restaurant Association said that the Bill would lead to the elimination of
jobs in the restaurant industry (©44-45). Potential adverse effects on the regional competiveness
of County businesses, and the cumulative impact of other worker protection mandates were also
issues of concern (see ©46-49, MCCC). Another issue raised by opponents ofthe Bill was ''wage
compression," which occurs when lower-paid workers' (those making below a newly increased
minimum) wages rise and the wages of workers paid at or above the new minimum do not. Jane
Redicker of the Greater Silver Spring Chamber of Commerce pointed out that "increasing the
minimum wage does not just impact those making minimum wage; it effects the entire salary
structure." (©50-51) Afshin Abedi indicated that certain health care businesses could not pass on
additional labor costs to consumers, because they are prohibited from charging Medicaid patients
for services (©52-53).
Members of the County's nonprofit community pointed out that minimum wage increases
would present a challenge to delivering the current level of service when State and local funding
does not increase to cover additional costs. Brigid Howe ofNonprofit Montgomery said that "the
choice between providing care to our most vulnerable neighbors and raising wages is a difficult
one." (©54-55) The Montgomery Coalition for the Homeless offered support for the Bill, but
indicated that this support is based on the assumption that the County would supply the $200,000
annual increase in labor costs (©56). Tim Wiens of Montgomery County Inter
ACCIDD
said that
the organization shares the goal of the Bill, but estimated $20,558,048 in increased annual labor
costs as a result of going from the $11.50 per hour minimum wage slated to take effect in 2017 to
$15 per hour in 2020 as proposed in the Bill ©57-59).
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Prior HHS Committee Worksession Discussion
The HHS Committee held two worksessions on the Bill, on July 11 and July 18, and
considered many issues related to continuing to increase the County minimum wage. The
Committee and other Councilmembers requested that staff research some matters further and
provide additional information for the Committee's consideration. The issues considered in the
earlier worksessions are below, and additional infonnation requested during these worksessions is
presented in the next section of this memorandum, beginning on page 20.
1.
Is there a need to enact this Bill quickly?
As mentioned above, by Bill 27-13, the Council created the County minimum wage and
provided for the wage to be phased in over a period ofyears. The County minimum wage is $10.75
on July 1 ofthis year, and under the provisions of Bill 27-13, as amended by Bill 59-14, will go to
$11.50 per hour on July 1,2017. This Bill would continue these annual increases in the minimum
wage, beginning on July 1, 2018 and going through 2020, when the County minimum wage would
reach $15 per hour, with increases indexed to inflation thereafter.
Because the first increase proposed in Bill 12-16 would not take effect for almost two years,
the Council does have time to consider the possible impacts of the increases before deciding
whether to enact the Bill. While giving notice well in advance of increases may be helpful for
businesses in planning their expenses for future years, the Council heard from several members of
the business community at the public hearing questioning the need to enact the Bill quickly without
careful consideration of its ramifications to County businesses. In any event, the Bill has been
introduced, and has five co-sponsors, so County businesses are certainly on notice that further
increases in the County minimum wage are possible.
It
is true that the District of Columbia, one of the County's "regional partners" in
implementing the minimum wage in 2013,12 has already enacted a law that will provide for future
increases in its minimum wage to $15 per hour by 2020. However, there are two key distinctions
between the circumstances in the District and those in the County. First, under the District's 2013
law, the last increase in the minimum wage took effect on July 1 of this year, making the DC
minimum wage $11.50 per hour. In this regard, the District was in the position that the County
will be in one year from now. Also, a ballot initiative likely to be voted on this fall would have
increased the minimum wage to $15 per hour by 2020, and eliminated, by 2025, the reduced
minimum wage that employers are required to pay tipped employees. The County does not face
that outside pressure to act.
The move to a $15 per hour minimum wage is certainly gaining momentum nationwide,
with several large cities, as well as the states of California and New York implementing increases
to reach $15 over different periods ofyears. However, aside from SeaTac, Washington, population
27,875, no jurisdiction
has
yet reached that goal. The Council has the opportunity to carefully
consider a number of issues related to further increases without delaying any such increases. While
it is unlikely that this consideration will provide a certain, definitive path forward, it is nonetheless
Council Chair Derrick Leon Davis of Prince George's County, the other "regional partner" in 2013, has indicated
that
it
is unlikely that Prince George's
will
be providing for further increases at this time.
See:
https:l/www.washin gtonpost com/locaVmd-politics/this-large-dc-suburb-w ill-consider-a-15-an-hour-minim um­
wage!20
16/03/31
/cfc0806a-t7
41-11
e5-a3ce-fD6b5ba2
J
£33 story.htm1
12
6
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worth taking the time to evaluate, as well as possible under the County's specific circumstances,
what effects further minimum wage increases might have.
2.
What is the rationale for a $15 per hour minimum wage?
The federal minimum wage was introduced in 1938, and throughout its history, has not
been considered a "living wage." Increasing the County's minimum wage would move it closer
to being a "living wage,,,13 but given the cost of living in Montgomery County, independently
maintaining even a modest standard of living on 40 hours a week at $15 per hour would be
challenging, ifnot impossible.
In
fact, the
20J
2 Self-Sufficiency Standard, representing the annual
income required for a family of three (one adult, one preschooler, and one school-aged child) to
live in Montgomery County without financial assistance, was $ 77,933. 14 Across the nation there
has been an increasingly prevalent view that there is a need to guarantee a living wage, due to the
shift in the economy away from mid-wage labor to low-wage labor. 15 This view is reflected in the
draft 2016 platform for the Democratic Party, which includes a $15 federal minimum wage. 16
Increasing the minimum wage would benefit working adults. According the most recent
U.S. Bureau of Labor Statistics data (2014),51.1% of workers making at or below the federal
minimum wage were age 25 and older.
In
contrast, only 21.4 of these workers were between the
ages of 16-19. 17 Increasing the minimum wage would also benefit a significant number ofwomen,
whose employment is highly concentrated in low-wage personal care and healthcare support
occupations. According to a 2014 White House report, "women account for more than half (55
percent) ofall workers who would benefit from increasing the federal minimum wage to $10.10.,,18
It
stands to reason, then, women would represent as large, and probably a larger, proportion of the
beneficiaries of increasing the County minimum wage to $15.00 per hour.
The argument for increasing the minimum wage to $15 per hour posits that the increase
would boost the economy by putting more money into the hands of workers who would spend it.
This boost would offset increased labor costs to business, thereby reducingjob losses or mitigating
losses with the creation ofnew jobS. 19 Another rationale offered to support increasing the minimum
wage is that it would reduce reliance on public assistance programs. In economic research, low
wages have consistently been the leading predictor of emolIment in public assistance programs by
working families.
20
The County has a living wage law, applying to County contractors, which requires them to pay their employees at
least $14.47 per hour. This amount is adjusted every year based on the increase in the CPI-U.
14
http://www.IUontgomeryplanning.org/research/housing/rental housing studv/documents/MD 12-SSS-Final-Print­
012412.pdf
15
h!t:ps:llv-.ww. washingtonpost.comJnews/wonklwp/2QJ 3
102/2
8/Q.ow-the-rec~ssion-tumed-m
iddle-c1ass-iobs-into­
low-wage-jobsl
l6
The
draft
reads "Democrats believe that the current minimum wage is a starvation wage and must be increased to a
living wage. No one who works full time should have to raise a family in poverty. We believe that Americans should
earn at least $15 an hour and have the right to form or join a union," See: http://www.poJitico.com/stO!:y/2016!07/dnc­
13
platfom:t..::.cjraft-22~JH.Q
17
.!:t.11P.../Iwww.bls.goyLQ,Rgb/rtm0rts!minimum-wage/archive!characteristics-of-min
imum-wage-workers-20 14.p-df
18
https:i/www.
wh itehouse.gov/sites!defauIt/files/docs/20
J
40325minimmnwageandwomenreportfmal. pdf
http://raisetheminimuIUwage.org/pages/stimulus
20
See pages 14-15 of
Local Minimum Wage Laws: Impacts on Workers, Families and Businesses
at
http://murray.seattle.gov/wp-content/up)oads/2014/03/UC-Berkeley-UAC-Report-3-20-2014.pdf
19
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The reasons identified above are offered in support of minimum wage increases generally.
The appropriate amount of a local minimum wage is another question. From 1960 to 1979, the
federal minimum wage averaged 48% of the national median hourly wage, according to a recent
Brookings Institution paper
(Designing Thoughtful Minimum Wage Policies at the State and Local
Levels,
by Arindrajit Dube) (©60-72). Dube proposes using half ofthe local-area median wage as
the starting point in setting an appropriate level for a local minimum wage, and then taking into
account the local cost of living as a relevant consideration. In his paper he suggests that the
appropriate level for a minimum wage in Maryland is between $10.85 and $11.69 per hour (in
2014$), and that the appropriate level for a minimum wage in the DC Metropolitan Statistical Area
is between $11.73 and $13.51 per hour (in 2014$).
As with almost all aspects of the debate about the minimum wage, however, there is not
consensus among experts. Economist Harry Holzer, in considering the then-proposed $15
minimum wage in the District of Columbia, cautioned that an increase ofthat magnitude may have
negative consequences for workers.
21
Holzer expressed particular concern that setting the
minimum wage at $15 would create incentives for businesses to move across local borders due to
substantial differences in local minimum wages within the region.
3.
How might the economy absorb an increase in the minimum wage to $15 per hour?
The information in this section is taken directly from the packet from Bill 27-13.2
2
It
provides a useful background and is equally applicable to the consideration of further increases in
the County minimum wage to $15 per hour.
Some labor economists perceive that there is monopsonistic competition in the low-skill,
low-wage labor market-the buyer (employer) has a disproportionate amount of power in the
market for low-wage, low-skilllabor.
23
Governments respond to this imperfect market by requiring
employers to pay minimum wages-the results of which may include increased employment (by
increasing an individual worker's incentive to work), increased economic activity, and reduced
poverty. Other economists argue that the labor market is competitive, and that government
interference in the labor market harms both employers and employees by requiring employers to
pay a wage that exceeds the marginal value of labor. These economists argue that the minimum
wage thereby results in reduced demand for labor, leading to reduced employment.
The following is a summary of the economic channels through which an increase in the
minimum wage might flow:
Earnings:
Hourly wages for individual employees earning below the new minimum wage
would increase. Increasing the wage in 2018 from $11.50 to $12.50 would clearly increase the
hourly wage of workers earning $11.50 by $1.00
(t
8.7%). Employers may respond to changes in
http://''vww .brookin gs.eduJresearch/op iniolls/20
15/071
15-dollar-minimum-wage-harm-economy-ho lzer
22
A review of the entire packet for Bill 27-13 provides additional background. The packet can
be
accessed here:
http://www
.montgomerycountymd.gov/COUNCI L/Resources/Fileslbi
11/20
13/Packetsi20131126 7.pdf
23
If you tuned out at
monopsonistic
here is the short version: whereas in a monopoly a very small number of sellers
enters a market place with many buyers, in a monopsony a very small number of buyers enters a market place with
many sellers. In the low-wage, low-skill labor market there
are
many more or less interchangeable sellers of labor
(potential workers), and relatively few buyers (employers). That under some circumstances employers have an
advantage in this marketplace is an idea that is older than West Virginia-John
stuart
Mill
first opined on this topic
in 1848.
21
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the minimum wage by reducing the hours of their employees-ifwages are increased by 8.7% and
hours are reduced by 8.7% then the employee will not experience an increase in earnings.
Wage compression:
While it is easy to calculate the increase in hourly wage for a worker
earning the minimum wage, it is less clear what effect an increase in the minimum wage would
have on those workers currently earning $12.25 Gust below the 2018 minimum wage) or $12.75
Gust above the 2018 minimum wage). Employers required to pay a higher minimum wage may
compress wages for workers earning above the minimum wage. In their study of the impacts of
the 2007-2009 increases in the Federal minimum wage on restaurants in Georgia and Alabama,
Hirsch, Kaufman and Zelenska found that almost half of the employers that they interviewed said
that they would delay or limit pay increases or bonus pay for more experienced employees as a
result of the increase in the Federal minimum wage.
24
Broad empirical studies of US economic
data have also indicated that the minimum wage compresses wage distribution (see, e.g. DiNardo,
Fortin, and Lemieux 1996).25
Employment:
There is substantial disagreement among labor economists with respect to
the economic and employment impacts of a minimum wage. For example, one think
tank
(the
Economic Policy Institute) projected that the 2013 Harkin-Miller proposal-to increase the
Federal minimum wage to $10.10 per hour-would increase total employment in Maryland by
2,000 FTEs.26 Another think
tank
(the Employment Policies Institute) projected that the 2012
Harkin-Miller proposal-to increase the Federal minimum wage to $9.80 per hour-would reduce
total employment in Maryland by approximately 3,800 to 11,500 jobs.
