HHS Item 1
October 9, 2017
Worksession
MEMORAND UM
October 5, 2017
TO:
FROM:
Health and Human Services Committ//..1
Josh Hamlin, Legislative
Gene Smith, Legislative Analys~
Attome./t-+{
SUBJECT:
Worksession:
Bill 28-17, Human Rights and Civil Liberties - County Minimum
Wage-Amount - Annual Adjustment
Bill 28-17, Human Rights and Civil Liberties - County Minimum Wage - Amount -
Annual Adjustment, sponsored by Lead Sponsor Councilmember Elrich, and Co-Sponsors
Councilmembers Leventhal, Riemer, Bucker and Navarro, was introduced on July 25. A public
hearing on the Bill was held on September 26.
Bill 28-17 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
require the Office of Legislative Oversight to conduct an annual analysis of the impact
of the County minimum wage.
Background
In 2013, the Council enacted Bill 2 7-13,
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 Bill 27-13, as amended, was 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, $10.75 on July 1, 2016, and $11.50 per hour on July 1, of this year.
There are no requirements in County law for further increases in the County minimum wage.
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
The County minimum wage law has been amended twice since being established by Bill 27-13. Bill 59-14
modified some of the effective dates for increases, and Bill 24-15 modified the method for calculating the "tip
credit" allowed to employers of tipped employees.
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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
changed since 2009.
2
There is a nationwide effort to increase the minimum wage at the federal,
state, and local levels to $15.00 per hour, which has thus far had some success.
3
California and
New York have enacted statewide laws that would increase the minimum wage in those states to
$15. 00 per hour over a period of years. In addition, several local jurisdictions and the District of
Columbia have passed laws gradually increasing their minimum wage to $15.00 per hour.
Bill 12-16
In January of this year, the Council enacted Bill 12-16,
4
which would have extended the
incremental increases set in County law by Bill 27-13 to go up to $15 per hour. The scheduled
increases under Bill 12-16 were based on the size of the employer: workers whose employers have
26 or more employees would reach $15.00 per hour by 2020
5
and those of employers with 25 or
fewer employees by July 1, 2022.
6
Bill 12-16 would also have required, beginning in 2023, 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 for the previous calendar year.
Bill 12-16 also included a "safety-valve" provision that would allow the County Executive
the ability to pause implementation of a scheduled increase under certain adverse economic
conditions. These conditions included: if total private employment for Montgomery County
decreased by 1.5 percent over the period from April 1 to June 30 of the previous year; total private
employment for Montgomery County decreased by 2.0 percent over the period from January 1 to
June 30 of the previous year; the Gross Domestic Product of the United States experienced
negative growth for the preceding two quarters: or the National Bureau of Economic Research
determined that the United States economy is in recession.
On January 23, 2017, the Executive vetoed Bill 12-16. In a memorandum explaining his
veto (©8-10), he expressed support for "the effort to move toward $15 per hour" but indicated that
the enacted Bill went "too far, too fast." The Executive expressed hope that a new bill, with broader
support, could be introduced "in the near future," and called for a study, to be completed by July
of this year, examining the anticipated fiscal and economic impact of an increased County
A chart showing the federal minimum wage rates from 1938-2009
is
at:
http://www.dol.gov/whd/minwage/chart.htm
3
A summary of jurisdictions approving some form of minimum wage increase in 2016 is at:
http ://raisetheminimumwage.com/21-states-localities-approved-minimum-wage-increases-in-2016/
4
The packet for Council action on Bill 12-16 is at:
http://www.montgomerycountymd.gov/COUNCIL/Resources/Files/bill/20l6/Packets/20170117 6.pdf
5
The scheduled increases in the minimum wage paid by employers of26 or more employees under Bill 12-16 were:
$12.50/hr. effective July 1, 2018; $13.75 in 2019; and $15.00 in 2020.
6
The scheduled increases in the minimum wage paid by employers of25 or fewer employees under Bill 12-16 were:
$12.00/hr. effective July 1, 2018; $12.75 in 2019; $13.50 in 2020; $14.25 in 2021; and $15.00 in 2022.
2
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minimum wage. In addition to the study, the Executive cited exemptions for small businesses and
youth workers, and the provision for reaching a $15/hour minimum wage by 2022, as
preconditions for him to fully agree with a new bill increasing the minimum wage.
Bill 28-17
Bill 28-17 would replicate the changes that would have been implemented under Bill 12-
16, but with two key distinctions aimed at addressing issues that were raised during that Bill's
consideration. Under Bill 28-17, two additional classes of employers would be subject to the
slower phase-in schedule for smaller employers (i.e., $15.00/hr by 2022). This schedule would
apply to employers who: (1) employ 25 or fewer employees; (2) have tax exempt status under
Section 501(c)(3) of the Internal Revenue Code; or (3) provide "home health services" or "home
or community-based services," as defined under federal Medicaid regulations (see ©11-19), and
receive at least 75% of gross revenues through state and federal medical programs. The third group
(Medicaid funded employers) would have to be determined eligible by the Office of Human
Rights. Bill 28-1 7 would retain the annual adjustment based on increases in the Consumer Price
Index and the requirement that the Office of Legislative Oversight provide the Council with an
annual analysis of the impact of the County minimum wage on the local economy. The Bill also
includes the "safety-valve" provisions of Bill 12-16, which allow the Executive to temporarily
suspend scheduled increases during the phase-in.
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.
The Minimum Wage Impact Study
As referenced in his veto message, the Executive commissioned a study of the impacts of
increasing the County's minimum wage to $15 per hour (the "Study"). On August 1, 2017, the
Executive forwarded the Study,
7
performed by PFM Group Consulting, LLC (PFM) to the Council
(see ©20). Key impacts of the proposed minimum wage increase identified by the Study included
a projected loss of approximately 47,000 jobs by 2022, an estimated loss of income of
approximately $396.5 million from 2017 to 2022, a projected need for $10.0 million in additional
funding in the County budget to address increased payroll costs, and a projected loss of income
tax revenue of $40.9 million from FY2018 to FY2022. (See Executive Summary at ©21-28). The
Study's projections were largely based on:
7
The full Study is at http://montgomerycountymd.gov/OPI/Resources/Files/2017/MC Minimum-Wage-Impact-
Analysis 7-31-2017.pdf
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Data from the County regarding its budget, contracts with outside vendors, and County
workers.
Feedback from County officials on the possible impact of the proposed increases gathered
during interviews conducted in April and May 2017.
Feedback from multiple County business owners and business community leaders gathered
during interviews conducted in April and May 2017.
Responses from an electronic survey of Montgomery County business owners conducted
in May 2017.
Feedback from multiple County non-profit employees and non-profit community leaders
gathered during interviews conducted in May 2017.
Responses from an electronic survey of Montgomery County non-profit leaders in May
2017.
Third-party economic and demographic data and research from sources that include the
United States Census Bureau (Census), the Bureau of Labor Statistics (BLS), the Center
on Wage and Employment Dynamics (CWED), the National Employment Law Project
(NELP), etc.
Information from the websites and public documents of other cities and counties that have
increased their minimum wage rates in recent years.
See pp. 14-17 of the Study for a description of the Study approach and methodology.
After reviewing the Study, Councilmembers had several questions about the Study, aimed
at better understanding the Study's methodology and findings. These questions were forwarded to
the Executive on August 15, 2017, with a request that PFM provide written answers by September
5, 2017 (see ©29-32). Also on August 15, the Executive sent a letter to PFM formally requesting
that PFM review the methodology and findings of the Study (see ©33-34). In the letter, the
Executive expressed concern about the projected number of jobs lost and economic impact, and
noted that PFM itself had indicated that "there might be a problem with the methodology and
calculation of the fiscal impact and resulting job impacts." The Executive requested that the review
receive immediate attention.
