Agenda Item 10
June 21, 2016
Public Hearing
MEMORANDUM
June 17,2016
TO:
FROM:
County Council
f'Jr11lr­
Josh Hamlin, Legislative
Attorn~
SUBJECT:
Public Hearing:
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 Health
and Human Services Committee worksession will be scheduled at a later date.
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 Bill 27-13,1 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 set to increase to $10.75 on 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 oftipped employees may include in the computation oftheir 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
County minimum wage Jaw has been amended twice since being established by Bill 27-13. BiII59-14
modified some ofthe effective dates for increases, and Bill 24-15 modified the method for calculating the ''tip
credit" allowed to employers oftipped employees.
1
The
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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 have enacted statewide laws that will increase the minimum wage for at least some workers
to $15 per hour over a period of years. State legislatures in Massachusetts
4
and New JerseyS
weighing measures raising the minimwn wage to $15 per hour for some or all workers. In this
region, the District of Columbia and Baltimore City are currently considering bills to phase in
minimum wage increases resulting in a $15 per hour minimum wage by 2020.
State laws:
Under California's new law,6 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 Cpr) beginning the first
January 1 after small businesses are at $15 per hour. The indexing may result in increases of 0
percent (but no decreases) with a ceiling of3.5 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.
7
Once the $15 per hour minimum wage has been
reached, the "off-ramp" provision expires.
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 of20 16, 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.
A chart showing the federal minimum wage rates from 1938-2009 is at
http://www.doLgov/whd/minwage/chart.htm
3
A
summary ofjurisdictions approving some fonn of$15 minimum wage is at
http://www.nelp.orgicontent/uploadsIPR-Minimum-Wage-Year-End-
J
5.pdf
4
http://www.metrowestdailvnews.com/article/20 160605fNEWS/160607750
5
http://www.nj.com/politics/index.ssfI2016/05/15minimumwagegetssenatecommitteeapproval.html
6
bJm§jikginfQJ~i.~lature&.a.go.Ylfa9~~.L12iIJN~yCIilllit~h.tmJlpilJ id=2..Q.L~2.Q.1Q.Q.s..B3
7
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
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.
2
2
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• 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
12/31/2021.
• For workers in the rest of the State, the minimum wage would increase to $9.70 at the end
of 2016, then another 70 cents each year after until reaching $12.50 on
12/3112020
-
after
which it 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.
• Beginning in 2019, the State DOB 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.
Bills under consideration in the region:
The District of Columbia is poised to enact a law this summer increasing the minimum
wage to $15 by 2020.
8
The bill, which is supported by Mayor Muriel Bowser, unanimously passed
its first reading before the full Council on June 7, and is expected to
be
finally voted on in July.
It
would continue to raise the District of Columbia minimum wage - currently $10.50, but already
set to increase to $11.50 on July 1, 2016 - in additional 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 D.C. 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.
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.
9
After reaching $15 per hour, the minimum wage will be adjusted each year to match
increases in the cost of living 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
• 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
http://lirns.dccouncil.us/Legislation/B21-0712?FrornSearchReSlllts=true
9
https:ilbaltimore.legistar.com/LegislationDetail.aspx?ID=2692688&GUID=FOB89A4C-DD59-42FF-B459­
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The Baltimore bill would also eliminate some exemptions under the City's existing law, and amend
the enforcement provisions of the law. A public hearing on the bill was held before the City
Council's Labor Committee on June 15.
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, if any, 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.
This packet contains:
Bill 12-16
Legislative Request Report
Fiscal and Economic Impact statement
F:\LAw\BILLS\1612 Minimum Wage - Annual Adjustment\PH Memo.Docx
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Bill No.
12-16
Concerning: Human Rights and Civil
Liberties - County Minimum Wage ­
Amount - Annual Adjustment
Revised: 03/29/2016
Draft No.