27
Teen employment:
Neumark and Wascher observed that past studies of the impacts of the
minimum wage found that employers respond to an increase in the minimum wage by decreasing
employment of younger workers.2
8
Critics of Neumark and Wascher's work tend to point to the
subjectivity involved in selecting which studies to include in the analysis, and to the fact that many
of the studies involved were measuring the effect of a statutory minimum wage in the UK rather
than in the US. A different 2009 meta-study of 64 minimum wage studies published between 1972
and 2007 tried to measure the impact of minimum wages on teenage employment. The authors
(Doucouliagos and Stanley) graphed employment estimates and found that the most precise
estimates were heavily clustered at or near zero effects on teen employment.
29
Worliforce composition:
Allegretto, Dube and Reich (2011), in their study of employment
from 1990-2009, found no statistically significant effect ofthe minimum wage on teens as a whole
or on white, black, or Latino teens.
30
In a separate study, Dube, Lester and Reich (2012) found no
Minimum wage channels ofa4iustment.
IZA DP 6132.
b.!!P-://www2.gsu.edul--ecobthlIZA
HKZ MinWageCQA
dJ?6132.pdf
2S
Labor market institutions and the distribution ofwages:
1973-1992.
24
http://www-personal.umich.edul-jdinardo/Pubs/dfl1996.pdf
26
Raising the minimum wage to
$
1
0.10 would give workingfamiles, and the overall economy, a much needed boost.
http://www.epi.orglpublication/bp357-federal-minimurn-wage-increasel
27
The impact ofa $9.80 Federal minimum wage.
hnru1!WFW
c.e..v.ionline.o!.!:1.wp-conte!!!!uploads/20
14/07lEPI
Thelmpactof9S0FederalMinimum Wage.pdf
28
Minimum wages and employment.
IZA DP No. 2570. h!!p:/lftp.iza.orgldp2570.pdf
29
Publication selection bias in minimum wage research: A meta-regression analysis.
http://onlinelibrary.wiJey.com/doiJlO.lll1/j.1467-8543.2009.00723.xlfull
30
Do minimum wages really reduce teen employment? Accountingfor heterogeneity and selectivity in state panel
data.
http://wwwjrle.berkelev.edu/workingpapers/J 66·0S.pdf
9
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evidence that employers changed the age or gender composition ofthe workforce in the restaurant
sector in response to changes in the minimum wage.
31
Efficiency:
While the direct quantifiable evidence is sparse, Hirsch, Kaufman and Zelenska
found in their interviews with restaurant managers in Georgia and Alabama that about 90% of
managers planned to respond to the minimum wage increase with increased performance standards
(requiring better attendance and punctuality, raising productivity expectations, faster termination
of poor performers, etc.).
Turnover:
Typically the turnover rate among low-wage employees is high and the cost to
employers is high (in recruitment/screening costs, training, lost efficiency). Turnover is reduced
when wages are higher. The savings that accrue to the employer as a result of reduced turnover
may offset a portion of the cost of the wage increase. Dube, Lester, and Reich used a contiguous
counties approach to study the effect of differences in minimum wages on teens and restaurant
employees across US counties. They find "evidence that separations, new hires, and turnover rates
for teens and restaurant workers fall substantially following a minimum wage increase."
Motivation:
A higher minimum wage may motivate workers to work harder independent
of any actions by employers to improve productivity. Because higher pay increases the cost to
workers oflosing their job, workers may work harder (increase productivity) to keep their job.
Non-wage benefits:
Most low-wage workers receive few non-wage benefits. Card and
Krueger, in their seminal study of the labor market behavior of restaurants in response to an
increase in New Jersey's minimum wage in the 1990s, observed that the non-wage benefit most
frequently offered was free or reduced price meals.
32
Their study indicated that restaurants did not
respond to an increase in the minimum wage by changing their free or reduced price meal benefits.
A more recent study by Simon and Kaestner (2004) found small or no effect on non-wage
benefits.
33
Training:
There is no conclusive empirical evidence that an increase in the minimum wage
affects the amount of training that employees receive or the amount that employers expend on
training. Neumark and Wascher tend to find negative effects of minimum wages on training, but
they acknowledge that most other recent research finds no evidence ofan effect. Some economists
have the perspective that employers might respond to an increase in the minimum wage by
increasing training (i.e., to raise productivity to a level befitting the new higher wage).
Increased demand:
The minimum wage has the effect of transferring income from
employers, who generally have a high savings rate, to employees, who generally have a low
savings rate. This transfer could spur additional consumer spending, with the result being an
increase in GDP and employment.
Pricing:
Some employers might choose to increase prices in response to an increase in the
minimum wage. One review of studies (Lemos, 2008) concluded that "most studies
31
Minimum Wage Effects Across State Borders: Estimates Using Contiguous Counties.
Minimum wages and employment: A case study ofthefastfood industry in New Jersey and Pennsylvania.
http;/!~scliolarship.org!uc!j.temi86w5m90m#page-l
32
http://davidcard.berkeley.edu/papers/njmin-aer.pdf
33
Do minimum wages affect non-wage job attributes? Evidence on fringe benefits and working conditions. NBER
Working Paper
9688. bttp://www.nber.org/papers/w9688
10
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reviewed... found that a 10% US minimum wage increase raises food prices by no more than 4%
and overall prices by no more than 0.4%."34 Other studies have reached different conclusions­
for example, Dube, Naidu and Reich found that prices "increased significantly" at fast food
restaurants, but not at table service restaurants. 35
Profits:
Firms could accept reduced profits in response to an increase in the minimum
wage. There has been very little study ofthis in the United States, though a study of the impact of
a British minimum wage law found that profitability was negatively affected by introduction of a
mllllmum wage.
4.
Which occupations are most likely to be affected by an increase in Montgomery
County's minimum wage?
In 2015, more than 143,000 workers in Montgomery and Frederick counties earned less
than $13.59 (the 25
th
percentile wage in the Silver Spring-Frederick-Rockville Metropolitan
Division).36
In
total, there are 89 occupations with median wages of$15/hour or less and average
wages of $ 16/hour or less. Total employment in those occupations is nearly 150,000. Four broad
occupational categories have average hourly wages that are below $16 per hour: healthcare
support; personal care and service; building and grounds cleaning and maintenance; and food
preparation
and
serving. The median hourly wage in each category is below $15/hour in 2015,
meaning at least half of the workers in each broad/major occupational category would be directly
affected by setting the minimum wage at $15/hour.
In
total, there are more than 100,000 workers
employed in these occupational categories in the Metropolitan Division (or 17.7% of total
employees). Of course, employees in other occupations will also be affected, though in many of
those occupations much smaller percentages of workers earn wages below the $15/hour leveL A
more accurate estimate of the number of affected employees in Montgomery County only will
require additional analysis. For more information regarding the low-wage occupations, see BLS
Data (OES Series) at ©73-75.
Average
hourly
wage
$15.94
$14.40
$13.64
$11.78
$13.33
Major Occupational Category
Healthcare Support Occupations
Personal Care and Service Occupations
Building and Grounds Cleaning and Maintenance Occupations
Food Preparation and Serving Related Occupations
Total
#of
employees
16,040
18,980
22,110
44,590
101,720
Occupations that will be most affected (by both the scheduled 2017 increase and any
subsequent increases to the minimum wage) are those that pay the lowest wages. Those
occupations include shampooers, amusement and recreation attendants, lifeguards, dishwashers,
prep cooks, ushers and ticket takers. For each of those occupations the average wage in 2015 for
workers in Silver Spring-Frederick-Rockville was at or below $1O.00/hour. Montgomery County
workers in those occupations are likely to be making the current minimum wage of
The effect ofthe minimum wage on prices. lZA DP No. 1072.
http://ftp.iza.orgJdplO72.pdf
35
The economic effects of a citywide minimum wage.
http://digitalcommons.ilr.comell.edu/cgi/viewcontellt.cgi?article==1293&context==ilrreview
36
Prior to 2015, this was known as the "Bethesda-Rockville-Frederick Metropolitan Division.
34
11
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$10.75/hour. More than 33,000 people are employed in these occupations in the Silver Spring­
Frederick-Rockville Metropolitan Division.
5.
What have been the effects of the increases implemented under Bill 27-13?
Data shows changes in several of the "economic channels" described above since the
enactment of Bill 27-13. Due
to
certain limitations ofdata, including lack of geographic specificity
and a relatively short evaluation period, it is difficult, if not impossible to say that a causal
relationship exists between the changes and the minimum wage increases implemented since the
Bill's enactment. However, a look at these changes may be useful in assessing potential impacts
of continuing to increase the minimum wage up to $15 per hour.
How have consumer prices changed since the enactment ofBill
27-13?
Publicly available data from the Bureau of Labor Statistics (BLS) indicate that prices in
the DC region generally are increasing more quickly than in US cities generally, and that the prices
of food away from home are increasing more rapidly in the DC region than elsewhere. According
to the BLS, from 2013 through May of2016 prices for all urban consumers in the Washington,
DC metro area increased by a total of 3.86% (prices for all urban consumers in US cities have
increased by 3.08% during that time). Prices for "food away from home" increased more rapidly
during that time, going up by 7.01 % in the Washington, DC metro area, and by 6.84% across all
US cities.
Limitations of the data include the following:
• The Washington, DC metro area includes jurisdictions that have increased the minimum
wage, as well as those that have not.
• All US Cities includes cities that have increased the minimum wage, as well as those that
have not (though given that multiple jurisdictions in the DC metro region have increased
minimum wages, it is likely that the effect on all US Cities would be smaller than the effect
on the DC metro region).
• It
is not yet known whether price effects will become more evident over time (e.g. if
business decisions to raise prices will lag, or will be driven by increases to labor costs
above a certain level).
How has employment changed since the enactment ofBill
27-13?
The overall employment picture in Montgomery County has remained steady and strong
over the past two years. Employment in the Silver Spring-Frederick-Rockville Metropolitan
Division increased from 561,830 to 566,300 in 2014, and then to 574,560 in 2015. Of course, the
actual effect of increasing the minimum wage is likely to be felt in specific industries-such as the
fast food industry-in which workers are paid low wages, in which labor costs are significant, and
in which capital investments can substitute for labor.
From 2014 to 2015, the number offast food cooks in the Silver Spring-Frederick-Rockville
Metropolitan Division and in the District of Columbia declined significantly (from 1,440 to 860 in
Silver Spring-Frederick-Rockville and from 2,570 to 2,050 in the District of Columbia).
In
the
same period, employment as fast food cooks rose significantly in Baltimore-Towson, Richmond,
and also in the Washington-Arlington-Alexandria Metro Division (in spite of the decline in DC).
12
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While there is always noise in the annual employment numbers for an occupation at the local level,
these numbers merit further consideration. Longitudinal employment numbers for other low-wage
occupations may indicate that this decline is anomalous (i.e. simply a blip in the 2015 numbers or
related to something that affects fast food only) or may support the notion that employment in
many low-wage occupations is affected by changes to the minimum wage.
• Employment of cashiers here has also declined, falling from 14,010 in 2013 to 13,340 in
2015. In contrast, employment ofcashiers in Baltimore-Towson is up from 37,860 in 2013
to 39,210 in 2015.
• Employment in some low-wage occupational categories has not declined. One example is
home health aides-demand is increasing, and capital substitutions for labor are less
feasible.
Some employment effects will become more evident as the minimum wage increases are
phased in. For example, Montgomery County's last scheduled increase is July 1, 2017. The
employment effects, if any, of Bill 27-13 will be much clearer in May of 2019 when the
Occupational Employment Statistics will reflect a full year of the July 2017 increase to
$11.50Ihour.
How have wages changed since the enactment ofBill
27-13?
Average wages of Montgomery County workers have increased over the past two years,
from $28.89Ihour in 2013 to $29.28Ihour in 2014 and then to $29.89Ihour in 2015. While average
wages have increased, the increases are largest among those with the highest incomes. Incomes
at the 90th percentile increased by 4.9% from 2013 to 2015 (from $57.39Ihour to $60.20Ihour).
During the same period, incomes at the 10th percentile increased only modestly from $9.13 to
$9.26Ihour, or 1.4%.
Wages of fast food cooks were up sharply from 2013 to 2014 in the Silver Spring­
Rockville-Gaithersburg Metropolitan Division, but wages for the same occupation dropped from
2014 to 2015. For example, at the 50th percentile (median), wages rose from $9.09Ihour in 2013
to $10.62Ihour in 2014 before falling back to $10.42 in 2015.
A quick review of wage data does indicate that there is some wage compression in low­
wage industries. For example, the gap between the 10th percentile wages of cashiers and 50th
percentile wages of cashiers fell from $1.52Ihour in 2013 to $1. 19lhour in 2015. Put differently,
while wages at the 10th percentile did increase by $0.47Ihour, wages at the 50th percentile
increased by only $0. 141hour. As the phase-in continues, the effects of the wage compression will
become more clear.
6.
What has been the experience in other local jurisdictions that have increased their
minimum wages to $15 per hour?
Because of the relative novelty of $15 minimum wage laws, it is hard to draw much
guidance from other jurisdictions that have enacted them.
37
Other than SeaTac, which due to its
In 2014, Michael Reich, a University of California, Berkeley economics professor with the Institute for Research
on Labor and Employment said "Our data show that an increase up to $13 an hour has no measurable effect on
37
13
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size and unique economic characteristics38 doesn't offer a good comparison, none have reached
the
$15
target yet (see
©76-83).