On September 13, 2017, the Executive sent a memorandum to Council President Berliner
laying out a suggested approach for moving forward with Bill 28-17 (see ©35-36). In the
memorandum, the Executive noted the challenges faced in conducting the Study, and indicated
that Executive Branch staff still had concerns about certain findings in the Study. Due to
uncertainty over whether the concerns could be adequately addressed in a timely manner, the
Executive recommended that the Council consider moving forward with an amended version of
Bill 28-17.
The Executive recommends the following changes to the Bill:
Amend the size of small employers to be 50 or fewer employees.
Amend the timeline for reaching the $15 minimum wage to:
o July 1, 2022 for large employers; and
o July 1, 2024 for small employers and non-profits.
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Establish a 90-day period after employment during which an employer may pay a new
employee 85% of the minimum wage.
Enact a County opportunity wage so that the County is not automatically tied to the State
opportunity wage, which is 85% of the State's minimum wage for workers under 20 years
of age for the first 6 months of employment. The intent of the opportunity wage is to
provide an incentive for employers to give opportunity for work experience to younger
workers.
State and local minimum wage laws around the U.S.
Twenty-one states, plus the District of Columbia, have approved minimum wage increases
since 2014. California, New York, and D.C. are phasing in $15 minimum wages. Many larger
cities, including Seattle, San Francisco, Los Angeles, D.C., and most recently Minneapolis, have
enacted local minimum wage laws that ultimately raise the minimum wage to $15.00 per hour.
The state-of-play regarding state and local minimum wages is discussed in some detail in the
January 13 memorandum that was part of the action packet for Bill 12-16 (see ©37-70).
8
Since the enactment (and subsequent veto) of Bill 12-16, there have been significant
developments related to local minimum wage laws in Seattle and Minneapolis, Minnesota.
Additionally, there has been some movement among businesses in increasing pay.
9
On September
25, Target announced its intention to raise its minimum pay to $11 an hour, with a "commitment"
to setting its lowest wage at $15 an hour by 2020.
10
The Seattle studies
Two studies examining the impact of increases in the minimum wage in Seattle were
released in June, 2017. In late June, researchers from the University of Washington (UW), which
was commissioned by Seattle to study the impacts of its minimum wage increases, released a
working paper through the National Bureau of Economic Research.
11
A two-page summary of the
paper is at ©71-72. The headline-grabbing
12
paper examined the effects of both the first and second
scheduled increases in the Seattle minimum wage. The first of these was an increase from $9 .4 7
to as much as $11.00 per hour on April 1, 2015; the second, in January 2016, raised the minimum
wage from $10. 5 0 to $13. 00 per hour. In conducting the study, researchers relied on data from the
State of Washington Employment Security Department showing hours worked, in addition to
eammgs.
From the first increase, researchers noted a 1.5% increase in hourly wages for low wage
employees (i.e., those earning $19/hour or less), modest reductions in employment, and little
The full packet (memorandum plus attachments) can be accessed at:
http://www.montgomerycountymd.gov/COUNCIL/Resources/Files/bill/2016/Packets/20170117 6.pdf
9
https://qz.com/1086383/big-american-companies-like-target-and-walmart-are-attracting-new-workers-by-raising-
their-minimum-wages/
10
https://corporate.target.com/press/releases/2017 /09/target-raises-minimum-hourly-wage-to-1 l-commits-to
11
https://evans. uw.edu/sites/default/files/NBER%20Working%20Paper.pdf
12
https://www.seattletimes.com/business/uw-study-finds-seattles-minimum-wage-is-costing-jobs/;
https://www.washingtonpost.com/news/wonk/wp/2017 /06/26/new-study-casts-doubt-on-whether-a- l 5-minimum-
wage-really-helps-workers/?utm term=.05d 10a6 l e6d8
8
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change in total payroll for low-wage jobs. The second increase had a significantly larger impact,
increasing pay in low-wage jobs by about three percent, but also resulting in a nine percent
reduction in hours worked in these jobs, and a six percent decrease in what employers collectively
pay,
and workers earn,
for those low-wage jobs. The net effect on the average low-wage worker
in Seattle, according to the paper, was a loss of about $125 per month per job.
Criticism of the UW paper was swift,
13
and focused largely on the study's methodology,
which excluded businesses with multiple locations, from its analysis. Because this exclusion left
out large chain restaurants and big box retailers, impacts on roughly 40% of Seattle workers,
including a significant number oflow-wage workers, were not even considered. Critics pointed to
a study by the Center on Wage and Employment Dynamics (CWED) at the University of California
- Berkeley's Institute for Research on Labor and Employment released shortly before the UW
paper, which offered a strikingly different view of the impacts of the minimum wage increase on
Seattle workers.
14
The abstract for the CWED study is at ©73-74.
CWED researchers examined data on Seattle's restaurant industry from 2009 to 2016, thus
reflecting the first two scheduled increases in Seattle, up to $13.00 per hour. The researchers
focused on the food-service industry, and found that wages in food services increased "in line with
the lion's share of results in previous credible minimum wage studies." Notably, the CWED
researchers determined that employment in food service was not affected, even among the limited-
service restaurants. More specifically, the evidence presented by the CWED researchers suggests
that increasing the minimum wage in Seattle up to $13 per hour resulted in higher wages for low-
paid workers without causing disemployment. Each ten percent minimum wage increase in Seattle
raised pay by nearly one percent in food services overall and by 2.3 percent in limited-service (fast
food) restaurants.
15
Minneapolis minimum wage law
On June 30, the City of Minneapolis, Minnesota passed a municipal $15.00 per hour
minimum wage law.
16
As with all the local minimum wage laws, Minneapolis' ordinance phases
increases over a period of years. Similar to Bill 28-17, there are two tiers in the phase-in, with
employers classified by number of employees.
17
Under the Minneapolis law, the $15.00 per hour
minimum wage applies to employers with more than 100 employees beginning July 1, 2022, with
increases indexed to inflation beginning January 1, 2023. Small employers (100 or fewer
employees) will reach the $15.00 requirement in 2024.
18
http://fortune.com/2017 /06/27 /seattle-minimum-wage-study-results-impact-15-dollar-uw/
http://irle.berkeley.edu/fi!es/20l7/Seattles-Minimum-Wage-Experiences-2015-16.pdf
15
CWED researchers found that wages increased much less among full-service restaurants, likely indicating that
employers made use of the tip credit component of the law.
16
http://www.minneapo lismn. gov/www/ groups/pub lic/@clerk/documents/webcontent/wcmsp-2012 7 8 .pdf
17
The law actually includes three size classifications of businesses. In addition to "large business" (more than 100
employees) and "small business" ( 100 or fewer employees), it contains a definition for "micro business," meaning "an
employer that employs 20 or fewer employees." However, the term is not used in the substantive provisions of the
ordinance, so it does not appear to have any applicability to minimum wage requirements.
18
Small employers in Minneapolis will likely never be subject to a minimum wage requirement of
exactly
$15.00 per
hour, because the law provides for annual inflation adjustments to the minimum wage for large employers beginning
January 1, 2023, and requires that, effective July I, 2024 the minimum wage rate for large employers applies to
all
14
13
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The implementation schedule in Minneapolis is as follows:
Date
Jan. 1, 2018
July 1, 2018
Julyl,2019
July 1, 2020
July 1, 2021
July 1, 2022
2023
July 1, 2024
Large employer
$10.00
$11.25
$12.25
$13.25
$14.25
$15
Jan. 1: $15 indexed to
inflation
$15 indexed to inflation
Small employer
No increase
$10.25
$11
$11.75
$12.50
$13.50
July 1: $14.50
$15 indexed to inflation
Another notable feature of the Minneapolis law is that it allows an employer to pay a sub-
minimum, or "training wage" of 85% of the applicable minimum wage, rounded to the nearest five
cents, to an employee under the age of 20 years who is employed in a city-approved training or
apprenticeship program, for the first 90 days of employment. This provision is analogous to the
opportunity wage permitted under the existing County minimum wage law, though it is more
restrictive and for a shorter duration.