..L
Introduced:
April 12, 2016
Expires:
October 12. 2017
Enacted: _ _ _ _ _ _ _ _ __
Executive: _ _ _ _ _ _ _ __
Effective: _ _ _ _ _ _ _ _ __
Sunset Date:
---!.:.No~n.!.l::ei:..._
_ _ _ _ __
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 minimum 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 Minimum Wage
Section 27-68
Boldface
Underlining
[Single boldface brackets]
Double underlining
[[Double boldface bracketsD
* * *
Heading or defined term.
Added to existing law by original bil/.
Deletedfrom existing law by original bill.
Added
by
amendment.
Deletedfrom existing law or the bill by amendment.
Existing law unqffected by bill.
The County Council for Montgomery County, Maryland approves the following Act:
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BILL
No. 12-16
1
2
Sec
1.
Section 27-68 is amended as follows:
27-68.
(a)
Minimum Wage Required.
County minimum wage.
Except as provided in Subsection (b), an
3
4
5
employer must pay wages to each employee for work performed in the
County at least the greater
0
f:
(1) the minimum wage required for that employee under the Federal
6
7
8
Act
,
(2) the minimum wage required for that employee under the State
Act; or
(3)
[$11.50] $15.00 per hour.
9
10
11
12
13
14
(b)
Annual adjustment.
The Chief Administrative Officer must adjust the
minimum wage rate required under Subsection (a)(3), effective July
L
2021, and July
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
calendar year.
successor index, for the previous
15
16
The Chief Administrative Officer must calculate the
17
18
19
adjustment to the nearest multiple of five cents, and must publish the
amount ofthis adjustment not later than March
1
of each year.
if}
Exclusions.
The County minimum wage does not apply to an employee
20
21
22
who:
(1) is exempt from the minimum wage requirements of the State or
Federal Act;
(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:
23
24
25
26
27
(1) retaliate against any person for:
o
f:\law\bills\1612 minimum wage - annual adjuslment\bill2.doc
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BILL No. 12-16
28
29
30
31
32
33
(A)
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
(B)
(2)
obstruct or prevent enforcement or compliance with this Article.
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)
effective July 1,2017, $11.50 per hour;
effective July 1,2018, $12.50 per hour;
effective July 1,2019, $13.75 per hour.
34
35
36
37
38
39
40
Sec. 3.
Approved:
Effective Date.
41
This Act takes effect on October 1, 2016.
42
43
Nancy Floreen, President, County Council
Date
44
45
Approved:
Isiah Leggett, County Executive
Date
46
This is a correct copy ofCouncil action.
47
Linda M. Lauer, Clerk ofthe Council
Date
o
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LEGISLATIVE REQUEST REPORT
Bill 12-16
Human Rights and Civil Liberties County Minimum Wage Amount
-
Annual Adjustment
DESCRIPTION:
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:
GOALSAND
OBJECTIVES:
COORDINATION:
FISCAL IMPACT:
ECONOMIC
IMPACT:
EVALUATION:
EXPERIENCE
ELSEWHERE:
SOURCE OF
INFORMATION:
APPLICATION
WITIDN
MUNICIP ALITIES:
PENALTIES:
Class A civil citation and equitable relief.
F:\LA\V\BILLS\l6xx Minimum Wage - Annual Adjustment\IEGISLATIVE REQUEST REPORT.Doc
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ROCKVILLE, JvIARYLAND
MEMORANDUM
May 2, 2016
TO:
FROM:
Nancy Floreen. President, County Council
jennifer A. Hughes,
Dinx.i'Or.
Joseph F. Beach, Director, Depa
FEfS
for
BiHI2-16, Human Rights and Civil Liberties
-County
Minimum Wage
- Amount ...,
Annual Adjustment
SUBJECT:
Please find
atfached
the tiscal and economic impact
~tatements
for the
above~
referenced legislation.
JAH:fz
cc: Bonnie Kirkland, Assistant Chief Administrative Officer ,
Usa Austin. Offices
of
the
County Executive
Joy Nurmi, Special Assistant to the County Executive
Patrick Lacefield,
Director,
Publ.ic Information
Office
Joseph
F.