Most of these jurisdictions are on the west coast, in the San
Francisco Bay Area, Silicon Valley, and Los Angeles in California, as well as the City of Seattle,
Washington. In enacting its
2014
law raising the minimum wage to
$15
per hour, the Seattle City
Council also commissioned a study of the law's impacts, contracted with the University of
Washington to conduct the study.39 While it is likely more useful to look at local impacts of the
increases in the County minimum wage since the enactment ofBill
27-13,
the information gathered
as part of the Seattle study may provide some
guid~mce.
Seattle:
Seattle enacted its
$15
minimum wage law in June
2014.
40
The law provides different
phase-in periods for different "schedules" of employers, described below:
• Schedule 1 employers
(more than
500
employees in the US) must pay an hourly minimum
wage of at least:
$11.00
by April
1, 2015; $13.00
by January
1, 2016;
and
$15.00
by
January
1, 2017.
The hourly minimum wage paid by a Schedule
1
employer will be
increased to reflect the rate of inflation on January
1
of each year thereafter.
Schedule 1
employers
that pay toward an individual employee's medical benefits plan must pay an
hourly minimum wage of at least:
$11.00
by April
1,2015; $12.50
by January
1, 2016;
$13.50
by January
1,2017;
and
$15.00
by January
1,2018.
Effective January
1,2019,
the
minimum wage requirement will be the same for all Schedule
1
employers.
• Schedule
2
employers
(500
or fewer employees in the US) must pay an hourly minimum
wage that is the lower of the minimum wage required of a Schedule
1
employer or:
$10.50
by January
1, 2016; $11.00
by January
1, 2017; $11.50
by January
1, 2018; $12.00
by
January
1,2019; $13.50
by January
1, 2020; $15.00
by January
1,2021; $15.75
by January
1,2022; $16.50
by January
1,2023;
and
$17.25
by January
1,2024.
Effective January
1,
2025,
the minimum wage requirements will be the same for all employers.
As noted above, Seattle commissioned a study to assess the impacts ofthe increases during
the phase-in period. The first report ofthe study was presented to the Seattle City Council on April
18
of this year,41 and found little impact on prices in the first year of the law's implementation.
The study involved a survey of
567
randomly selected Seattle employers as well as
55
workers,
asking their awareness of and feelings about its expected and actual effects, to establish a baseline
for that information. While
62%
of employers surveyed said that they expected to raise prices of
goods and services to cover increased labor costs, an analysis of area prices over time did not
reveal such price increases.
As
with the examination of local impacts of the County's minimum
employment," but added "we have not studied what would happen at $15." l:!.1!R:I/,¥ww.!;eattletimes.cOIl).!seattle­
ne'''ls!st:.IJ.9.i~s-100k-at-whl!.t-h~p''p'en~d-wh~n-cities-raiseQ:Il1injm!!!!!.:~Y.A~
According to the most recent US Census and Bureau of Labor Statistics data, SeaTac's population is 27,875, and
there are 13,751 workers within the city. Nearly a third of the people who work within the city work at the Sea-Tac
International Airport, which serves Seattle and Tacoma, Washington.
39
http://evans.uw.eduipolicy-impactiminimum-wage-study
40
Prior to the enactment of the Seattle law, two studies on potential effects of a minimum wage increase were
commissioned by the Inequality Advisory Committee convened by Mayor Ed Murray. These studies can be accessed
here:
http://mutTay.seattle.gov/wp-contentiuploads/2014/03/Evalls-report-3 21 14-+-appd.x.pdf
and
here:
http://murray.seattle.gov/wp-contentiuploads/2014/03iUC-Berkeley-IIAC-ReDort-3-20-2014.pdf
41http://seattle.legistar.com/LegisJationDetail.aspx?JD=269I OOS&GUlD=7C839899-302C-4FSC-AD39­
2DFDE2CBEF87&Options=&Search
3&
14
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wage increases implemented thus far, this is early-stage analysis and not necessarily a good
predictor of impacts of future increases.
An
update to the Seattle study, examining the effects of the minimum wage increases
through
2015,
was released in July of this year. 42 Two key findings of the study, noted economist
Jared Bernstein, were:
(1)
"the pay of affected workers went up almost
12
percent, compared to a
5 percent increase for workers in nearby, similar places that weren't bound by the increase;" and
(2)
"relative to historical trends, the rate at which low-wage workers affected by the increase stayed
employed rose by about three percentage points.,,43
The Bay Area and Silicon Valley:
In California, a number ofjurisdictions have approved minimum wage increases that reach
the
$15
level earlier than
2022,
as is required under the recently enacted State law. On November
4, 2014,
San Francisco voters passed Proposition J, raising the minimum wage to
$15.00
by
2018.
44
Proposition J provided for minimum wage increases according to the following schedule:
(1)
effective May
1,2015, $12.25
per hour;
(2)
effective July
1,2016, $13
per hour;
(3)
effective July
1, 2017, $14
per hour;
(4)
effective July
1,2018, $15
per hour; and
(5)
each July
1
thereafter,
adjusted for inflation. 45
Since
2014,
the minimum wage in San Francisco has risen
21
percent. During this period,
unemployment in San Francisco County has dropped from five percent to
2.9
percent.
In
the same
period, the labor force has grown from
522,300
to
549,800.
However, according to the Executive
Director ofthe Golden Gate Restaurant Association, many restaurants have raised prices this year,
and one local fast-casual restaurant plans to raise menu prices seven percent. According to the
Association, an accumulation of labor compliance costs has forced the increase in prices, as
restaurant owners have to account for minimum wage, increased health care spending and
mandatory paid parentalleave. 46
In addition to San Francisco, the Bay Area city of Emeryville, in Alameda County has
enacted a
$15
minimum wage law.
In
Emeryville, employees of large employers (more than
56
employees) will earn at least
$15
per hour as of July
1,2017,
while employees of employers with
56
or fewer employees will reach the
$15
minimum wage as of July
1,2018.
47
Also in Alameda
County, the City of Berkeley, which has a minimum wage slated to go to
$12.53
in October, will
have two
$15
ballot measures on the ballot this fall. The City Council recently approved placing
on the ballot a measure that would raise the minimum wage to
$15
in
2019;
a citizens' ballot
initiative that would raise the minimum wage to
$15
next year will also be on the ballot. 48
httP-:/levans,uw.eduisites/default/files/MinWageReport-July20 16 FinaLQdf
43
https:llwww.washingtonpostcom/posteverythinglwp/20
J
6/08/]
O/so-far-the-seattle-minimum-wage-increase-is­
doing-what-its-supposed-to-do/?utm term=.62525381 b954
44
CWED analyzed the potential impacts ofthe proposed increase prior to the November vote. The analysis can be
accessed at: hnp:llwww.irle.berkeley.edu/cwed/briefs/2014-04.pdf
42
4S
ht!P.2.Lillwv.org/oJse/mini~num-wage-ordinallc~:.mwO
46
SF's Minimum Wage Hike Took Effect July
1,
but Changes Little:
http://www.s{chronicle.comlbusinessiarticle/SF­
s-minimum-wage-hike-took-effect-JuJy-l-but-8335408,php
47
h!!p:!/www.ci.emenyille.ca.us/1024!Minimum-Wage-Ordinance
48
h!!p:!Iwww.berkeleyside.comi20
I
6/061
I5Iberkeley-council-approves-altemative-minim um-wage-meas ure-for­
baBot!
15
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In
Santa Clara County, Mountain View
49
and Sunnyvale
50
have enacted laws raising the
minimum wage to $15 per hour.
In
each ofthese jurisdictions, the minimum wage will reach $15
per hour as of January 1,2018, with future annual increases tied to inflation.
The Los Angeles Area:
On May 19, 2015, the Los Angeles City Council approved a measure providing annual
minimum wage increases for employees in the City of Los Angeles up to $15.00 in 2020.
51
The
measure applies to all employers, but implementation is delayed for employers having no more
than 25 employees. Non-profits with more than 25 employees may apply for a waiver if they meet
certain conditions. The Los Angeles County Board of Supervisors approved a measure that will
increase the minimum wage for unincorporated areas in the County each July over five years in
identical increments, starting at $10.50/hour on July 1,2016, then $12.00 (2017), $13.25 (2018),
$14.25 (2019), and $15.00 (2020). Following 2020, minimum wage will adjust according to the
cost of living.
In
both the City and County, compliance of businesses with under 26 employees on
payroll will be required a year later.
7.
What are the potential effects of having a minimum wage substantially higher than
most other jurisdictions
in
the region?
While an increase of the County minimum wage to $15 per hour by 2020 would be
generally synchronized with the District of Columbia, it would create significant disparities
between the County and other neighboring jurisdictions in the region. In the absence of further
federal, State, or local action, the County's minimum wage would be roughly twice the minimum
wage of Fairfax County and other suburban Virginia jurisdictions, nearly 50% higher than
Frederick and Howard Counties, and 30% higher 1han Prince George's County. While there has
been research done on the impacts of disparities in minimum wages in neighboring jurisdictions,
the disparities studied did not approach those that will likely result from the enactment of Bill 12­
16.
It
is possible that a substantial disparity will increase the number of non-County residents
seeking low wage employment in the County, increasing competition for these jobs and possibly
negatively impacting employment of County workers.
52
It
is exceedingly unlikely, given the results of the November 8 elections, that the federal
minimum wage is going to increase during at least the first two years ofthe Trump administration.
It
is also unlikely that Maryland's sitting Governor would sign a bill increasing the State minimum
wage, but there is a gubernatorial election in 2018, so it is technically possible that another
statewide increase could occur before the increases proposed
in
Bill 12-16 are fully implemented.
This possibility may be enhanced by the success of ballot initiatives in Arizona, Colorado, Maine
and Washington in this year's elections and the apparent political momentum building in East
coast states such as Massachusetts, Connecticut, and New Jersey.
http://www.mountainview.gov/depts/comdev!economicdev!city minimum wage.asp
so
http://sunnyvale.ca.gov!DoingBusiness/EconomicDevelopment
1M
inimumWage.aspx
s
1
CWED prepared a report for the Los Angeles City Council analyzing potential impacts of the City's then­
proposed increase. The report can be accessed at:
http://irJe.berkeley.edulfiles!20 14/The-Mayor-of-Los-An geles-Proposed-City-Minimum-Wage-Po Iicy.pdf
S2
For an illustration ofincreased commuting for low-wage jobs, see:
http://www.nvtimes.com/20
14/02/
16/us/crossing-borders-and-changing-I
i
ves-Iured-by-higher-state-minimum­
wages.html? r=0
49
16
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8.
How
will
the increase in the minimum wage impact non-profits and other businesses
that are not able to pass along increased labor costs to consumers?
At the public hearing, the Council heard from representatives of non-profits and service
providers that cannot pass along increased labor costs
to
consumers. Jurisdictions raising their
respective minimum wages are increasingly having to grapple with this issue. The organizations
that addressed the Council expressed support for the idea of increasing the County minimum wage,
but indicated that it would result in additional costs that they would not be able to pass on to
consumers.
Nonprofit Montgomery recognized increasing the minimum wage as a tool to address
poverty, and that workers "deserve a wage that leads to self-sufficiency." They asked however,
that the Council consider several items concerning the implementation of any increase (see ©55),
first among them ensuring that funding and reimbursement rates for County nonprofit contracts
match increased labor costs as a result of the increases. Similarly, the Montgomery County
Coalition for the Homeless offered support for the Bill, but indicated that increasing the wages of
its 44 case aides to $15 per hour would result in an additional $200,000 in annual costs (see ©56).
Montgomery County Inter
ACCIDD,
a coalition of about 30 agencies serving adults with
intellectual and other developmental disabilities, indicated it would support the Bill if it included
language requiring the County to provide funding necessary to keep its member agencies' pay to
staff at 125% of the minimum wage. Inter
ACCIDD
estimated that the additional cost
to
maintain
that pay rate, over the $11.50 per hour already provided for in law, would be $20,558,048 per year
(see ©57-59). Maryland Association of Adult Day Services, while not necessarily representing
non-profits indicated that some of its member businesses are contractually prohibited from
charging Medicaid patients for services reimbursed through the Medical Assistance Program. As
such, these businesses, which provide a necessary service, would be unable to recover increased
labor costs associated with a minimum wage increase. The Association requested consideration
of an amendment exempting such businesses.
Around the country, jurisdictions are increasing their respective minimum wages while
many nonprofit service organizations are struggling to maintain funding levels. Because the non­
profit organizations represented at the public hearing, and likely others providing services in the
County, rely largely on public (County, State, and federal) funding sources, those sources would
be expected to increase their contributions or possibly accept some degradation or reduction in the
services provided. In the face of increased costs but without a corresponding increase in funding,
these organizations may resort to reducing staff or service hours, may cut back services offered or
scale back service areas, or, where possible serve only clients who can afford higher fees.
9.
Will there be a fiscal impact on the County beyond that estimated in the Fiscal Impact
statement?