Fiscal and Economic Impact
0MB has indicated that the Fiscal and Economic Impact statements for the Bill will not be
complete until October 16 (©75). However, since the timelines and minimum wage amounts in
this Bill are essentially identical to those of Bill 12-16, the statement for Bill 12-16 may be useful
(see ©76-83). For Bill 12-16, 0MB estimated a total fiscal impact in fiscal years 2018 through
2022 of $6,483,575. This estimate was based on pay increases to employees on the minimum
wage/seasonal salary schedule, assuming the current number of hours worked by affected
employees. It does not include any impact related to increases in the supplement paid to providers
of services to adults with developmental disabilities (see discussion of this issue below). The
Office of Finance noted that "there is no consensus among economists on the effects of the
minimum wage on enforcement," and concluded that it is uncertain whether increasing the
minimum wage would either increase or decrease employment among low-wage workers.
Public Hearing and Correspondence
Thirty-seven people testified at the September 26 public hearing. As with Bill 12-16's
public hearing, a number of perspectives were presented. Opponents of the Bill warned of adverse
effects on businesses, which could ultimately hurt the workers the Bill is intended to help. Ron
Zimmerman of Zimmerman's Ace Home Center presented a breakdown of his payroll expenses,
and said that enactment of the Bill would cause him to close his business (©84-86). Jennifer Russel
employers. In effect, on July 1, 2024 small employers will go from a minimum wage rate of $14.50 per hour to a rate
of$15.00 plus the annual inflation increases of January 1, 2023 and 2024.
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of the Greater Bethesda Chamber of Commerce reiterated concerns she expressed at the public
hearing for Bill 12-16, highlighting that the impacts of the Bill are not clear (©87-88). Ilaya
Hopkins of the Montgomery County Chamber of Commerce cited potential negative impacts of
further minimum wage increases on small businesses (©89-93). In a letter, the Greater Silver
Spring Chamber of Commerce reiterated an oft-stated concern that the increases were "too much,
too fast" (©94-95).
Maddy Voytek of the Maryland Retailers Association referenced the recently released
University of Washington study of the effects of Seattle's minimum wage increase, and warned of
increasing costs for businesses (©96). Melvin Thompson of the Restaurant Association of
Maryland strongly opposed the Bill, saying it would have a particularly significant effect on
County restaurants due to the labor-intensive nature of the business and its very narrow profit
margins (©97-98). These concerns were also shared in a letter from James Plamondon of the
Plamondon Companies, which operate four company and one franchisee-owned Roy Rogers
restaurants in the County (©99-100). The Agricultural Advisory Committee wrote in opposition
to the Bill because it would put Montgomery County farms at a competitive disadvantage
compared to farms in neighboring jurisdictions (© 101 ).
The Bill's supporters referenced the high cost of living in Montgomery County, and
included first-hand accounts of the struggle to get by on minimum wage. Jaime Contreras of the
SEIU (©102-103), Pamela Luckett of the Community Action Partnership (©104-105), and Amy
Millar of UFCW Local 1994 (© 106-107) presented examples of the financial needs of different
hypothetical households, all of which were far above what could be attained working one full time
minimum wage job. Ethan Kaplan, Associate Professor of Economics at the University of
Maryland also spoke in support of the Bill, criticizing the PFM Study, referencing support for the
notion that there are essentially no negative employment effects of a minimum wage that is 55%
of the area median wage, and pointing out potential indirect benefits of a minimum wage increase
(©108-113). Representatives from the Economic Policy Institute (EPI) (©114-121) and National
Employment Law Project (NELP) (©122-137) offered testimony in support of the Bill, against
any sub-minimum or opportunity wage, and, in EPI's case, against the slower phase-in schedule
proposed by the Executive.
Diamante Rodriguez, offered general support for the Bill, but supported different rules,
such as the "opportunity wage" for young workers, and particularly young workers of color, who
face additional challenges entering the workforce (©138-140). The Council also heard from Jared
Hautamaki (©141-142), Carlos Alvarado (©143) and Jose Ventura (©144), all of whom presented
first-hand experience of the struggles faced by low-wage workers.
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. Tim Wiens of Montgomery County Inter ACC/DD said
that the organization shares the goal of the Bill, but estimated that organizations serving adults
with developmental disabilities will need an additional $19,481,220 in FY23 County funding to
maintain wages of direct service providers at 125% of the increasing County minimum wage
(©145-146). Afshin Abedi of the Maryland Association of Adult Day Services indicated that adult
day care providers could not pass on additional labor costs to consumers, because they are
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prohibited from charging Medicaid patients for services. He asked that the Council consider
committing to a supplement similar to that paid to DDA providers (©147-149). The Jewish
Community Relations Council expressed significant concerns about the impact of the Bill on the
ability of its affiliated agencies to continue to offer services to several constituencies, including
home care, nursing care, and preschool and aftercare (©150-153).
Issues for Committee Discussion
The issues raised by this Bill are essentially the same as those raised by Bill 12-16. Staff
has included the action memorandum for Bill 12-16 at ©3 7-70. The Executive's recommendations
in his September 13 memorandum present new considerations, which are discussed below, as is
the continued concern expressed by providers of services to adults with developmental disabilities
about future funding levels.
1.
Implementation timeline
Like Bill 12-16, Bill 28-17 has a two-tiered transition, or phase-in, under which the
minimum wage increases each year, ultimately reaching $15.00 per hour in 2020 for employers
with 26 or more employees. Smaller employers, non-profits, and certain Medicaid-dependent
service providers
19
reach the $15.00 per hour minimum two years later, in 2022. The Executive
has recommended that this transition be more gradual, with the larger employers reaching the
$15.00 minimum in 2022, and the smaller employers, non-profits, and eligible service providers
reaching it in 2024.
As with all of his recommendations on the Bill, the Executive didn't offer a specific
rationale for this proposal. However, a phase-in schedule where suburban jurisdictions move
toward the ultimate minimum wage level slightly more slowly than the urban, regional economic
driver is not unprecedented; this model is employed in New York. In New York City, minimum
wage increases have a two-tiered phase-in, with large businesses (those with at least 11 employees)
reaching a $15.00 per hour minimum on 12/31/2018, and small businesses (those with 10
employees or fewer) reaching $15.00 per hour on 12/31/2019. In suburban New York City
(Nassau, Suffolk and Westchester Counties), the minimum wage would not reach $15.00 per hour
until 12/31/2021.
20
With Washington D.C. already committed to reaching a $15.00 per hour
minimum wage by 2020, this slower transition would resemble that model.
2.
Size of small business
As noted above, Bill 28-1 7 distinguishes between "larger" and "smaller" businesses for the
purposes of phasing-in the $15.00 per hour minimum wage, with the demarcation being between
25 and 26 employees. The Executive has recommended that this be changed to 50-51, so that
Specifically, the slower phase-in applies to employers who: (1) employ 25 or fewer employees; (2) have tax exempt
status under Section 50l(c)(3) of the Internal Revenue Code; or (3) provide "home health services" or "home or
community-based services," as defined under federal Medicaid regulations and receive at least 75% of gross revenues
through state and federal medical programs.
20
The minimum wage in New York outside the New York City metro area would also increase, eventually reaching
$15.00 per hour, but on a much slower timeline.
19
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employers with 51 or more employees reach the $15.00 requirement two years earlier than those
with 50 or fewer employees. Raising this number would increase the number of establishments
21
subject to the slower transition by 1,408, and the number jobs by nearly 50,000. However, 54.5%
of jobs would remain in the faster phase-in, including most jobs with chain retail and food service
establishments. This change would likely provide the extra implementation time to a substantial
number oflocal businesses. However, many have expressed concern about the amount ofincreases
proposed in the Bill, regardless of the transition period. The table below shows the number of
establishments in six size categories, and more importantly, the number of jobs in these categories.