Beacb, Director, Department of Finance
Shawn
Y.
Stoke~,
Direct.or,
Office of
Human
Recourses
Jim Stowe, Director, Office of I-iuman Rights
David Platt. Department
of Finance
Corey Orlosky, Office of Management and Budget
Alex Espinosa, Office of Management and Budget
Naeem Mia,. Office of Management and Budget
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Fiscal Impact Statcmcnt
Bm 12-16
Human
Rights
and
Civil
Liberties-County
MinimumWage-Amount~Annual
Adjustment
1. Legislative
Summary.
Bill. 12-16 would
increase the
County
mtnimum
wage to $15.00
per hour effective
July 1,
.2020. Under the
bill's transition
provision, the County minimum
wage
would increase
from
$1 L50 effective
July
1.2017
to
$1250
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 expenditures regardless of whether
the revenues or expenditures are assumed in the rec:ommended or approved budget.
Includes source of information, assumptions, and methodologies used.
This proposed legislation would not change any County revenUes
or
expenditures in the
County
Executive's
recommended FY 17 budget. The cbangesin this proposed legislation
would
have
an
impact
beginning
in FY19.
The
fiscal impact
of this bill has been
estimated using
the
current minimum wage
law
establishing
Ii
minimum wage
of $1150
effective July
1, 20
17a5
the baseline. To
determine
the
impact~
a
projection
of
the
minimum
wage/seasonal
salary
schedule
was
used
to
discoverthat the changes to
minimum
wage would impact grades Sl through 85
in FYI 9 and beyond.
The
County
currently
utilizes an
estimated
565,258
hours
of
work
in
grades SI through S5. Additionally, once tbeminimurnwage
reaches
$15.00 per hour,
this
legislation
would
provide
~
annual adjustment
to the
minimum ",,-age
by
the
annual
increase in
the CPI.
This adjustment
is used in
the
6~year
fiscal
year projection
in
#3,
and
would
continue
to
hav~
an
imp~ctbeyond
6
years.
Specifically
f'Or
the
OUice 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, Licensing and Regulations Employment
Standard Service. It is unknown
whether an
increase
in the minimum
wage
rate
would
affect the number ofcomplaints
filed
each year from Montgomery County
so case
processing
and
closure
estimates
are
difficult
to
determine
at this time, These
variables
should
not
impact revenues or expenditures in
the foreseeahle
future.
The
Office of
Human
Rights
estimates a
minimum cost will be required to print
new minimum wage
posters for the county employment community.
3. Revenue and expenditure estimates
covering
at least the next 6 fiscal years.
The
CWTent minimum
wage law provides
for incremental
changes
to achieve a
minimum
wage
of $11.50
in
FY18. The
prQPo~ed
legislation
would
add
additional
minimum
wage
increases
beyond
FY18,
leadin~
to an
estimated
~ddiFional
fiscal impact
Qf
$6,483,575 to
the
County
over
the next 6
¥~.,11ps,e.stim~,~}~p~~sents.
the increases
proposed
to
take
effect
in FY19-FY22,
~surnip:~;thecurtent
nunlber
of hours
~'Orked
by
Cou.nty
employees
in
the affected grades on the minimum wage/seasonal salary schedule.
"
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...............
FY18
...............
"
"
FY19
Minimum wage:
Hours worked
,
.....
,
.....
,'"
$11.50 '
$12:50 '"
""'$13:75;
FY20
FY22
$15.41
565,258
565,258
565,258
$7,606,259 '
'$608,501
tost
Impact •
Note:
oo~t
estimate
includes
payroll
tID! of 7./ili%
Total impact
The Office of Human Rights estimates a minimum 'cost
will
be required to print new
minimum wage posters for the county employmen(community.
:
:}"
'
'
4. An actuarial analysis
through
the
entire
amortIZation
period for each
regulation
that would affect retiree pension or
group
insurance costs.
Not applicable.
S. Later actions that may
affed
foture
revenue and
expenditures
if
the regulation
autkorizes future
spending.