As noted above, the fiscal impact estimate is based entirely on a projection ofthe minimum
wage/seasonal salary schedule (see ©84) to assess the cost of the Bill's proposed increases due to
increases.
It
is not clear whether any adjustment to the County's other salary schedules
53
was
considered, whether
to
raise in-schedule minimums to or above the minimum level or to avoid
wage compression. For example, in the FY2016 General Salary Schedule (see ©85), the minimum
53
The County Salary Schedules can be accessed athttp://www.montgomerycountvmd.gov/HRlclasscomp.html
17
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salaries in Grades 5 through 9 fall below the roughly $31,200 that would be earned under a $15
per hour minimum wage. Certainly, these minimums will be adjusted upward in the years that any
increase to $15 will be phased-in, but likely not at the pace proposed in Bill 12-16. A look at what
may be a shrinking gap between the lowest paid salaried County employees illustrates the wage
compression problem; it would be helpful to understand the likelihood and cost of an additional
upward adjustment in some or all of these grades.
Also, as previously discussed, certain non-profits that depend largely on County funding
have indicated that they will face significant additional expenses should the minimum wage be
increased to $15 per hour. Because they are mostly unable to pass along these additional costs to
consumers, these organizations would be looking to their funding sources, including the County,
for the necessary increased resources.
Finally, it is worth noting that one anticipated effect of increasing the minimum wage is
reduced dependence among low-wage workers on social safety net programs. The County's
earned income tax credit supplement is one program that is specifically designed to benefit low­
income workers. Finance projects that the number of recipients of that tax credit supplement in
FY17 will continue to increase, reaching nearly 12% above the number of recipients in FYI4. It
is not known at this time whether the increase in the number of eligible recipients would have been
larger without Montgomery County's legislated increase in the minimum wage.
WORKING FAMILIES tNCOME SUPPLEMENT NDA (EIre)
Flscal
Year
2000
County
2001
2002
2003
Match
100.00%
125.00%
100.00%
Admin.
Cost
511;813
$9,740
$10,921
$10l32
$12,910
$14,109
$25,316
Cost of
EItC Refunds
Total
Cost
Total
RedpientJ
Average
elTe
$118.51
$233.08
$219.86
$309.51
$332.64
$380.08
100,00%
100.00%
2004
2005
2006
2007
2008
2009
2010
2011
2312
2013
2014
100,00%
100.00%
100.00%
100.00%
100.0096
100.00%
$2.199,592
$2,544,411
$3,952.062
$4,585,128
$6,012
1
089
$7,907,451
$10.236.647
$2.2.11,405
$2,554,152
$3,962.98l
$4,595
1
860
$6,024,999
$7.921,560
$10,262,023
12.322
10,911
14,122
14,814
18))74
20,805
20,789
$16,027
$17,571
$
15,l61
$19,448
$34726
S3~t231
72.50%
68.90%
15.50%
85.00%
90.000.4
$9,970.176
$12,910,993
$9,000,906
$15,063,537
$12,920,388
$12.so5,l77
$14,6S6~1
$34
1
058
$38,663
2015 Act.
2016 Est.
S40.s11
$41,650
$44,600
$16,847,181
$18/916,413
$9
1
986.203
$12,928.570
$9,016:267
$1$,082,985
$12,953,114
$12
t
8S8,409
S14
t
720.,565
$16)l8S)S60
$18
1
960,549
20;210
26,584
19.5S9
30,189
33,840
34,290
34~76
$492.40
$493.33
$485.66
$460.19
$498.97
$381.81
$3'73.44
$421.11
95.00%
100.00%
$21,359,150
$24~29~900
$21,400,800
$24,274
J
5OO
37,281
38,824
40(076
$451.93
$488,37
$534.01
$583.38
2017 CE Ret.
41plO
source:
Montgomery County Department of Finance, Division of Treasury
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10.
Should the County minimum wage be indexed to the CPI-W?
Bill 12-16 provides that, beginning in 2021, the County minimum wage is to be adjusted
annually by the annual percentage increase, if any, in the CPI-W. Providing for an annual
adjustment to the minimum wage would largely depoliticize the regular increases, and would
ensure a measure ofpredictability to employers. However, annual increases in the minimum wage
could result in wage compression being a yearly problem for employers, as employers would be
required to increase wages for workers making the minimum wage without regard to whether the
business could provide corresponding raises up the wage scale. In addition, the State minimum
wage is not indexed to inflation, so the already significant spread between the County minimum
wage and the State minimum wage will continue to grow.
Indexing to inflation does not, however, result in higher real wages each indexed year.
Since 1990, the real value of the minimum wage has been as low as $6.58 (in 2007) and as high
as $7.89 (in 2009). See ©86-88, Congressional Research Service, 2013
"Inflation and the Real
Minimum Wage: A Fact Sheet.
"Similarly, indexing the minimum wage to inflation does not mean
that hourly wages at the minimum wage will keep up with total economic productivity, the earnings
of the top earners, or the average or median wages of all non-supervisory employees.
54
For a thorough explanation ofthe issue, please see attached statement by Arindrajit Dube,
Ph.D. to the U.S. Senate Committee on Health, Education, Labor and Pensions for a hearing on
indexing the minimum wage. See ©89-1 09.
11.
Should an increase in the minimum wage to $15 per hour be phased-in over a longer
period?
As described above, different jurisdictioIls have implemented different timelines for
reaching the $15 per hour minimum wage. Some have provided longer phase-in periods for small
employers. Doing so may mitigate some of the impact on small businesses, but may complicate
enforcement.
12.
Should the Bill include mechanisms to "pause" scheduled increases based on
economic condidons?
As previously noted, California and New York have included in their State laws "off
ramps" or "pause" mechanisms that would allow scheduled increases in the minimum wage to be
delayed due to certain adverse economic conditions. Aside from the fact that such mechanisms
would tend to hurt those who least can afford it in hard economic times, there may also be
significant challenges to implementing these provisions at the county-level.
13.
Should the applicadon of the minimum wage and "dp credit" to tipped employees be
changed?
For example, the Economic Policy Institute compared the change in the minimum wage since 1968 (the year in
which the real value of the minimum wage was the highest in the history ofthe minimum wage) to changes in other
economic indicators- if the minimum wage had increased at the same rate as economic productivity it would be
$18.72; ifthe minimum wage had increased at the same rate as the wages ofthe top 1
%
ofearners it would be $28.34;
if the minimum wage had increased at the same rate as real average wages since 1968 the minimum wage would be
$10.46.
54
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At the public hearing, a number of speakers in favor of the Bill urged the Council to also
increase the amount that employers must pay tipped workers. Currently, County law allows an
employer to apply a ''tip credit" equal to the County minimum wage less $4.00, in calculating a
tipped employee's compensation. What this means, is that an employer is effectively only required
to pay tipped employees $4.00 per hour. Tipped employees are guaranteed to earn the minimum
wage when employer pay and tips are combined, and an employer must make up any shortfall. To
increase the amount earned by tipped employees, the law could be amended to simply reduce the
amount of the allowed tip credit. Under the current method, there is no increase in the employer
pay corresponding to future increases in the minimum wage. If the minimum wage is indexed as
proposed in the Bill, the Council could include a mechanism to index tipped employees' pay-from­
employer as well.
Additional Information for Committee Consideration
As noted above, at the prior worksessions on the Bill, Committee members and other
Councilmembers requested additional information and discussion from staff on several matters
related to the proposed increase in the minimum wage. These requests can be divided into three
general categories:
(1)
economic and demographic data; (2) potential impacts of an increase; and
(3) possible implementation issues. Additional information gathered by staff, by category, is
presented below.
Economic and Demographic Data
1.
Cost-of-Living Comparisons
At the July 18, worksession, the Committee requested additional information about where
the cost-of-living in the County stands relative
to
other jurisdictions that have committed to raising
their local minimum wage to $15 per hour. While this information is generally only available at a
regional level, staff has identified two resources which both seem to indicate that the Washington
D.C. region is similarly situated to the regions containing these jurisdictions.
The U.S. Office ofPersonnel Management (OPM) sets the "locality payment" for different
Federal Pay Areas to adjust for "pay gaps" between Federal and non-Federal pay. OPM uses the
National Compensation Survey conducted by BLS so that Federal employees are earning
comparable salaries to their counterparts in their region. While these locality adjustments are not
directly connected to cost-of-living, they can provide a comparison for regional differences in
wages.
OPM 2016 GSS Locality Payment for Select Regions
Region
Locality Payment
i
San Francisco-Oakland-San Jose
35.75%
New York-Newark, NY-NJ-CT-PA
29.20%
Los Angeles-Long Beach, CA
27.65%
Washington-Balt., DC-MD-VA-WV
24.78%
Seattle-Tacoma, WA
22.26%
Source: www.opm.gov, 2016 GSS tables; Locality Payment is applied equally to all grades.
!
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Also, the Council for Community and Economic Research (C2ER) generates a cost-of­
living index to compare different metro areas in the U.S. This measure weighs several different
factors in coming with a composite ranking. A recent comparison was published by the Greater
Houston Partnership (see ©11O), where the D.C. region had the third highest index of the top 20
metro areas in the U.S. In conjunction with the OPM data above, it is reasonable to conclude that
the D.C. region is one of the more expensive metro areas to live in but not the most. While less
expensive than New York City and San Francisco, 1he D.C. region is slightly more expensive than
Seattle and Los Angeles in the C2ER ranking.
2.
Projection of Area Median Wage
After discussing the proposal by economist Arindrajit Dube that 50% of area median wage is an
appropriate local minimum wage (see ©60-72), the Committee requested projections of the area
median wage. Data for projecting the area median wage is limited. The Maryland Department of
Labor, Licensing, and Regulation (DLLR) updates occupation and wage data for the different
workforce regions in Maryland. Montgomery County is its own workforce region, which makes it
easier to analyze County-only data. DLLR shows that the median wage in 2015 for Montgomery
County was $24.50 (see ©111). Montgomery County's median wage increased by 2.2% from 2013
to 2014 and by 2.1% from 2014 to 2015. Given the limited data points,
it
is difficult to estimate
the likely increase in area median wage in the coming years. The table below provides estimates
for an increase at 1.5% to 2.0% in the County's median wage.
Projecting Area Median Wage (rounded to the nearest cent)
1.5% Annual Increase 2.0% Annual Increase
i
Year
2015
2016
2017
12018
2019
2020
$24.50
$24.87
$25.24
$25.62
$26.00
$26.39
$24.50
$24.99
$25.49
$26.00
$26.52
$27.05
3.
Differences Between CPI-U and CPI-W, and Likely Impacts on Future Increases
As discussed above, Bill 12-16 provides that the County minimum wage be adjusted
annually by the increase, if any, in the Consumer Price Index for Urban Wage Earners and Clerical
Workers (CPI-W). The CPI-W applies to all households in which more than one-half of the
household's income comes from clerical or wage occupations. In February 2014, the CPI-W
represented about 28% of the U.S. population. The CPI-W was the standard index published by
BLS until 1978. Starting in 1978, BLS published the CPI-U (All Urban Consumers) to capture a
larger percentage ofthe U.S. population. BLS planned to discontinue the CPI-W series after three
years ofthe CPI-U publication, but the CPl·W was not discontinued for several reasons. However,
due to budget and workload issues, BLS did not maintain two separate indexes. Instead, BLS tracks
the spending and prices for the CPI-U and then adjusts that index for the CPI-W based on weights
to reflect the different spending habits of the wage earner.
55
BLS published weights for 2013-2014 in December 2015 (see (112). The CPI-W is
weighted heavier for the categories Food and Beverage (+ 1.677) and Transportation (+2.765) but
55
http://www.bls.gov/opub/btn!volume-3/wby-does-bls-provide-both-the-cpi-w-and-cpi-u.htm
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weighted less for the categories Medical Care (-1.533) and Housing (-1.466)56 compared to the
CPI-U. Future fluctuations to the CPI-W would be based on the changes in prices compared to
the weights that BLS uses to calculate that index. Currently, the minutes from the September 20­
21,2016 meeting for the Board of Govemors ofthe Federal Reserve System estimates the inflation
will be approximately 2.0% in the short term (2017 - 2019) and longer run (beyond 2019)57. The
Federal Reserve only projects inflation in general terms and does not offer separate projections for
the CPI-U compared to the CPI-W.
For discussion purposes, below is a table comparing how the County's minimum wage
would fluctuate using the CPI-U or CPI-W. Since inflation projections don't provide separate
estimates for the CPI-U or CPI-W, the table assumes that: 1) the County's minimum wage was
$11.50 in 2013 (Le. Bill 27-13 required the minimum wage
to
be $11.50 immediately and indexed
it
to
the CPI); 2) 2016 uses the half-year estimates for both CPI-U and CPI-W; and 3) 2017 - 2019
uses a flat 2.0% for both indexes.
HIM' .
age n
ourlY lDlmum W I dexed t
0
CPI U and CPI
-
W
Year
CPI-U
CPI-UWage
2013
152.500
$11.50
·2014
154.847
$11.68
2015
$11.72
155.353
2016
156.770
$11.82
2017
159.905
$12.06
2018
163.104
$12.30
.2019
166.366
$12.55
2020
$12.80
169.693
the 2016 index.