Breakdown of County Establishments by Size
Number of
Percent of
Establishments
Total
10 or fewer jobs
26,457
81.1%
10.4%
11 to 25 jobs
3,384
26 to 50 jobs
1,408
4.3%
51 to 99 jobs
2.3%
752
1.7%
100 to 499 jobs
568
0.1%
Greater than 500 jobs
43
Source: 2017Ql QCEW; County, private establishments only
Establishment Size
3.
90-day training wage
Number of Jobs
63,069
54,874
49,702
52,240
100,723
47,361
Percent of
Total
17.1%
14.9%
13.5%
14.2%
27.4%
12.9%
In his September 13 memorandum, the Executive recommended that the Bill provide for a
90-day period after employment during which an employer may pay any new employee 85% of
the County minimum wage.
22
The purpose of this recommendation is apparently to permit
employers to pay a lower wage to employees for a very short period to mitigate against the claimed
high turnover among new employees. Businesses, often restaurants, have indicated that new hires
at low-wage positions frequently quit within the first weeks of employment; this would reduce
these businesses' investment in these employees until a point where retention of the employee is
more likely. The amount of savings for a business would amount to $2.25 per employee hour, or
$90.00 per 40 hour work week, during the 90-day period at a $15.00 per hour minimum wage.
4.
Opportunity wage
Under current County law, employees subject to an "opportunity wage" under the State or
federal minimum wage laws are exempt from the County minimum wage. The opportunity wage,
The U.S. Census defines "establishment" as "generally a single physical location where business is conducted or
where services or industrial operations are performed (e.g., factory, mill, store, hotel, movie theater, mine, farm, airline
terminal, sales office, warehouse, or central administrative office). An enterprise, on the other hand, may consist of
one or more locations that are more than 50 percent owned by the same entity performing the same or different types
of economic activities. Each establishment of that enterprise is assigned a NAICS code, based on its own primary
business activity." For example, there are five Target stores
in
the County. Each of these stores is an establishment
and thus Target Corporation would be represented five times (once for each store) in the data above.
22
For reference, 85% of the current County minimum wage of $11.50 per hour would be $9.78; 85% of a $15.00
minimum wage would be $12.75.
21
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or "youth minimum wage" as it is called in federal law, is essentially a sub-minimum wage for
young workers that may be paid for a limited period of time. The intent behind these policies is to
try to incentivize the hiring of young people just entering the workforce by discounting their labor
for a limited period of time. This mechanism is the component of the minimum wage law that
comes closest to addressing, however incompletely, Councilmember Rice's concern that young
people, and particularly young people of color, already face undue hardship entering the
workforce, and that increasing the minimum wage will exacerbate that hardship.
Both State and Federal law provide for an opportunity wage, but the amounts of the sub-
minimum and the duration that it may be paid differ. The federal youth minimum wage allows
employers to pay employees under 20 years of age a minimum wage of $4.25 per hour for 90
calendar days (not work days) after they are first employed. The State law provision requires a
higher rate of pay, but allows it for a longer period. Under Maryland Labor and Employment Code
§3-413(d)(l), an employer may pay an employee under the age of 20 years a wage equal to 85%
of the State minimum wage for the first 6 months that the employee is employed. This amounts to
a minimum of$7.86 per hour at the current State minimum of$9.25, rising to $8.59 when the State
minimum increases to $10.10 per hour on July 1, 2018.
Because the State opportunity wage is higher than the federal youth minimum wage (and
in fact higher than the full federal minimum wage), it applies to eligible employees in Montgomery
County. The Executive has called for an amendment to the Bill that would provide for a specific
County opportunity wage, using the same formula as the State, but pegged to the County rather
than the State minimum. Under this proposal, a County opportunity wage would be $9.78 per hour
at the current County minimum of $11.50, and would rise to $12.75 when the County minimum
reaches $15 per hour under the Bill. Tying the opportunity wage to the County, rather than State,
minimum wage is consistent with the notion that the higher County minimum is necessary due to
the higher cost ofliving in the County relative to the rest of Maryland. However, it would diminish
the incentive to employers to higher these young workers, as it would reduce the "discount" at
which they could be employed for their first six months of employment.
5.
DDA providers supplement
Throughout the consideration of Bill 12-16 and this Bill, the Council has heard from
organizations that provide services to adults with developmental disabilities ("DD providers").
These organizations are largely dependent on federal Medicaid reimbursement, which does not
adequately account for the higher cost of living in Montgomery County, or the higher minimum
wage. Historically, the County has provided an annual financial supplement to these organizations
in recognition of the higher cost ofliving. InterACC/DD has expressed support for the goals of the
Bill, but stated a concern that the County supplement may not keep pace with the increases in the
minimum wage, and that the organizations will not be able to maintain their practice of paying
their direct service providers an average of 125% of the County minimum wage.
Similar concerns have also been expressed by the Maryland Association of Adult Day
Services (MAADS) whose affiliates are also frequently reliant on Medicaid reimbursement, and
unable to pass along cost increases. Adult day care providers do not currently receive a dedicated
supplement from the County, but MAADS has asked the County to consider implementing one.
11
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Because there is no benchmark for this supplement, as there is for the DD providers, the potential
cost to the County of such a commitment is unknown.
The DD supplement is not provided for by law, but is approved through the annual budget
process. Because the commitments sought by the DD providers and MAADS are budget, and not
minimum wage issues, any steps to address their concerns legislatively will need to be done
through separate legislation. Council staff is currently working on such legislation.
Recommended staff amendment
OLO
's
annual reporting responsibility
Bill 28-17 currently includes a provision requiring the Office of Legislative Oversight
(OLO) to provide an annual "analysis of the impact of the County minimum wage on the local
economy." After seeing the challenges faced by PFM in conducting the study of the potential
impact of the Bill's proposed minimum wage increases, as well as the scope of the University of
Washington's Seattle report discussed above, Council staff believes that such a broad mandate is
beyond OLO's operational capacity. Staff believes that requiring OLO to collect and report
annually on data related to the implementation of the County minimum wage and the local
economy would be more feasible.
Staff recommendation:
Amend lines 34-37 as follows:
27-70A. Annual impact analysis.
The Office of Legislative Oversight must provide to the Council, by January
.11
of each year, [[an analysis of impact]] a report containing data related to the
implementation of the County minimum wage [[on]] and the local economy.
This packet contains:
Bill 28-17
Legislative Request Report
County Executive veto memo
42 C.F.R. § 440.70. Home health services
42 C.F.R. § 440.180. Home and community-based waiver services
County Executive Study transmittal memo
Study Executive Summary
Council questions to PFM, August 15, 2017
County Executive letter to PFM, August 15, 2017
County Executive memo to Council, September 13, 2017
Bill 12-16 Action memorandum
UW Study summary
Circle#
1
7
8
11
16
20
21
29
33
35
37
71
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CWED Study abstract
FEIS Extension memo
Bill 12-16 Fiscal and Economic Impact Statement
Selected Public Hearing Testimony and Correspondence
Ron Zimmerman
Jennifer Russel
Ilaya Hopkins
Greater Silver Spring Chamber of Commerce
Maddy Voytek
Melvin Thompson
James Plamondon
Agricultural Advisory Committee
Jaime Contreras
Pamela Luckett
Amy Millar
Ethan Kaplan
Marni von Wilpert (EPI)
Y annet Lathrop (NELP)
Diamante Rodriguez
Jared Hautamaki
Carlos Alvarado
Jose Ventura
Tim Wiens
Afshin Abedi
Jewish Community Relations Council
73
75
76
84
87
89
94
96
97
99
101
102
104
106
108
114
122
138
141
143
144
145
147
150
F:\LA W\BILLS\1728 Minimum Wage - Annual Adjustment\HHS Memo.Docx
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Bill No.
28-17
Concerning: Human Rights and Civil
Liberties - County Minimum Wage -
Amount - Annual Adjustment
Revised: 07/13/2017
Draft No.