Any
substantive changes to the utilization of employees on the minimum wage/seasonal
salary
schedule would have
an impact on the estimate for the next 6 fiscaJ years.
6. An estimate
of
the staff
time needed
to
implement the regulation.
There would
be
minimal 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 Standards Service. The Office ofHuman Rights
staff would
continue
to address questions and provide clarification of the requirements of
the law and provide educational outreach to the general community.
7.
An
explanation
of
bow
the
add.itjtiD
6f
n~~talfi-espOI,18ibilities
would
affect otber
duties.
.
Not applicable.
8. An estimate of costs when an additional appropriation is needed.
No additional appropriation is needed.
9. A
description of
any
variable
that
could affeef revenue
and cost estimates.
Cost estimates could be affected
by
changes in the utili7..ation of employees on the
.minimum
wage/seasonal
salary
schedule.
(j)
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There is no impact for the Office of;
Human
,Rights ,as the Maryland
DLLR will
enforce
the law
and
process
complaii1~.~
, .' "
10. Ranges of revenue or expenditures that are uncertain or difficult to project.
Not applicable.
11.
If
a regulation
is
likely to have
no
flScalimpact, why that is the casco
Not applicable.
12.
Other fiscal impacts or comments.
Not applicable.
13. The following contributed to and concurred with tbis analysis.
James Stowe, Ofiice of Human Rights
Corey Orlosky, Office of Management and Budget
Lori O'Brien, Office of Hurnan Resources
..
~
.
..
~
Date
, ., i .
~~,
.... '... ". . .'
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In;tpad Statement
Bm 12-16,
Human Rights
and
Ci\'iI
Liberties­
County Minimum Wage - amount - Annual Adjustment
Econo~j(.'
Background:
This legislation
would:
• Increase the minimum wage set in
County
law to $15.00 per hour
effective
July 1,
2020,and
• Beginning
in 2021,
the
minimum wage
would
be
adjusted by the alIDual increase
in
the
Consumer
Price Index for Urban \Vage Earners
and
Clerical
Work~'fs
(CPI-W)
for the previou..'l
calendar
year.
The County's minimum wage
would
be 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 u.sed.
The
sources ofinform.a.tion include economic
research papers and
data that
analyzed
the effects
of
increasing the minimum wage on employment.
Those
papers and data.
include the fol!o\\'ing:
• David Neumark,
"The
Effect'; of
Minimum. Wages
on
Employment"~
Federal
Reserve
Bank
of
San Francisco
(t"RBSF)
Economic Letter, December 21 ,
2015,
• Robert Pollin and Jeannette Wicks-Lim,
"A
$15
U.S.
Minimum Wage:
How
the
I~'ast-Food
Industry
Could AdjustWithout
Shedding
Jobs'"
Working Paper
Series, Political Economy Research Institute, University
of
Massachusetts
Amher&i,
January
2015, and
• Bureau
of
Labor Statistics (BLS), U.S. Department
of
Labor,
"Characteristics
of
Minimum Wage
Workers.
2013", BLS Reports, Ma:rch
2014.
According
to Neumark,
"researchers
offer
conflicting evidence on
whether
or not
raisingilie minimum
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
minimum wage.
will
lead to job
loss.
This model
assumes
a labor market for a single type oflabor. According to this model, a
minimum 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.
Sec.ond,
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Economic Impact Statement
Bill 12-16, Human Rights and Civil Liberties­
County Minimllm \Vage - Amount - Annual Adjustment
higher Vr'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
~'neoclassical
modc" suggests, analiernative model is the "labor-Iabor substitution"
framework
that may
not
reStllt
in total job
losS(;.,'S
but
will
result in a shift in
hiring fTom fewer lowwskilled workers to
more
high-skilled workers.
• A
third conceptual model as
an
alternative
to
either the "neoclassical" or
the
"labor-labor substitution" model is that employers .have significantly more
market power
than com;umers..
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.