CPI-WWage
$11.50
$11.66
$11.67
$11.76
$12.00
$12.24
$12.48
$12.73
Source: BLS for 2013 - 2016; base year
=
1996; 2017 - 2020 data is a 2.0% annual increase starting
with
-
CPI-W
153.006
155.151
155.211
156.492
159.622
162.814
166.071
169.392
Indexing to the CPI-U or the CPI-W has a marginal impact to the overall growth in the
minimum wage, resulting in an additional $0.07 for the CPI-U during that time period. Though the
CPI-U generated a minimum wage that is greater than the CPI-W, it is cautioned that this may not
always be the case. Given the assumptions and utilizing the CPI-W as the index, the minimum
wage would be $12.73 in 2020. This is about 15.1% less than the amount proposed in Bi1l12-16.
As discussed in previous packets, indexing minimum wage to CPI may have several complications
(e.g. annual wage compression and greater spread between County and State minimum wage) and
may not achieve higher real wages.
4.
Montgomery County Worker Demographics
The Committee requested additional demographic information on County workers likely
to be affected by the minimum wage increases proposed
in
the Bill. The tables below provide
selected demographics for the various breakdowns requested by the Committee from the previous
work session.
The Housing component for Clerical and Wage Consumers
is
less than All Urban Consumers because of BLS's
Rental Equivalency index. This index tries to estimate the value of owner-occupied units based on their potential
income from rent instead of assessment value.
S71t is important to note that this meeting occurred prior to the 2016 Presidential election.
S6
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Select Demo ra hic Information - All Occu
Ae
14-18
1.7%
19
24
eater
male
Male
Race
Black
or Hispanic
African Amer.
White
All
others
8.6%
89.7%
51.8%
48.2% 24.5%
11.9%
52.70f<
10.9%
Source: EMSI, Inc., 2016.4, QCEW only.
For race, "All others" includes American Indian or Alaska, Asian, Native Hawaiian or Other Pacific, and
Two or More Races.
Select Demographic Information - Occupations with hourly median wage of $15 or less in
Mont2omery County
Age
14-18
5.2%
19
24
Gender
25
and Female
greater
Male
Race
Black
or Hispanic White
African Amer.
All
others
17.3%
77.5%
56.9%
43.1%
28.7%
19.6%
41.1%
10.6%
Source: EMS!, Inc., 2016.4, QCEW only.
For race, "All others" includes American Indian or Alaska, Asian, Native Hawaiian or Other Pacific, and
Two or More Races.
Select Demographic Information for Occupations with hourly median wage less than $11.50
(Bill
27-13)
Age
14-18
7.3%
19-24
21.1%
Gender
25
and Female
greater
Male
Race
Black
or Hispanic White
African Amer.
All
others
71.6%
58.9%
41.1% 25.1%
18.7%
43.5%
12.7%
Source: EMS!, Inc., 2016.4, QCEW only.
For race, "All others" includes American Indian or Alaska, Asian, Native Hawaiian or Other Pacific, and
Two or More Races.
5.
Commuting Patterns of Low-Wage Workers (including County residents)
At the prior worksessions, the Committee discussed which workers would likely be
affected by the Bill's provisions, and specifically inquired as to commuting patterns of likely
affected workers. lbis information indicates that a significant number ofthese workers do not live
in
the County, and illustrates one of the challenges to implementing local minimum wage laws
in
a regional economy.
Approximately
172,999
workers in Montgomery County earned less
than
$3,333
per
month
(-$19.23
per hour at
2,080
hours per year) in
2014,
according to the U.S. Census Bureau's
"ontheMap" tooL Of that total,
51.0%
were residents of Montgomery County. Most of those
workers
(49.0%)
traveled
10
miles or less to their place of employment. Conversely, there were
166,020
County
residents
that earned less than
$3,333
per month in
2014.
The top three locations
that County residents traveled for employment were within the County
(53.1 %),
to Prince George's
County
(8.7%),
and to D.C.
(4.9%).
Similar to those employed in the County,
53.9%
of low-wage
earners living in Montgomery County traveled less than
10
miles for employment.
58
As
a point of reference, a ten-mile radius (not by road distance) from the COB in Rockville, MD would include
only employment options in Montgomery County, except for
a
small portion just across the American Legion Bridge
58
in Virginia.
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Montgomery County Workers by Place of Residence
010
of
~ess
than
%
of $1,250 to
0/0
of Greater
$1,250
$3,333
than $3,333 total
total
total
Montgomery County
50.5% 123,774
47.5%
32,128
51.7% 56,051
8.7%
12.3% 15,622
Prince George's County
14.1% 22,796
63
• District of Columbia
5.1%
4.3%
5,227
4.7%
13,193
95
All other
38.7%
,615
31.6% 33,998
30.7%
Total
62,101
110,898
Source: onthemap.ces.census.gov, U.S. Census Bureau, primary jobs only (Le., 1 job per worker).
I
~~
10
ment
%
of
$1,250 to
%
of Greater
$3,333
total
than $3,333 total
46.4%
56,051
53.0% 123,774
23.8%
1,466
1.4%
63,350
6.4%
9,129
8.6%
17,071
23.4%
39,022
36.9% 100,885
110,898
260,648
Source: onthemap.ces.census.gov, U.S. Census Bureau, primary jobs only (Le., 1 job per worker).
Potential Impacts ofan Increase
1.
Wage compression
Residents
b
Place of Em
Less than
%
of
$1,250
total
32,128
53.2%
6,675
11.1%
5,281
8.8%
26.9%
The issue.of"wage compression," the shrinking gap between the lowest paid workers and
those earning more, was raised by opponents of the Bill, and is discussed briefly above. The
Committee asked for more information on the potential impacts of wage compression, both on
County businesses and on the County itself. Wage compression, as discussed above, is not a
hypothetical problem, and poses a question of fairness and may threaten morale within a
workplace. Estimating the economic and fiscal impacts of wage compression is a complicated
matter, as the impact is generally felt when an employer increases wages to
relieve
the compression
that occurs due to an increase in the wages of its lowest paid employees.
Economic impact of wage compression on an employer is realized when the employer
increases wages to workers other than the lowest paid workers to maintain a pay scale when the
lowest paid workers get a raise. As illustrated in a recent Wall Street Journal article,59 an employer
may realize a certain cost solely due to an increase in the minimum wage
(20%
of profits in the
article), but a substantially higher cost to preserve the current wage scale "with veteran workers
earning more than newcomers" (more than
50%
of profits in the article). Because profit margins
and the number of directly-affected workers varies substantially from business to business, and
each employer mayor may not choose whether, or to what degree, to maintain existing wage
scales, estimating costs across a local economy is beyond staff's capacity.
The issue ofwage compression, and the cost to relieve it, relative to the County's existing
salary schedules, was also raised as a possible fiscal impact on the County. As noted above, Grades
5
through
9
in the
FY16
General Salary Schedule, include minimum salaries that fall below the
59
http://www.
wsj .comfaJiicles!push·for-15-raises-payand4ellsions-1462491407
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roughly $31,200 that would be earned under a $15 Jper hour minimum wage. Staff confirmed with
OMB that there are not full-time, permanent County employees that are paid below what the
minimum wage would
be
under the phase-in schedule of the Bill, so there would not be an
immediate direct impact on County payroll in this regard. However, since future salary schedules
will be bargained for, there is a significant probability that there could be indirect costs incurred
by the County in the future.
2.
Cumulative Impact of "Worker Protection" Laws on County Businesses
In
addition to the minimum wage increases already provided for under Bill 27-13, the
County's recently enacted Sick and Safe Leave law will have some impact on County businesses.
The Sick and Safe Leave law, which just went into effect on October 1, requires employers to
provide certain employees with a specified amount of paid leave, subject to some limitations.
In
addition to these County laws, a rule promulgated by the U.S. Department of Labor under the Fair
Labor Standards Act took effect on December 1 and will extend overtime protections to 4.2 million
workers who are not currently eligible under federal law. Under this rule, workers who do not earn
at least $47,476 a year ($913 a week) will have to be paid overtime, even if they're classified as a
manager or professional.
Staff was asked to assess the cumulative impact of these recent changes on County
businesses. As with estimating the costs of dealing with wage compression, though for different
reasons, such an assessment is beyond the capacity of Council staff. With regard to the Sick and
Safe Leave law and the FLSA overtime rule, the limited time during which the provisions have
been in effect presents a serious challenge to estimating their impact. With the minimum wage
increases implemented thus far under Bill 27-13, it is extremely difficult to isolate the impacts on
County businesses attributable to the minimum wage increases.
This task is further complicated, at least concerning effects on employment, by broad
employment trends. Overall employment in the County has steadily increased each year since
2010, and County unemployment has decreased in each of those years, going from 5.7% in FY10
to 3.7% in FY16. With time it may become easier to identify a causal relationship between
minimum wage increases and certain outcomes related to employment, business viability and
consumer prices, but at this point, we are quite limited in this area.
Essentially, information available on this point is anecdotal; the Chambers of Commerce
in the County have consistently stated the concern oftheir membership that continuing to go up to
a $15 per hour minimum wage by 2020 will be ''too much, too fast." Specifically articulated
concerns include: (1) concern that increased wage costs will be passed on to clients, many ofwhom
are on fixed incomes (this is particularly true in the home health care sector); and (2) concerns of
larger companies that costs of goods and services procured from smaller local businesses will go
up, adding to their cost ofdoing business in Montgomery County.
In
addition to concerns from the Chambers, Council staff has heard from representatives
in the landscaping industry who will likely be affected by Bill 12-16's increases. These concerns
highlight the limits that landscapers face in the amount of additional costs that they can pass along
to consumers. Licensed County landscapers may lose business to illegal, unlicensed landscapers,
or landscapers based outside ofthe County who do work in the County. Each of these concerns is
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an enforcement issue as much as a wage issue, but given the challenges of enforcement, may be
well-founded.
3.
Impact on Competitiveness of County Businesses with Businesses in Neighboring
Jurisdictions with Significantly Lower Minimum Wages
As has been noted the absence of federal, State, or other local action, the County's
minimum wage under the Bill would be roughly twice the minimum wage of Fairfax County and
other suburban Virginia jurisdictions, nearly 50% higher than Frederick and Howard Counties,
and 30% higher than Prince George's County. Staff was asked to provide additional information
about potential competitive disadvantages to County businesses resulting from this disparity.
There have been studies that have examined employment patterns across borders of
jurisdictions with different minimum wages. A 2010 study by economists from the Universities of
California, Massachusetts, and North Carolina analyzed minimum wage impacts across state
borders. The authors compared employment patterns in more than 250 pairs of neighboring
counties in the U.S. that had different minimum wage rates between 1990 and 2006 and generally
concluded that higher minimum wages did not reduce employment and did not put states with
higher minimum wages at a significant competitive: disadvantage.
A 2011 study by Center for Economic and Policy research looked at the first three city­
specific minimum wages in the United States -San Francisco, Santa Fe, and Washington, D.C.,
and reached similar conclusions.
60
Because the disparities analyzed in these studies were not of
the magnitude ofthose that may be created by the enactment ofBi1112-16, however, the studies'
utility as a predictor of the Bill's impacts may be l.imited. While the impact of relatively modest
differences may be negligible, until substantial disparities have been realized and studied, it will
be difficult to predict the Bill's effects with a large degree of certainty.
4.
FiscallEconomic Impact on Nonprofits
As discussed above, the Council heard at the public hearing from some nonprofit service
providers that further increases in the minimum wage will have significant impacts on them, and
that unlike private sector, for-profit businesses, they are not able to pass these costs along to
customers. As a result, there is almost certain to be a substantially greater need for County funding
to make up the difference. Ifthe County maintains the same formulas for funding
(e.g.,
125% of
minimum wage for Inter
ACCIDD,
etc.), that need will be great.
Nonprofit Montgomery conducted two surveys on the impacts of a minimum wage
increase, in spring and fall of 2016 (see ©113-115). Twenty-one organizations responded to the
Nonprofit Montgomery surveys, representing a range of budget sizes. Of these, seven described
potential service disruptions if funding is not increased to cover additional wage costs.
Montgomery County is not unique in facing this dilemma. As previously noted, mitigating
substantial wage-related increases in operating costs for these organizations is a problem with
which all jurisdictions implementing a $15.00 per hour minimum wage are grappling. Staff has
not identified an established program or solution, beyond committing to increasing funding to
offset the costs.
In
fact, one of the issues tracked by the study commissioned by Seattle to study
60
http://cepr.netldocnments!publications/min-wage-1011.03.pdf
26
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the implementation of its minimum wage increases is "do nonprofit service organizations respond
to higher wage rates by cutting back on services to vulnerable families?"
Locally, Prince George's County has struggled with this issue, and recently passed a bill
which provides the option for direct service providers who work with individuals with disabilities
under contract with the state Developmental Disabilities Administration (DDA) to apply for a
waiver from the county's minimum wage law.
61
The Prince George's County waiver only applies
during the time between the County's final increase on Oct. 1, 2017 (up to $11.50 per hour) and
when the State's minimum wage reaches $10.10 on July 1, 2018. Even the temporary waiver
provoked an impassioned debate, with advocates for the employees of such organizations saying
that it sends employees a message that their services are not valued.