_l_
Introduced:
July 25, 2017
Expires:
January 25, 2019
Enacted: _ _ _ _ _ _ _ _ __
Executive: _ _ _ _ _ _ _ _ __
Effective: _ _ _ _ _ _ _ _ __
Sunset Date: _.:...,.N""on_,_,,e,..___ _ _ _ __
Ch. _ _ , Laws of Mont. Co. _ _ __
COUNTY COUNCIL
FOR MONTGOMERY COUNTY, MARYLAND
Lead Sponsor: Councilmember Elrich
Co-Sponsors: Councilmembers Leventhal, Riemer, Bucker and Navarro
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;
(3) require the Office of Legislative Oversight to conduct an annual analysis of the
impact of the County minimum wage; and
(4) 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
By adding
Montgomery County Code
Chapter 27, Human Rights and Civil Liberties
Article XI. County Minimum Wage
Section 27-70A
Boldface
Underlining
[Single boldface brackets]
Double underlining
[[Double boldface brackets]]
* * *
Heading or defined term.
Added to existing law by original bill.
Deleted.from existing law by original bill.
Added by amendment.
Deleted from existing law or the bill by amendment.
Existing law unaffected by bill.
The County Council for Montgomery County, Maryland approves the following Act:
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BILL
No. 28-17
1
Sec
1.
Section 27-68 is amended and Section 27-70A is added as follows:
27-68.
(a)
2
3
4
5
Minimum Wage Required.
County minimum wage.
Except as provided in Subsection (b ), an
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)
6
7
8
'
the minimum wage required for that employee under the State
Act; or
9
10
11
(3)
(b)
[$11.50] $15.00 per hour.
Annual adiustment.
The Chief Administrative Officer must adjust the
minimum wage rate required under Subsection (a)(3), effective July
2023, and July
12
13
14
15
16
17
L
l
of each subsequent year, by the annual average
increase, if any, in the Consumer Price Index for Urban Wage Earners
and Clerical Workers, CPI-W, or
f!
successor index, for the previous
calendar year.
The Chief Administrative Officer must calculate the
adjustment to the nearest multiple of five cents, and must publish the
amount of this adjustment not later than March
l
of each year.
18
19
20
21
(f}
Exclusions.
The County minimum wage does not apply to an employee
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)
is subject to an opportunity wage under the State or Federal Act.
22
23
24
25
26
27
[(
c)
]@
Retaliation prohibited.
A person must not:
retaliate against any person for:
(1)
G)
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BILL
No. 28-17
28
29
30
31
32
33
34
35
(A)
(B)
lawfully opposing any violation of this Article; or
filing a complaint, testifying, assisting, or participating in
any manner in an investigation, proceeding, or hearing
under this Article; or
(2)
obstruct or prevent enforcement or compliance with this Article.
*
*
*
~
27-70A. Annual impact analysis.
The Office of Legislative Oversight must submit
January
report to the Council,
QY
36
37
38
39
40
41
42
43
44
45
46
ll
of each year,
analyzing the impact of the County minimum wage on the
local economy.
Sec. 2. Transition.
Notwithstanding Section 27-68, as amended in Section 1, except when the
scheduled increases are suspended under subsection (e ), the County minimum wage,
until July 1, 2022, must be the greater of the minimum wage required under the
Federal or State Act or:
(a)
for an employer who employs 26 or more employees:
(1)
(2)
(3)
(b)
effective July 1, 2018, $12.50 per hour;
effective July 1, 2019, $13.75 per hour; and
effective July 1, 2020, $15.00 per hour.
47
48
49
for an eligible employer under subsection (c):
(1)
(2)
(3)
(4)
effective July 1, 2018, $12.00 per hour;
effective July 1, 2019, $12.75 per hour;
effective July 1, 2020, $13.50 per hour; and
effective July 1, 2021, $14.25 per hour.
50
51
52
53
54
(c)
An
employer is eligible for the implementation schedule in subsection
(b) if the employer:
(1)
employs 25 or fewer employees;
0
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BILL
No. 28-17
55
56
(2)
has tax exempt status under Section 501(c)(3) of the Internal
Revenue Code; or
provides:
(A)
"home health services" as defined by 42 C.F.R. § 440.70
or "home or community-based services" as defined by 42
C.F.R.
§
440.180;
(B)
receives at least 75% of gross revenues through state and
federal Medicaid programs; and
(C)
is certified by the Office of Human Rights as meeting the
requirements of subparagraphs (A) and (B).
57
(3)
58
59
60
61
62
63
64
65
66
(d)
For the purposes of subsections (a) and (b), an employer's number of
employees must be calculated based upon the employer's average
number of employees per calendar week during the preceding
calendar year for each week at least one employee worked for
compensation. For employers that did not have any employees during
the preceding calendar year, the employer's number of employees
must be calculated based upon the average number of employees who
worked for compensation per calendar week during the first 90
calendar days of the current year in which the employer engaged in
business.
67
68
69
70
71
72
73
74
75
76
(e)
(1)
On or before January 31 of each year beginning in 2018
through 2022, to ensure that economic conditions can support a
minimum wage increase, the Director of Finance must
determine and certify to the Executive and Council if:
(A)
total private employment for Montgomery County
decreased by 1.5% over the period from April 1 to June
30 of the previous year. The calculation must compare
77
78
79
80
81
G
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BILL
No. 28-17
82
total private employm ent in June to total private
employm ent in April, as reported by the Marylan d State
Departm ent of Labor, Licensing, and Regulati on's
Quarterl y Census of Employm ent and Wages data series;
(B)
total private employm ent for Montgom ery County
decrease d by 2.0% over the period from January 1 to
June 30 of the previous year. The calculati on must
compare total private employm ent in June to total private
employm ent in January, as reported by the Marylan d
State Departm ent of Labor, Licensing, and Regulati on's
Quarterl y Census of Employm ent and Wages data series;
(C)
the Gross Domestic Product of the United States, as
publishe d by the U.S. Departm ent of Commerce, has
experien ced negative growth for the precedin g two
quarters; or
(D)
the
National
Bureau
of Economi c
Research
has
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
determin ed that the United States economy is in
recess10n.
(2)
100
101
102
103
104
105
106
107
108
If,
in any year, the Director of Finance certifies that a conditio n
in subparag raphs (A) through (D) of paragrap h (1) occurred, the
Executiv e may, on or before February 10 of that year, suspend
the minimum wage increases schedule d under subsections (a)
and (b) for that year.
(3)
If
the Executiv e suspends the scheduled mm1mum wage
increases for a year, all dates specified in subsections (a) and
(b) that follow the temporary suspensi on must be postpone d by
an additional year.
G
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BILL
No. 28-17
109
11
o
111
112
(4)
The Executive must not suspend scheduled mm1mum wage
increases under this Section more than two times.
Sec. 3.
Effective Date.
This Act takes effect on July
1, 2018.
Q
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LEGISLATIVE REQUEST REPORT
Bill 28-17
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 for
employers with 26 or more employees. Employers who
(1)
employ
25 or fewer employees (2) have tax exempt status under Section
501(c)(3) of the Internal Revenue Code; or (3) provide "home health
services" or "home or community-based services," as defined under
federal Medicaid regulations and receive at least 75% of gross
revenues through state and federal medical programs would be
required to pay at least $15.00 per hour by 2022.
It
would also
require annual adjustments to the County minimum wage each year
beginning in 2023.
The existing County minimum wage of $11.50 per hour 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:
GOALSAN D
OBJECTIVES:
COORDINATION:
FISCAL IMPACT:
ECONOMIC
IMPACT:
EVALUATION:
EXPERIENCE
ELSEWHERE:
SOURCE OF
INFORMATION:
APPLICATION
WITHIN
MUNICIPALITIES:
PENALTIES:
Class A civil citation and equitable relief.
F:\LA W\BILLS\1728 Minimum Wage - Annual Adjustment\LEGISLATIVE REQUEST REPORT.Doc
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I
·1
I·.