• Finally, a paper by .Pollin and Wisk-Lim suggest that "there are fow primary
ways for businesses
to adjust
to
cost
increases other than reducing
employment." The four
'ways
include:
1)
an increase
in the
minimum wage
would reduce absenteeism, lower turnover and training costs, 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 firm from profits to the wages
ofthcir
lowest-paid workers.
Alan
Blinder, former Vice Chairmall of the Board of Governors ofthe Federal
Reserve System, posits three reasons minimum wages do not affect emph,")yment
similar
to
the PollinlWisk-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 \wge earners
represent a small portion of the employer's cost such that an increase is relatively
insignificant
to
the
employer~s
total
cost
of production.
In Ncumark:g paper, he provides the
research
estimates of the responsiveness
(elasticity) of raising the minimum wage to jobs losses. He reports elasticities
ranging from
·0.1
to
wO.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 research? Neumark suggests a reasonable estimate based on his reviews that
current
minimum wages "have directly reduced the number ofjobs
nationally
by
about
IOO~OOO
to
200,000 relative to
tIre
period before the Great
Rec~'Sion:'
He also
suggests that this small decline in aggregate employment should be "weighed against
increased wages for still-employed w'orkers because of higher minimum wages."
Based on 2013 data from the Bureau of Labor Statistics (BLS), there were 66,000
employees in Maryland out ofa total of 1.334 million hourly-paid workers (4.95%)
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EccOnomic Impact Statement
.Bill
U-16, Human Rights and Civil Liberties ­
County Minimum Wage - Amount - Annual Adjustment
earning at or below the minimUIll 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
be10\v
the
minimum wage. Since the 2013 data are based
011
a survey ofholl..;;eh01ds
natiom,ride,
there are no spt.'Cific data
on
minimum wage employees in Montgomery
County. Based on BLS data, minimum
wage
employees are concentrated ill 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
nationwide.
2. A description of any variable
that could affect the
economic
imllaet
estimates..
• Ibe
ability
of
th(;~
employer
to
pass
the
increase
of
the
minimum wage to
his
or
her
customers~
• The
share
of
minimum
wage camel'S
to total employment for a
particu1~
business~
• The
elastic/inelastic demand for the business's
product or
service;
• 'Ine
e1asiicity
ofrdising
the minimum wage and the
effects
on
employment;
• The
costs
of
retraining
workers~
and
• The extent to which higher minimum wages induce
gre-dter
spending in the local
economy,
3. Tbe Bill's positive or negative effect, if any on employment, spending, saving,
investmen'4 incomes, and property
values in
the
County.
As stated previously, there is no consensus among economists
011
the effects of
the
minimum wage on emplo}ment. Based on the review ofthe research, it is not
certain whether an increase in the minimum wage would either increase
or
decrease
employment. This uncertainty is based on the following factors presented in
Section
2:
• The
ability of the employer to
compensate for the increase in the
111inirnum
''''age
by
passing such increase onto customers
with
higher prices;
• TIle proportion ofthe wage costs among workers earning the minimum wage
to
the
total costs of production; and
• The
multiplier
em~ct
ofincreasing the minimum
wage
on
the 10cal economy.
Finally,
in the research studies presented above, the conclusions are based. on datasets
used
to
determine the effect of the
minimum
wage on
ellipioyment.
the
statistics.1
methods used to reach those
conclusions,
and the model used as the
theoretical
framework to
conduct
the analysis.
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Economic Imp.act Statement
BilIl2-l6, Human Rights and Civil Liberties­
County Minimum \Vage '- Amount - Annual Adjustment
4.
If
a Bin
is
likely to
have
no economic
iD1pact~
why
is that the case?
It
is uncertain whether increasing the mjnimum wage would either increase or
decrease emploYlllent among low-wage "w'Orkers. As stated
in
Section 3; the
economic
impact
would be based on
the
assumptions and the characteristics and
location of those businesses that would
be
required to raise the
minimum
wage.
S.
The following contributed to and concurred
with
this analysis:
David Platt,
Mary
Casciotti, and Robert Hagedoom,
Finance.
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