As the Council heard at the public hearing, it is not only County-funded nonprofits that are
likely to see increases in costs that they are unable to pass along to customers. Medicaid-funded
caregivers are in a similar situation, and a waiver from County minimum wage requirements is
probably undesirable in that it would essentially value the work of these employees at less than
that of employees in virtually all other types of work. Absent a waiver, a further increase in the
County minimum wage, the County may need to take steps to assist these businesses as well.
62
5.
Effect of Increasing the Minimum Wage on Worker Eligibility for Social Service and
Other Benefit Programs
The Committee asked staff to provide more information on how increasing the minimum
wage might affect workers' eligibility for social programs. Potential savings on such programs is
often offered by supporters of an increase as an offset to potential wage-related increases in
government costs. Each social services program has its own maximum income eligibility levels.
If a low-wage worker receives a higher wage due to a new County minimum wage, that person's
eligibility for such programs may change. Although there are too many variables to predict how
many County residents would lose eligibility due to a higher County minimum wage, we can make
some general observations. A spreadsheet showing the maximum income levels for the different
social services programs is
at
©
116-118.
For example, if a worker earns the 2017 minimum wage of $11.50 per hour for 2000 hours
in a year (roughly full-time work), the worker would have an annual gross income of $23,000. If
the worker receives a raise to $13.50 per hour, the annual gross income would grow to $27,000.
A raise to $15.00 per hour would bring the annual gross income up to $30,000. A raise from
$11.50 to $13.00 per hour would not affect Medicaid eligibility, but an increase to $15.00 per hour
would cause households with fewer than four people to lose eligibility. Similarly, the maximum
income to be eligible for the Montgomery Cares Program is $29,700 for an individual. The same
worker would lose eligibility (as an individual) for Montgomery Cares ifpaid $15.000 per hour.
Other variables include number of hours worked and other family income, so for workers who
work more than 2,000 hours per year, or households with more than one low-wage worker, the
impacts would be magnified. While one might reasonably conclude that a significantly higher
h11"Qj/www.thesentinel.com/pgs/index.phQ?o..p.tion=com
k2~vievFiteln&id-=31_82:cotm!Y-waive~:.m.iniln.l:lffi.:
wage-for-service-providers&Itemid=766
62
For a recent discussion on the problems oflow wages in the nonprofit sector, with some mention ofminimum wage
impacts, see:
"Nonprofit Wage
Ghettos
and What We
Should
Do
about Them"
https:llnonprofitguarterly.org/20 16/11l18!nonprofit-wage-ghettosl
61
27
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County minimum wage would reduce the number of residents eligible for different social services
programs, Council staff did not fmd any studies that could be used to predict the effect.
The cost of child care is another area likely to be affected by an increase in the minimum
wage. The 2015 OLO report, "Child Care in Montgomery County," included the following:
Currently, wages of child care workers are significantly lower than those of school
teachers (even when comparing those with similar levels ofeducation) and in many
cases barely above the poverty level. A University of California, Berkeley study
reported that the average hourly wage for a child care worker in 2013 was $10.33,
only slightly higher
than
that for fast food cooks ($9.07) and significantly lower
than that of kindergarten teachers ($25.40). From 2007 to 2011, an estimated 46%
of child care workers' families were enrolled in public support programs such as
Medicaid, food stamps, or the Federal Earned Income Tax Credit annually.63
An increase in the County minimum wage would likely mean a raise for many of the County's
child care workers. This increase, would, however, probably result in an increase in the cost of
child care in the County. This increase, combined with the likelihood that some low-wage workers
that currently qualify for State child care subsidies will become income ineligible, presents a
potential issue that should be anticipated. While the County offers a County-level child care
subsidy for parents with limited income that do not qualify for the State subsidy, there is a waiting
list for this subsidy. An increase in costs, combined with losing eligibility for a subsidy, could be
very challenging for affected households.
The federal and State earned income credits, as well as the County supplement, is another
program likely to be impacted by an increase in the minimum wage to $15.00 per hour.
If
a
Maryland resident receives credits through the Federal EITC Program, Maryland will provide
credits equal to 50% of the Federal EITC. Montgomery County residents receive additional tax
credits based on 10 times the income tax rate for the County. At the current rate of $0.032 per
$100, County residents will receive an additional 32% in tax credits based on their Federal EITC.
For example, a Montgomery County resident receives $500 in Federal EITC. Maryland will
provide a $250 tax credit and Montgomery County will provide $160 in
tax
credits, for a combined
$410 in tax credits for their Maryland tax return.
In addition to tax credits, Maryland and Montgomery County provide refunds for tax
credits that are greater than a resident's tax liability. However, the refund rate for the State of
Maryland is different than the natural tax credit. For 2015, Maryland's rate was 25.5% of the
Federal EITC. Montgomery County matches the State's refund at 100%.
The U.S. Internal Revenue Service allows any user to estimate their eligibility and potential
EITC for previous tax years. The table below compares the value of EITC, Maryland ETC and
Montgomery ETC for the current minimum wage required by Bill 27-13 ($11.50Ihour) to the
proposed wage in Bill 12-16 ($15.00Ihour). This is based on the 2015 tax schedule.
63
https:llwww.montgomeIYCOlmtymd.gov/OLO/Resources/Files/20
J
5 Reports/Report20 16-3ChildCare.pdf
28
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Maryland
County ETC
ETC
$1,383
$4,323
$2,162
$919
$2,786
$1,393
-$1,537
-$464
..
children,
-$769
one full-tIme Job (2080 hours per year) at
Assumptions: Smgle parent and two elIgible
WIth
Federal EITC
minimum wage.
Minimum
Wage
$11.50
$15.00
Difference
Earned
Income
$23,920
$31,200
+$7,280
Increasing the minimum wage to $15.00 per hour will impact the value of assistance
received from the Federal EITC program; however, an individual in the above scenario will still
earn more than what is lost in tax credits. Additionally, the tax credits represent a deduction in
tax
liability, not actual dollars refunded and at the disposal of the individual. Using the same data and
assumptions for the table above, this table details the impact to an individual's refund, if eligible.
Minimum
Wage
$11.50
Earned
Income
$23,920
$31,200
+$7,280
Federal EITC
$4,323
$2,786
-$1,537
Maryland
ETC Refund
$1,102
$710
-$392
County ETC
Refund
$1,102
$710
-$392
Assumptions: Single parent and two eligible children, with one full-time job (2080 hours per year) at
minimum wage.
~~nce
As before, an individual will receive more income at the $15.00/hour minimum wage to offset any
reductions in the Federal EITC and State/County ETC programs.
Implementation Issues
1.
Possible Different Phase-in Periods and "Off-Ramp" Provisions
Staff was directed to provide the Committee with additional information on different
phase-in periods used in other jurisdictions, as well as so-called "off-ramp" provisions. Three
jurisdictions generally illustrate the options
in
both regards. California and New York State have
implemented increases that provide for different schedules for small employers. In California,
employers with 25 or fewer employees get an additional year to reach $15.00 per hour, while in
New York, New York City employers with 10 or fewer employees get an additional year. Seattle
takes a somewhat different, and more complicated approach, requiring very large employers (500+
employees nationwide) to pay $15.00 per hour by January 1,2017.
64
Seattle employers with fewer
than 500 employees must pay $15.00 per hour by 2021.
Both California and New York also have "off-ramps" to pause increases if economic
circumstances so warrant. California's is based on specific statewide economic indicators, and
gives the Governor the discretion to temporarily suspend scheduled increases up to twice during
the phase-in if certain conditions exist. New York has a more general provision allowing
suspension of increases based on a broader analysis of the State economy. Seattle's law does not
include an "off-ramp" provision, nor does any local jurisdiction that has enacted a minimum wage
64
Large employers in Seattle that provide medical benefits to employees get an extra year, to 2018, to pay $15.00
per hour.
29
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increase thus far. This may be due to the challenges of getting sufficient economic data at a local
level
to
determine whether a suspension of increases is warranted.
The California, New York, and Seattle implementation schedules are described below:
California statewide phase-in:
MinimumWa e
$10.50/hour
$11/hour
$ 12/hour
$13/hour
$ 14/hour
$15/hour
6S
26 or more em
10
ees
January 1, 2017
Janu
1,2018
Jan
1,2019
1,2020
Jan
1,2021
January 1,2022
25
or fewer em
Jan
1,2018
1,2019
Janu
1,2020
January 1,2021
Jan
1,2022
Jan
1,2023
• Off-Ramp Provisions
Governor can choose to pause any scheduled increase for one year if either economy or
budget conditions are met. The increase to $1O.50/hour is not subject to off-ramps. Initial
determination of Governor by August 1 of each year prior to a January increase. The
Governor makes the final determination by September 1.
1.
Economy
Governor has the ability to pause an increase if seasonally adjusted statewide job
growth for either the prior 3 or
6
months is negative and retail sales receipts for the
prior 12 months is negative.
2.
Budget
Governor has the ability to pause an increase if any year from the current budget year
to two additional years is forecasted to be in deficit when including the next scheduled
increase. Pursuant to Proposition 2, a multiyear forecast is adopted as part ofthe annual
Budget Act. A deficit is if the operating reserve is projected to be negative by more
than 1 percent of annual revenues, currently about $1.2 billion. The budget off-ramp
can only be used twice.
New York statewide phase-in:
Date
NYC <11
emp.
NYC
l1+emp.
Suburban
NYC*
Rest of State
12/3112016
$10.50/hour
$11.00/hour
$10.00/hour
$9.70/hour
12/31/2017
$ 12.00/hour
$ 13.00/hour
$11.00/hour
$10AO/hour
12/3112018
$ 13.50/hour
$15.00/hour
$ 12.00/hour
$11.1 O/hour
$11.80/hour
12/3112019***
$15.00/hour
3 .OO/hour
12/31/2020
4.00/hour
$ 12.50/hour
12/31/2021
$15.00/hour
**
*
Nassau, Suffolk and Westchester Counties
**
After
2020,
the minimum wage in the rest of the State will continue to increase to
$15
on
an
indexed
schedule to be set by the Director of the Division of Budget (DOB) in consultation with the Department of
Labor.
ffi
65
As mentioned above, both the City of San Francisco and the City and County of Los Angeles have local minimum
wage laws that provide for a $15 per hour minimum wage in 2018
(San
Francisco) and 2020 (Los Angeles).
30
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***
Off-Ramp Provisions:
Beginning in
2019,
the State DOB Director will conduct an annual analysis of
the economy in each region and the effect ofthe minimum wage increases statewide to determine whether
a temporary suspension ofthe scheduled increases is necessary.
City o/Seattle phase-in:
Date
Schedule 1 (500+ Schedule 1 (500+
emp. nationwide) emp. nationwide)
with med. benefits
1, $Il.OO/hour
$Il.OO/hour
Schedule 2 «500
emp.
nationwide)* *
$ IO.OO/hour
Schedule 2 «500
emp.
nationwide)* **
$IO.OO/hour
April
2015
January 1, $ 13.00/hour
OO/hour
$I2.50/hour
$ 10. 5O/hour
2016
January 1, $I5.00/hour
$I3.50/hour
$Il.OO/hour
$ 13.00/hour
2017
January 1,
$I5.00/hour
$I1.50/hour
$I4.00/hour
2018*
$I2.00/hour
$15.00/hour
January 1,
2019
January 1,
$I5.75/hour
$13.50/hour
2020
January 1,
$I5.00/hour
2021****
January 1,
$I5.75/hour
2022
January
I,
$ 16.50/hour
2023
January 1,
$I7.25/hour
2024*****
*
Effective January 1, 2018, the hourly minimum wage paid by a Schedule 1 employer to any employee
shall be increased annually on a percentage basis to reflect the rate of inflation and calculated to the nearest
cent on January
1
of each year thereafter.
**
Effective January
1
of 20 16 and each year thereafter, Schedule 2 employers shall pay each employee an
hourly minimum wage that is the
lower
of (a) the applicable hourly minimum wage for Schedule 1
Employers or (b) the hourly minimum wage shown in the above schedule.
***
Effective January 1 of2016 and each year thereafter, Schedule 2 employers shall pay each employee
an hourly
minimum compensation
that is the lower of (a) the applicable hourly minimum wage for Schedule
1 Employers or (b) the hourly minimum wage shown in the above schedule.
"Minimum
compensation"
means the minimum wage in addition to tips actually received by the employee and reported
to the Internal Revenue Service, and money paid by the employer towards an individual employee's medical
benefits plan.
****
Effective January 1, 2021, the hourly minimum compensation paid by a Schedule 2 employer to any
employee shall equal the hourly minimum wage applicable to Schedule 1 employers.
*****
Effective January 1,2025, minimum compensation will no longer be applicable as defmed in the
law.
I
I
I
2.