·.1
'
:J '
OFFICE OF THE COUNTY EXECUTIVE
ROCKVILLE, MARYLAND 20850
Isiah Leggett
County Executive
MEMORAND UM
January 23, 2017
TO:
Roger Berliner, President
County Council
Isiah Leggett, County Executive
Bill 12-16, Human Rights and Civil Liberties - County Minimum
Wage - Amount - Annual Adjustment
FROM:
SUBJECT:
There continues to be a great deal of discussion since the passage ofBill 12-16,
Human Rights and Civil Liberties - County Minimum Wage - Amount - Annual Adjustment,
and my position regarding this bill. I understand that there is a strong interest by some
councilmemb ers to even reconsider the bill. However this is no longer a possibility since this bill
has been signed and transmitted to the executive branch. At present, I have only three options:
sign the bill and it becomes law as is, not sign the bill and it will go into effect without my
signature or veto the bill. The only way to express my position regarding this bill at this time is
to reluctantly veto and return it to you with what
I
believe is a more reasonable path to moving
the County to a
$15
wage.
·
That said, I wish to congratulate the County Council on the very full and
thoughtful discussion it held on the bill. In particular, I want to commend Councilmemb er Elrich
for his commitment to the issue.
I
respect his very principled position on a matter that is
extremely important to our County and the nation as a whole.
As I have said
on
numerous occasions,
I
support the effort to move toward $15
per hour over an appropriate timeframe and under certain conditions. And that sentiment was
expressed by you and your Council colleagues who voted against the bill. Indeed, the Council
unanimously passed Bill 27-13, the 2013 Minimum Wage bill, and we celebrated together with a
public bill signing ceremony. But this year's effort became much more contentious and divided
resulting in only a 5-4 majority. Many believed it went too far, too fast, and I am disappointed
that we did not find a broader consensus.
It is my hope that a modified bill can be introduced in the near future and, similar
to the 2013 bill, receive greater support. Such an effort would send a stronger and clearer
message to our County and to the rest of the State.
montgomeryc ountymd.gov/ 3Uliii14ifV
.301-251-4850
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Roger Berliner, President
January 23, 2017
Page2
While the Council adopted several amendments intended to address some of the
issues I raised in my November 22, 2016 memorandum, I do not believe they went far enough to
address the very serious issues that I am concerned about or to gain more widespread support. I
wish to thank the Council for adopting my recommendation for the so-called "off ramp" to
address concerns about increasing the minimum wage during economic downturns. Other issues,
however, were not addressed satisfactorily.
As mentioned previously, Montgomery County has already put itself in the
forefront on the minimum wage issue and several other initiatives to assist our more vulnerable
residents. Montgomery County's minimum wage is, and will continue to be, higher than both the
federal and State minimum wage, as well as that in all surrounding jurisdictions except the
District of Columbia. I remain concerned, however, about the competitive disadvantage Bill 12-
16 would put the County in compared to our neighboring jurisdictions. Additionally, we must
realize that Bill 27-13 would put our County in a different position compared to the few
jurisdictions that have already passed a $15 minimum wage. Unlike Seattle or New York City,
we are not a "destination city" that draws great numbers of business travelers or tourists that will
be able to afford higher costs for short-term visits. Our residents will essentially shoulder the
bulk of the cost. Also, in California the $15 minimum wage does not go effect until 2022, and
there is an additional one-year phase-in for small businesses with less than 26 employees. For
this reason and others, we must act in a more measured way based on the best information
available and the potential unintended negative impacts to Montgomery County.
While some experts may disagree, I believe in an expeditious and timely study of
relevant issues on the fiscal and economic impact of an increase
in
the minimum wage on
Montgomery County, I maintain that
a
study will better inform the Council on the direct and
indirect impacts on private employers' bottom line as well as the impact on County government.
As you know, there are very few jurisdictions that provide the array of health and human
services
to
help vulnerable populations at the same level that Montgomery County does. For
example, all things remaining equal, if the Council continues the policy of providing financial
support to our non-profit partners for imposed legislated wage adjustments, when the minimum
wage reaches $15, there will.be a significant financial impact to the County. The County's
budget for Developmental Disability providers alone would be $21.1 million over the current
FY 17 base of $13. 8 million. Based on our current budget projections, this would be a very
difficult amount to absorb, and this does not address the challenge faced by all of our non-profit
partners.
·
Another example of the financial impact of the increase in the minimum wage
comes from our Medicaid providers. I will send to you separately a letter and data I received a
few days ago.
In
sum, they estimate that the move to $15/hour will result in an approximate
5.5% increase in the cost of operations each year. Unlike some businesses, Medicaid providers
(j).
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Roger Berliner, President
January 23, 2017
Page 3
cannot legally pass these increases on to the consumer and will be unable to absorb the
significant increased costs .
. It is my view that a study addressing these issues can be accomplished in a
relatively short time. I propose that it be completed by no later than July of this year. This study
would give the Council ample time to propose and enact a new bill long before the first new
increment under Bill 12-16 would have taken effect.
In my November 22, 2016 memorandum, I urged the Council to consider a longer
timeframe for raising the County minimum wage, noting that California would not reach $15
until 2022. While the Council provided an extension to 2022 for small employers (25 or fewer
employees), the bill retained 2020 as the date for the County minimum to reach $15/hour for all
other employers.
I
think that is too fast and believe we should not reach $15/hour for all
employees until 2022.
In
addition, small employers will be hit particularly hard, and thus should
be exempted entirely from the increased minimum wage requirement.
In
summary, for me to fully agree with a bill, it should:
Be based on
an
expeditious study on the direct and indirect financial impacts on private
employers, non-profits and County government;
Include an exemption for small business, the definition of which can be informed by the
study;
Include an exemption for youth workers; and,
Provide for reaching $15/hour in 2022
It is clear that there is broad support in the community and on the Council for an
increase in the minimum wage to $15/hour. The real questions are how quickly we get there and
what exemptions should be made. By adopting a revised bill that addresses these issues, I believe
we can work toward a broader consensus and a better outcome for Montgomery County residents
and businesses.
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§
440.70 Home health services., 42 C.F.R. § 440.70
Code of Federal Regulations
Title 42. Public Health
Chapter IV. Centers for Medicare & Medicaid Services, Department of Health and Human Services (Refs
&Annos)
Subchapter C. Medical Assistance Programs
Part 440. Services: General Provisions (Refs & Annos)
Subpart
A.
Definitions
42 C.F.R.
§
440.70
§
440.70 Home health services.
Effective: July
1, 2016
Currentness
(a) "Home health services" means the services in paragraph (b) of this section that are provided to a beneficiary-
(1)
At his place of residence, as specified in paragraph (c) of this section; and
(2)
On his or her physician's orders as part of a written plan of care that the physician reviews every
60
days, except
as specified in paragraph (b )(3) of this section.
(b) Home health services include the following services and items. Paragraphs (b)(l),
(2)
and (3) of this section are
required services and items that must be covered according to the home health coverage parameters. Services in
paragraph (b)(4) of this section are optional. Coverage of home health services cannot be contingent upon the beneficiary
needing nursing or therapy services.
(1) Nursing service, as defined in the State Nurse Practice Act, that is provided on a part-time or intermittent basis
by a home health agency as defined in paragraph (d) of this section, or if there is no agency in the area, a registered
nurse who-
(i) Is currently licensed to practice in the State;
(ii) Receives written orders from the patient's physician;
(iii) Documents the care and services provided; and
(iv) Has had orientation to acceptable clinical and administrative recordkeeping from a health department nurse.
(2)
Home health aide service provided by a home health agency,
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§
440.70 Home health services., 42 C.F.R.
§
440.70
(3) Medical supplies, equipment, and appliances suitable for use in any setting in which normal life activities take
place, as defined at§ 440.70(c)(l).
(i) Supplies are health care related items that are consumable or disposable, or cannot withstand repeated use by
more than one individual, that are required to address an individual medical disability, illness or injury.
(ii) Equipment and appliances are items that are primarily and customarily used to serve a medical purpose, generally
are not useful to an individual in the absence of a disability, illness or injury, can withstand repeated use, and can be
reusable or removable. State Medicaid coverage of equipment and appliances is not restricted to the items covered
as durable medical equipment in the Medicare program.
(iii) A beneficiary's need for medical supplies, equipment, and appliances must be reviewed by a physician annually.
(iv) Frequency of further physician review of a beneficiary's continuing need for the items is determined on a case-
by-case basis, based on the nature of the item prescribed;
(v) States can have a list of preapproved medical equipment supplies and appliances for administrative ease but
States are prohibited from having absolute exclusions of coverage on medical equipment, supplies, or appliances.
States must have processes and criteria for requesting medical equipment that is made available to individuals to
request items not on the State's list. The procedure must use reasonable and specific criteria to assess items for
coverage. When denying a request, a State must inform the beneficiary of the right to a fair hearing.
(4) Physical therapy, occupational therapy, or speech pathology and audiology services, provided by a home
health agency or by a facility licensed by the State to provide medical rehabilitation services. (See § 441.15 of this
subchapter.)
(c) A beneficiary's place of residence, for home health services, does not include a hospital, nursing facility, or
intermediate care facility for individuals with intellectual disabilities, except for home health services in an intermediate
care facility for Individuals with Intellectual Disabilities that are not required to be provided by the facility under subpart
I of part 483. For example, a registered nurse may provide short-term care for a beneficiary in an intermediate care facility
for Individuals with Intellectual Disabilities during an acute illness to avoid the beneficiary's transfer to a nursing facility.
(1)
Nothing in this section should be read to prohibit a beneficiary from receiving home health services in any
setting in which normal life activities take place, other than a hospital, nursing facility; intermediate care facility
for individuals with intellectual disabilities; or any setting in which payment is or could be made under Medicaid
for inpatient services that include room and board. Home health services cannot be limited to services furnished
to beneficiaries who are homebound.
(2) Additional services or service hours may, at the State's option, be authorized to account for medical needs that
arise in the settings home health services are provided.
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§
440.70 Home health services., 42 C.F.R.
§
440.70
(d) "Home health agency" means a public or private agency or organization, or part of an agency or organization,
that meets requirements for participation in Medicare. including the capitalization requirements under§ 489.28 of this
chapter.
(e) A "facility licensed by the State to provide medical rehabilitation services" means a facility that-
(I) Provides therapy services for the primary purpose of assisting in the rehabilitation of disabled individuals through
an integrated program of-
(i) Medical evaluation and services; and
(ii) Psychological, social, or vocational evaluation and services; and
(2) Is operated under competent medical supervision either-
(i) In connection with a hospital; or
(ii) As a facility in which all medical and related health services are prescribed by or under the direction of individuals
licensed to practice medicine or surgery in the State.
(f) No payment may be made for services referenced in paragraphs (b)(l) through (4) of this section, unless the physician
referenced in paragraph (a)(2) of this section or for medical equipment, the allowed non-physician practitioner, as
described in paragraph (f)(3)(ii) through (v), with the exception of certified nurse-midwives, as described in paragraph
(f)(3)(iii) documents that there was a face-to-face encounter with the beneficiary that meets the following requirements:
(1) For the initiation of home health services, the face-to-face encounter must be related to the primary reason the
beneficiary requires home health services and must occur within the 90 days before or within the 30 days after the
start of the services.
(2) For the initiation of medical equipment, the face-to-face encounter must be related to the primary reason the
beneficiary requires medical equipment and must occur no more than 6 months prior to the start of services.
(3) The face-to-face encounter may be conducted by one of the following practitioners:
(i) The physician referenced in paragraph (a)(2) of this section;
(ii) A nurse practitioner or clinical nurse specialist, as those terms are defined in section 1861(aa)(5) of the Act,
working in collaboration with the physician referenced in paragraph (a) of this section, in accordance with State law;
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§
440.70 Home health services., 42 C.F.R.
§
440.70
(iii) A certified nurse midwife, as defined in section 1861 (gg) of the Act, as authorized by State law;
(iv) A physician assistant, as defined in section 186l(aa)(5) of the Act, under the supervision of the physician
referenced in paragraph (a) of this section; or
(v) For beneficiaries admitted to home health immediately after an acute or post-acute stay, the attending acute
or post-acute physician.
(4) The allowed non-physician practitioner, as described in paragraph (f)(3)(ii) through (v) of this section,
performing the face-to-face encounter must communicate the clinical findings of that face-to-face encounter to the
ordering physician. Those clinical findings must be incorporated into a written or electronic document included in
the beneficiary's medical record.
(5) To assure clinical correlation between the face-to-face encounter and the associated home health services, the
physician responsible for ordering the services must:
(i) Document the face-to-face encounter which is related to the primary reason the patient requires home health
services, occurred within the required timeframes prior to the start of home health services.
(ii) Must indicate the practitioner who conducted the encounter, and the date of the encounter.
(6) The face-to-face encounter may occur through telehealth, as implemented by the State.
(g)(l) No payment may be made for medical equipment, supplies, or appliances referenced in paragraph (b)(3) of this
section to the extent that a face-to-face encounter requirement would apply as durable medical equipment (DME) under
the Medicare program, unless the physician referenced in paragraph (a)(2) of this section or allowed non-physician
practitioner, as described in paragraph (f)(3)(ii) through (v) of this section documents a face-to-face encounter with the
beneficiary consistent with the requirements of paragraph (f) of this section except as indicated in paragraph (g)(2) of
this section.
(2) The face-to-face encounter may be performed by any of the practitioners described in paragraph (f)(3) of this
section, with the exception of certified nurse-midwives, as described in paragraph (f)(3)(iii) of this section.
Credits
[43 FR 45224, Sept. 29, 1978, as amended at 45 FR 24888, April 11, 1980; 62 FR 47902, Sept. 11, 1997; 62 FR 49726,
Sept. 23, 1997; 63 FR 310, Jan. 5, 1998; 81 FR 5566, Feb. 2, 2016]
SOURCE: 43 FR 45224, Sept. 29, 1978; 51 FR 41338, Nov. 14, 1986; 77 FR 29028, May 16, 2012, unless otherwise noted.
AUTHORITY: Sec. 1102 of the Social Security Act (42 U.S.C. 1302).
----·---- ·~------- -------
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§
440.70 Home health services., 42 C.F.R. § 440.70
Notes of Decisions (35)
Current through July 6, 2017; 82 FR 31277.
End
of Document
©
2017
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§
440.180 Home and community-based waiver services., 42 C.F.R. § 440.180
Code of Federal Regulations
Title
42.
Public Health
Chapter IV. Centers for Medicare & Medicaid Services, Departm ent of Health and Human Services (Refs
&Annos)
Subchapt er C. Medical Assistance Programs
Part
440.
Services: General Provisions (Refs
&
Annos)
Subpart
A.
Definitions
42
C.F.R.
§
440.180
§
440.180
Home and communi ty-based waiver services.
Effective: March
17, 2014
Currentn ess
(a) Description and requirements for services. "Home or community-based services" means services, not otherwise
furnished under the State's Medicaid plan, that are furnished under a waiver granted under the provisions of part 441,
subpart G of this chapter.
are defined by the agency and approved by CMS.
(1)
These services may consist of any or all of the services listed in paragraph (b) of this section, as those services
(2) The services must meet the standards specified in§ 441.302(a) of this chapter concerning health and welfare
assurances.
(3) The services are subject to the limits on FFP described in§ 441.310 of this chapter.
(b) Included services. Home or community-based services may include the following services, as they are defined by the
agency and approved by CMS:
(1) Case management services.
(2) Homemaker services.
(3) Home health aide services.
(4) Personal care services.
(5) Adult day health services.
(6) Habilitation services.
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§
440.180 Home and community- based waiver services., 42 C.F.R. § 440.180
(7)
Respite care services.