Tipped
Employees
At the July 18 worksession, Council staff was asked to look into whether the existing law's
reporting requirement for employers of tipped employees could
be
modified for more proactive
31
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enforcement. As described above, the law currently allows an employer
to
apply a "tip credit"
equal to the County minimum wage less $4.00, in calculating a tipped employee's compensation,
as long as the employees combined earnings (employer paid plus tips) equals or exceeds the
minimum wage. The law further requires each employer who employs a tipped employee to submit
a quarterly wage report to the Director certifying that each tipped employee was paid the required
mInImum wage.
Because current law requires only a certification that each tipped employee is paid the
required wage, and not specific information about individual employees, it would require
substantial revision in order to allow for proactive enforcement (see OHR "Minimum Wage
Reporting Form at ©119). To enable OHR to determine that a particular employee was not
receiving the minimum compensation, employers would seemingly need to report each employee's
hours worked, compensation paid by the employer, and tips received. Expanding the reporting
requirement to this extent would likely present a significant burden to employers that employee a
substantial number of tipped employees.
It
would also essentially require an employer to self­
report violations.
Proposals and Requests Since the Prior Worksessions
1.
County Executive Memorandum
The County Executive sent a memorandum dated November 22,2016 to Council President
Floreen, stating his "support [for] the effort to move toward $15 per hour over an appropriate time
frame and under certain conditions." (see ©120-121) The Executive expressed specific concerns
about the Bill and stated his opposition to it as introduced. The Executive expressed specific
concerns about both economic impacts on businesses and adverse impacts on employment
opportunities, as well as the likely additional fiscal impact on the County due to increased costs of
contracts with nonprofits. In view of these concerns, he urged the Council to consider a longer
time frame for raising the minimum wage and to include a provision to give the Executive authority
to keep a scheduled increase from happening in the event of an economic downturn. He also urged
the Council to consider exemptions such as those included in the bill sent to the Baltimore City
Council from the Labor Committee.
2.
Councilmember Katz Memorandum
Councilmember Katz sent a memorandum to Councilmembers dated November 30, 2016
stating his concerns about the Council taking action on the Bill without adequate information about
potential impacts on businesses and workers. In concluding the memorandum, Councilmember
Katz asked Councilmembers to undertake a "robust economic impact study" before enacting any
further increases in the minimum wage. The memorandum is at © 122-123.
3.
Councilmember Floreen Memorandum
By memorandum to
0
LO Director Chris Cihlar dated December 1, 2016, Council President
Floreen requested that "OLO contract with outside experts as soon as possible in order to conduct
an economic impact analysis ofBil112-16. This memorandum is at ©124.
32
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4.
Possible Amendments
Councilmember Berliner may offer a set of amendments that would: (I) create separate
phase-in schedules for large (26 or more employees), medium (between 6 and 25 employees, and
small (5 or fewer employees) employers; (2) extend the phase-in schedule to 2022 for medium
employers and 2023 for small employers; and
(3)
create a mechanism by which scheduled
increases during the phase-in period may be temporarily suspended if certain economic
circumstances exist. These draft amendments are at ©125-127.
This packet contains:
Bill 12-16
Legislative Request Report
Fiscal and Economic Impact statement
Selected Public Hearing Testimony
Jaime Contreras, SEm
Laurie-Anne Sayles, Community Action Board
Progressive Maryland
UFCW Local 1994 MCGEO
Carlos Jimenez, AFL-CIO
Felix Kala, CASA
Mekdes Sisay
Ana Martinez, CASA
Boaz Young-EI, UFCW Local 400
Marilyn Balcombe, Gaithersburg-Germantown Chamber
Jennifer Russel, Greater Bethesda Chamber
Wendy Johnson
Stacey Brown, Signarama
Emily Bruno, Denizens Brewing Co.
Melvin
R.
Thompson, Restaurant Association of Maryland
Ilaya Hopkins, Montgomery County Chamber
Jane Redicker, Greater Silver Spring Chamber
Mshin Abedi, Maryland Association of Adult Day Services
Brigid Howe, Nonprofit Montgomery
Susie Sinclair-Smith, Coalition for the Homeless
Tim Wiens, Inter
ACCIDD
Dube,
Designing Thoughtful Minimum Wage Policy .
..
BLS Data
Inventory of Local Minimum Wage Ordinances
FY16 Minimum Wage/Seasonal Salary Schedule
FY16 General Salary Schedule
Fact sheet: The Real Minimum Wage
Statement from Arindrajit Dube, Ph.D.
C2ER Cost-of-Living Ranking
DLLR Occupational Wage Estimates
BLS Weights for CPI
Nonprofit Montgomery Minimum Wage Survey
33
Circle
#
1
4
5
13
15
17
19
21
24
26
27
29
30
34
36
38
40
44
46
50
52
54
56
57
60
73
76
84
85
86
89
110
111
112
113
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Social Service Programs Income Eligibility Spreadsheet
OHR Minimum Wage Reporting Form
County Executive Memo, November 22,2016
Councilmember Katz Memo, November 30, 2016
Councilmember Floreen Memo, December 1, 2016
Possible Berliner Amendments
116
119
120
122
124
125
F:\LAW\BILLS\1612 Minimum Wage - Annual Adjustment\HHS WKS 3 Memo 12-7-16.Docx
34
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Bill No.
12-16
Concerning: Human Rights and Civil
Liberties - County Minimum Wage ­
Amount - Annual Adjustment
Revised: 0312912016
Draft No.
-L-
Introduced:
April 12. 2016
Expires:
October 12, 2017
Enacted: _ _ _ _ _ _ _ _ __
Executive: _ _ _ _ _ _ _ __
Effective: _ _ _ _ _ _ _ _ __
Sunset Date:
....;N!..::o::::.:.n~e'---
_ _ _ __
Ch. _ _• Laws of Mont. Co. _ __
COUNTY COUNCIL
FOR MONTGOMERY COUNTY, MARYLAND
Lead Sponsor: Councilmember EIrich
Co-Sponsors: Councilmembers Leventhal, Riemer, Navarro and Hucker
AN
ACT to:
(1)
increase the County minimum wage by a certain amount;
(2) require the Chief Administrative Officer to adjust the County minimwn wage rate
each year; and
(3) generally amend the laws governing the minimum wage
By amending
Montgomery County Code
Chapter 27, Human Rights and Civil Liberties
Article XI. County Minirnwn Wage
Section 27-68
Boldface
Underlining
[Single boldface brackets]
Double underlining
[[Double boldface brackets]]
* * *
Heading or defined term.
Added to existing law by original bill.
Deletedfrom existing law by original bill.
Added by amendment.
Deletedfrom existing law or the bill by amendment.
Existing law unqlfected by bill.
The County Council for Montgomery County, Maryland approves thefollowing Act:
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BILL
No. 12-16
1
Sec 1. Section 27-68 is amended as follows:
27-68.
(a)
Minimum Wage Required.
County minimum wage.
2
3
Except as provided in Subsection (b), an
4
5
6
employer must pay wages to each employee for work performed in the
County at least the greater of:
(1)
the minimum wage required for that employee under the Federal
Act·
,
(2) the minimum wage required for that employee under the State
Act; or
(3) [$11.50] $15.00 per hour.
(b)
Annual adjustment.
The Chief Administrative Officer must adjust the
minimum wage rate required under Subsection (a)(3), effective July.L.
2021, and July
7
8
9
10
11
12
13
14
1
of each subsequent year,
Qy
the annual average
increase, if any, in the Consumer Price Index for Urban Wage Earners
and Clerical Workers, CPI-W, or
~
15
16
17
successor index, for the previous
calendar year. The Chief Administrative Officer must calculate the
adiustment to the nearest multiple of five cents, and must publish the
amount ofthis adjustment not later than March
1
of each year.
(£)
Exclusions.
The County minimum wage does not apply to an employee
18
19
20
who:
21
(1)
is exempt from the minimum wage requirements of the State or
Federal Act;
22
23
24
25
(2)
is under the age of 19 years and is employed no more than 20
hours per week; or
(3)
[(c)]@
is subject to an opportunity wage under the State or Federal Act.
Retaliation prohibited.
A person must not:
26
27
(1)
retaliate against any person for:
V
f:lJaw\bills\1S12 minimum wage - annual adjustment'lbill2.doc
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BILL No. 12-16
28
(A)
(B)
lawfully opposing any violation ofthis Article; or
filing a complaint, testifying, assisting, or participating in
any manner in an investigation, proceeding, or hearing
under this Article; or
29
30
31
32
(2)
obstruct or prevent enforcement or compliance with this Article.
33
34
Sec. 2. Transition.
Notwithstanding Section 27-68, as amended in Section 1, the County
minimum wage, until July 1, 2020, must be the greater of the minimum wage
required under the Federal or State Act or:
(a)
(b)
(c)
Sec. 3.
Approved:
35
36
37
effective July 1,2017, $1l.50 per hour;
effective July 1,2018, $12.50 per hour;
effective July 1,2019, $13.75 per hour.
Effective Date.
38
39
40
41
This Act takes effect on October 1,2016.
42
43
Nancy Floreen, President, County Council
44
45
Date
Approved:
Isiah Leggett, County Executive
46
This is a correct copy ofCouncil action.
Date
47
Linda M. Lauer, Clerk of the Council
Date
o
f:\law'lbills\1612 minimum wage -'annual adjustment\bill2.doc
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LEGISLATIVE REQUEST REPORT
Bill 12-16
Human Rights and Civil Liberties County Minimum Wage
DESCRIPTION:
Amount
-
Annual A4iustment
The Bill would increase the County minimum wage that must be paid
to certain employees working in the County for a private sector
employer or the County government to $15.00 per hour by 2020.
It
would also require annual adjustments to the County minimum wage
each year beginning in 2021.
The existing County minimum wage of $9.55 per hour, which will
increase to $10.75 on July 1 of this year and $11.50 on July 1,2017,
is insufficient to support a full-time worker in the County, and
existing law does not provide for annual increases based on inflation.
To maintain a reasonable living wage for workers in the County
when the State and federal minimum wage is insufficient.
Human Rights Commission, Office of Management and Budget,
Department of Finance
To be requested.
To be requested.
To be requested.
To be researched.
Josh Hamlin, Legislative Attorney, 240-777-7892
To be researched.
PROBLEM:
GOALS AND
OBJECTIVES:
COORDINATION:
FISCAL IMPACT:
ECONOMIC
IMPACT:
EVALUATION:
EXPERIENCE
ELSEWHERE:
SOURCE OF
INFORMATION:
APPLICATION
WITHIN
MUNICIPALITIES:
PENALTIES:
Class A civil citation and equitable relief.
F:\LAW\BILLS\16xx Minimum Wage - Annual Adjustment\LEGISLATIVE REQUEST REPORT.Doc
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ROCKVILLE, MARYLAND
MEMORANDUM
May 2, 2016
Nancy
Floreen,
President, County Council
TO:
t."ROM:
Jennife' A. Hughes, Director,
Joseph
F.
Beach,
Diredor,
I)eP~~:~;
of
Fillanc~
O~fMruiagen~Udget
SUBJECT:
PEfS for Bill 12-16, Human Rights aM Civil Liberties - County Minimum Wage
- Amount _
Annual Adjustment
.
Please find attached
the fiscal and
economic impact
~tatemellts
for
the
above­
referenced legislation.
JAI·):fz
cc:
Bonnie
Kirkland,
Assistant
Chief
Administrative Officer
Lisa Austin,
Offices
of
the County Executive
Joy
NUffi1i,
Special Assistant to tbe County Executive
Patrick
Lacefield,
Director,
Public lnfbrmation Office
Joseph
F.
Beach,
Dire.ctor, Department of Finance
Shawn Y.
Stokes, Direct.or, Office of
Human
Recourses
Jim Stowe, Director, Office of
Human
Rights
David Platt, Department
of
Finance
Corey Orlosky, Office of Management and Budget
Alex Espinosa, Office of.Management and Budget
Naeem
Mja.
Office
of
Management
and Budget
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Fiscal Impact Statement
Bill
12~16
Human Rigbts and Civil Liberties..County Minimum Wage-Amount"Annual
Adjustment
1.
Legislative Summary.
Bill. 12-16 would increase the County minimum wage
to
$15.00 per hour effective July I,
.2020. Under the bill's transition provision. the County minimum wage would increase
from $1 L50 effective July 1,2017 to $12,50 per hour July 1,2018, $13.75
per
hour July
1,2019, and $15.00 per hour July 1.2020.
2. An estimate of changes
in
County revenues and expenditu.res regardless
or
whether
the revenues or
expenditur~s
are assumed in the reeommended or approved budget.
Indudes source of information, assumptions, and methodologies used.
This proposed legislation would not change any County revenues or expenditures in the
County Executive's recommended FYI7 budget. The changesintbis proposed legislation
would have an impact beginning iIi FY19.
The fiscal impact of this bill has been estimated using the current minimum wage law
establishing a
minimum
wage of $11.50 effective July 1.2017
as
the baseline. To
determine
th~
impact, a projection of the minimum
~'agelseasonal
salary
schedule
was
used
to
discover
that
the changes to minimum wage would iznpact grades 81 through S5
in FY19 and beyond.
TheCo~ty
currently utilizes an estimated 565,258 hours of'-\'Ork
in grades 81 through S5.
Additionally~
once
th~m.inimumwage
reaches $15.00 per hour.
this
legislation would provide
~n
annual adjustment
to
the
minimum
wage by the annual
increase in the
CPt This
adjustment is used in the 6·year fiscal year projection in #3, and
would continue to have an
imp~ct
beyond 6
years.
Specifically for the Office of Human Rights, a person may file a complaint against their
employer for non-compliance
With
the law and
in
violation of the wage requirements in
this bill
with
the Maryland Department of Labor, Licehsingand Regulations Employment
Standard
Service.
It
is
unknown
,-vhetller
an
increase
in the minimum wage rate would
affect the number of complaints
filed
each year from Montgomery County so case
processing
and
closure
estimates
are
difficult to detenlline at this time, 'These variables·
should not impact revenues or expenditures in the foreseeable future.
TIle
Office of
Human Righis estimates a minimum cost
will
be required to print new minimum wage
po~ters
for the county employment community,
.
3. Revenue and expenditure estimates C!Overing at least the next 6 fiscal years.
'Ibe current minimum wage law provides for incremental changes to achieve a minimum
wage of $1150 in FYI8. The proposed legislation would add additional
minimum
wage
increases
beyond
FY18,
)eadin~to
an
estimafed~diponal
fiscal impact
of
$6,483.575 to
the County over the next 6
y~.,'P}is.~llJ~'lflep\qsents
the increases proposed to take
effect
in
FYI9 FY22,
a~$umi,ri~,thecUrrent
n;urrtber of hours worked
by
County
employees in the
affected
grades on the minimum wage/seasonal salary schedule.
w
"
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Minimum wage •
Hours worked •
Cost'
FYI8
$11.50 .
565,258
$0
FYI9
$12.50
FY20
_ . L h ••••• _ .
1
....
FV21
'" ."',".
~
,
...
$13.75
i
$15.00
565,258
,
"
"'
$6,997,758 . $7,606,259 '
. . . .
.........
$608,501
$1,369,127 •
Impact .
Note: cost estimate includes payroll tax af 7.65%
Total impact
The Office of Human Rights estimates
a.
minimum cost \vlll be required to print new
minimum
wage
posters
for
the
county
emploYI'l!ent
COmiIlunity.
4. An actuarial analysis through
the
entire
amort~tion
period for each regulation
that would affect retiree pension or group insurance costs.
Not
applicable.
S.
Later actions that.
may
aftect
future revenue
and
expenditures if
the
regulation
authorizes
future
spending.
Any substantive <:himges to the Utilization of employees on the minimum wage/seasonal
salary
schedule
would have an impact on the
estimat~
for the next 6 fiscal years.
6. An estimate of the staff time
n~eded
to implement the regulation.
There
would be I'l1inimal
impact
to
the Office of Human Rights staff in regards to
processing complaints
submitted
to and
enforced
by the Maryland Departm.ent of
Labor~
Licensing and Regulations Employment
StandardsServic~.
The Office ofHuman Rights
staff would continue to ru:ldress questions and provide clarification ofthe requirements of
the law and provide educational outreach to the general community.
7. An. explanation of how the
addj#onof
n~w~taff*eSp()~5itJiIities
would affect other
duties.
..
.
..
'1 •.
Not
applicable.
8. An estimate of costs when an
additional appropriation
is needed.
No additional appropriation
is
needed.
9. A
description
()f
any
variable that could affect revenue and cost estimates.
Cost
estimates
could be affected
by
changes in the utili:?'.ation ofemployees on the
minimum
wage/seasonal
salary schedUle.
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There is no impact
for
the
Offi~e
of;
Human
Ri:ghts~as
the
Maryland
DLLR
vvill
enforce
.
the law
and
process
complaii1t~~,,'
10. Ranges ofrevcnue or expenditures that are uncertain or difficult to project.
Not applicable.
11.
If
a regulation
is
likely to have no fIScal impact, why that is the case.
Not applicable.
12.
Other fiscal impacts or comments.
Not
applicable.
13. The following contributed to and concurred with this analysis.
James Stowe, Office of Human Rights
Corey Orlosky, Office of
Management
and
Budget
Lori O'Brien. Office of
Human Resources
..
I.
<;\
~;~.I',
Date
.
.
" ..,.'::. >'.,:
.
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Eco.nomi.: Impact
Statement
BiD
12~16,
Human Rights and Civil Liberties­
County Minimum Wage - Amount - Annual Adjustment
Background:
This legislation
would:
• Increase the minimum wage
set
in County Jaw
to
$15.00 perhour effective
July
1,
2020, and
• Beginning in 2021, the minimum wage would
be
adjusted
by
the annual increase
in
the Consumer
Price
Index for
Urban Wage Earners and Clerical
Workers
(CPl·
W)
for
the previous
calendar year.
The
County's minimum
\\'age would he
phased in over several years.
The minimum
wage would increase to
$12.50 per
hour
beginning on
July 1, 2018, increase
to.
$13.75
per hour
beginning on
July
1, 2019, and
increase
to $15.00 per hour
beginning
on
July
1,2020.
1.
The sources of information, assumptions, and methodologies
used.
The sources
ofinformation include economic research papers and
data
that analyzed
the
effects
of increasing
the
minimum wage
on
employment.
Those
papers and data
include
the follo\\ring:
• David Ncumark,
"The Effects
of
Minimum
Wages
on.
Employment", Federal
Reserve.Bank
of San
Francisco
(i-'RBSF)
Economic Letter,
December 21.
2015,
.. Robert PollinandJeannette
Wicks-Lim, "A $15 U.S.
Mininlum
Wage: How
the
.Fast-Food
Industry Could
Adjust Without
Shedding
Jobs'~,
Working
Paper
Series,
Political
Economy Research
Institute, University of
Ma,<;sachusetts
Amherst, January 2015, and
• Bureau of Labor
Statistics (BIB), U.S. Department
of
Labor.
"Characteristics
of Minimum Wage
Workers,
2013", BLS Reports,
March
2014.
According
to
Neunlark, "researchers
offer conflicting
evidence on whether
or
not
raising
the minimunl wage means
fewer jobs
for
low~skilled
workers." These
conflicts are
based
on
four models:
• The
'"neoclassical"
model or standard model of competitive labor markets
predict~
that a higher minimQnl wage will lead to job loss. This model
assumes
a
labor nlarket for a single
type
oflabor. According
to
this model, a
minimwn wage that Is
set above
the
competitive
equilibrium reduces
employment. Employers may substitute low· skilled labor for other factors of
production such as equipment or other types ofcapital resources. Second,
Page] of4
(j)
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Economic Impact Statement
Bill 12-16,
Human Rights and Civil Liberties­
Connty Minimum Wage - Amount - Annual Adjustment
higher
\~>ages
and fixed factors of production imply higher prices, thereby
reducing
product
and
labor demand.
• However,
since
the labor market is more complex than the ·"'neoc1assical
mode"
suggests, rui.
aliemative model is the
"labor-Iabor
substitution"
framework that may not result in total job losses butwiU result in a shift in
hiring from
fewer low-skilled workers to
more
high-skilled workers.
• A third
conceptual
model
a.'l
an alternative to
either the
"neoclassical" or the
"labor-labor substitution" model is
that
employers
ha.ve
significantly more
market power
than consumers. This monopsony could
be
the result ofpricing
power by the
employer.
that is,
he
or she is able to pass along the increase in
the wage rate through
higher prices.
This ability to pass on the wage
increase
is attributed to the
elastic/inelastic
demand for the product by the consumers.
• FinaHy,
a paper
by
Pollin and Wisk-Lim suggest that "there are four primary
ways for businesses to adjust to cost increases
other
than
reducing
employment." The four
ways include:
1)
an increase
in
the
minimum wage
wouId reduce absenteeism" lower turnover and training
cost.'4~
and
yield higher
productivity
~
2)
cover a share of the increase in the minimum wage
by
raising
prices (the monopsony model), 3) allocate a share ofthe
business
revenue
generated
by
economic growth to cover the increase in the minimum wage,
and 4) redistribute overall revenues within the finn from profits to the wages
of their .lowest-paid workers.
Alan Blinder. former Vice
Chaimlan
of the,Board of Governors ofthe Federal
Reserve System, posits three
reasons
minimum \.vages
do
not
affect
employment
similar to the PoUinfWisk-Lim study: .higher wages
may
reduce turnover and
therefore training costs, raising the minimum wage may eliminate the problem of
recruiting workers
at a
higher wage than current workers,
and
minimum
'wage earners
represent a
small
portion of the employer's cost such that an increase is relatively
insignificant to the employer's total C()st of production.
In
Neumark's paper, he provides the research estimates of the responsiveness
(elasticity) of raising tbeminimum
wage
to jobs losses. He reports elasticities
ranging from -0.1 to ..Q.2 depending on
the
makeup ofthe labor force and business
such as teenagers in restaurant industry
to
geographical locations. Ba..;ed on review of
the
re...;;earch,
Neumark suggests a reasonable estimate based on his reviews that
current
minimum wages "have directly reduced the number ofjobs
nationally
by
about 100,000
to
200,000 relative to the period before the Great
ReceS5ion.~~
He also
suggests
that this small decline in aggregate employment should be "weighed against
increased Vlliges for still-employed workers because of
higher
minimum wa.ges."
Based on 2013 data from the Bureau of Labor Statistics
(ALS),
there were 66,000
employees in Maryland out ofa total of 1.334 million hourly-paid workers (4.95%)
Page 2 of4
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Economic Impact
Statement
B111.12-16, HU:man Rights and
Civil
Liberties ­
County Minimum
Wage -
Amount - •
.<\nnnal Adjustment
earning at or below the miniml1Ill wage as measured by
the
labor force series
data.
Of
that
percentage, 2.2
percent workers were at the minimum wage and
2.7
percent were
below the minimum wage.
Since
the
2013
data
are based on
a
survey
ofhbuseho1ds
nationwide, there are no specific data on minimum wage employees in Montgomery
County.
Based
on BLS
data,
minimum wage
employees are
concentrated in the
leisure and hospitality industry, retail, and education and .health services. In tenns of
occupations, nearly
44% are
in food preparation and serving related occupations
.natioltwide.
2.
A description of any variable that could affect the economic impact estimates.
• The ability of the employer to pass the increase of the minimUin wage to
his
or
her customers;
• Ihe share
of minimum
wage camers to total
employment il)r a
particular
business;
• The
elast~c/inelastic
demand for the business's
product
or service;
• The elasticity ofraising the minimum wage and the
effects
on employment;
• '{be
c01'.1S
ofretraining workers, and
• The
extellt
to which higher
minimum wages induce
greater spending
in the local
economy.
3. The BiU's positive or negative effect,
if
any on employment, spending,
saving~
investment, incomes, and property values in the County.
As stated
pre\iously,
there is no consensus among economists on the
effects
of
the
minimum
wage on employment Based on the review of
the
research, it is not
certain
whether an increase in the minimum
wage
would either increa'le or decrease
employment.
'Ibis uncertainty is
based
on the following factors presented in
Section
2:
• The ability
of the employer to compellsate
fbrthe increase
in the minin.1U111
wage
by
pa')sing such increase onto customers with higher prices;
• TIle
proportion of the wage costs
among
workers
earning
the minimum wage
to
the
total costs of production;
and
• The
multiplier effect of increasing
the
minimum wage
on
the local
economy.
Finally, in the research studies presented above, the conclusions
are based
on
datasets
used
to
determine the effect of the minimum wage on employment, the statistical
methods used to reach those conclusions, and the model used as the theoretical
framework
to
conduct
the
analysis.
Page 3 of4
®
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Economic Impad Statement
BUII2-10,
Human
Rights' and Civil Liberties ­
County Minimum
"rage .... Amount -
Annual Adjustment
4.
If
a Bill
is
likely
to
have
no economic
impact, why is
that the
case?
It
is uncertain
whether ll<""Teasing the minimum wage would either
increase
or
decrea~
employment among
low·'wage
\\-'Orters,
As~1ated
in Section
3~
the
economic impact would be based on
the
assumptions
and the characteristics and
location of
those businesses
that \\'Ould
be
required to raise the
minimum
wage.
5.
The
following contributed to and concurred
llith thi-,
analysis: David
Platt, Mary
Ca'lciotti, and Robert Hagedoom, Finance.
Director
lI:lon,l(rtn'lent
of Finance
"ac~
--~-
Date
Page 4 of4
@
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3ZBJ
SEIU
Sfl'onger,Together
SERVICE EMPLOYEES
Testimony of Jaime Contreras, Vice President 32BJ
SHIU
Council Public Hearing on:
Bill 12-16, Human Rights and Civil Liberties - County Minimum Wage­
Amount - Annual Adjustment
June 212016
b
ow,
a.c
INTERNATIONAl UNION
Good evening Council President Floreen and Council members. My name is Jaime
Contreras and I aiD Vice President of 32BJ SEIU and Director of the Capital Area
District.
Thank you for the opportunity to testify here today on behalf of our members.
32BJ represents over 155,000 men and women in 11 states on the East Coast, as
well as Washington, DC. We have over 18,000 members here in the Capital Area
which encomp