(8) Day treatment or other partial hospitalization services, psychosocial rehabilitation services and clinic services
(whether or not furnished in a facility) for individuals with chronic mental illness, subject to the conditions specified
in paragraph (d) of this section.
(9) Other services requested by the agency and approved by CMS as cost effective and necessary to avoid
institutionalization.
(c) Expanded habilitation services, effective October 1, 1997-
(1) General rule. Expanded habilitation services are those services specified in paragraph (c)(2) of this section.
(2) Services included. The agency may include as expanded habilitation services the following services:
(i) Prevocational services, which means services that prepare an individual for paid or unpaid employment and that
are not job-task oriented but are, instead, aimed at a generalized result. These services may include, for example,
teaching an individual such concepts as compliance, attendance, task completion, problem solving and safety.
Prevocational services are distinguishable from noncovered vocational services by the following criteria:
(A) The services are provided to persons who are not expected to be able to join the general work force or
participate in a transitional sheltered workshop within one year (excluding supported employment programs).
(B)
If
the beneficiaries are compensated, they are compensated at less than 50 percent of the minimum wage;
(C)
The services include activities which are not primarily directed at teaching specific job skills but at
underlying habilitative goals (for example, attention span, motor skills); and
(D)
The services are reflected in a plan of care directed to habilitative rather than explicit employment
objectives.
(ii) Educationa l services, which means special education and related services (as defined in sections 602(16) and (17)
of the Education of the Handicappe d Act) (20 U.S.C.
1401
(16 and 17)) to the extent they are not prohibited under
paragraph (c)(3)(i) of this section.
(iii) Supported employment services, which facilitate paid employment, that are-
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§
440.180 Home and community-based waiver services., 42 C.F.R.
§
440.180
...
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(A) Provided to persons for whom competitive employment at or above the minimum wage is unlikely
and
who, because of their disabilities, need intensive ongoing support to perform in a work setting;
(B) Conduc ted in a variety of settings, particularly worksites in which persons without disabilities are employe
d;
and
equipment that the State demonstrates are essential for persons to engage in paid employment and that
are not
normally required for nondisabled persons engaged in competitive employment.
(3) Services not included. The following services may not be included as habilitation services:
(i) Special education and related services (as defined in sections 602(16) and (17) of the Educati
on of the
Handica pped Act) (20 U.S.C. 1401 (16) and (17)) that are otherwise available to the individual through
a local
educational agency.
(C)
Defined as any combination of special supervisory services, trammg, transpor tation, and
adaptive
(ii) Vocational rehabilitation services that are otherwise available to the individual through a program funded
under
section 110 of the Rehabil itation Act of 1973 (29 U.S.C. 730).
(d) Services for the chronically mentally
ill-
have been diagnosed as being chronically mentally ill, for which the agency has requested approva l as part
of either
a new waiver request or a renewal and which have been approve d by CMS on or after October 21, 1986.
(2) Services not included. Any home and community-based service, including those indicated in paragra
ph (b)(8) of
this section, may not be included in home and community-based service waivers for the following individu
als:
(i) For individuals aged 22 through 64 who, absent the waiver, would be institutionalized in an institution
for mental
diseases (IMD); and, therefore, subject to the limitation on IMDs specified in§ 435.1009(a)(2) of this chapter.
(ii) For individuals, not meeting the age requirements described in paragra ph (d)(2)(i) of this section, who,
absent
the waiver, would be placed in an
IMD
in those States that have not opted to include the benefits
defined in §
440.140 or§ 440.160.
(1)
Services included. Services listed in paragra ph (b)(8) of this section include those provided to
individuals who
Credits
[46 FR 48540, Oct. 1, 1981; 50 FR 10026, March 13, 1985; 59 FR 37716, July 25, 1994; 65 FR 60107, Oct.
10, 2000; 71
FR 39229, July 12, 2006; 72 FR 38690, July 13, 2007; 79 FR 3029, Jan. 16, 2014]
SOURCE: 43 FR 45224, Sept. 29, 1978; 51 FR 41338, Nov. 14, 1986; 77 FR 29028, May 16, 2012, unless
otherwise noted.
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§
440.180 Home and community-based waiver services., 42 C.F.R. § 440.180
----- ----- --·
AUTHOR ITY: Sec. 1102 of the Social Security Act (42 U.S.C. 1302).
Notes of Decisions (19)
Current through July 6, 2017; 82 FR 31277.
End of Document
©
2017 Thomson Reuters. No claim to original U.S. Governmen t Works.
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--·'I
OFFICE OF THE COUNTY EXECUTIVE
ROCKVILLE, MARYLAND 20850
Isiah Leggett
County Executive
MEM ORA NDU M
August 1, 2017
TO:
Roge r Berliner, President
Mont gome ry County Council
J~
FROM:
SUBJECT:
Isiah Leggett, County E x e c u t i v e ~ ~
Minim um Wage Increase Impact Study
I am forwarding the report from Public Financial Management (PFM) Group
Consulting, LLC, "Mon tgom ery County, Maryland Minimum Wage Increase
Impa ct Study." As
I indicated in my mess age vetoing Bill 12-16, a study of the relevant issues of
the impact of an
increase in the Coun ty minim um wage would provide critical information for
the Council as it
considers new legislation.
The report addresses the following impacts: the impact on the County economy
and labor market; the impac t on the County government; the impact on Coun
ty businesses; and
the socioeconomic impacts. The report is comprehensive and compelling, and
I would suggest
that PFM present its findings to the Council in a briefing to address questions
Council members
might have about the report. Executive Branch staff are available to coordinate
that briefing.
IL/ae
montg omery county md.go v/311
.
240-77 3-3556 TTY
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op fm
Montgomery County, Maryland
Mini mum Wag e Incre ase Impa ct Stud y
July 31, 2017
PFM Group Consulting, LLC
1735 Marke t St
43
rd
Floor
Philadelphia, PA 19103
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0
Executive Summary
In April 2016, five members of the Montgomery County Counci l introduced Bill 12-16 to increas
e
the County 's minimum wage to $15.00 per hour by July 1, 2020.
1
The Council passed the
bill on
a 5-4 vote, but it was vetoed by County Executive Isiah Leggett, who called for additional
study
into the potential econom ic impact of the increase.
This study addres ses issues raised by the County Executive from four perspectives: the
impact
on County government, the impact on the County workfor ce and budget, the impact on the
County econom y and businesses, and the socioeconomic impact. As the findings detail,
there
are signific ant potential benefits, as well as significant econom ic costs associated with moving
to a higher County minimum wage as proposed by Bill 12-16.
There is a signific ant body of research around the impacts of an increas e in the minimum
wage.
In general, the primary benefit from an increase in the minimum wage is heightened earning
s
that improve the standard of living for low-wa ge workers. This greater purchasing power
leads
to improved mental health, morale, and decreased stress. The broade r impacts from increas
ed
earning s include a potential reduction of poverty and overall wage inequality. Additional
research has shown a connection betwee n a higher minimum wage and a reduction in hunger
and food insecurity.
Conver sely, as the impact analysi s conduc ted for the study shows, an increase in the County
minimum wage would increase person nel and contrac t costs to the County, as well as prompt
job loss and a loss of income due to these job losses. The projected loss of jobs and income
would result from the actions County busines s owners would be expected to take in respon
se to
an increas e in the minimum wage. These would include laying off employees, cutting hours
and
benefits, reducing training programs, and, in the extreme, possible business closure s or
relocation.
In short, the benefits from a minimum wage increase have the potential to be significant.
Howeve r, worker s who lose their jobs or are not hired as a result will not experience them.
The specific impacts of a minimum wage increase may vary depend ing on a variety of factors.
For example, a tight labor market might ameliorate the potential job losses, while an econom
ic
downtu rn might exacerb ate projected job and income losses. As it relates to the minimum
wage
increase, the County might conside r additional exemptions or excepti ons for small busines
ses
or non-profits, provide a differen t youth worker or training wage, or provide an "off ramp"
provision that halts schedu led increas es during an econom ic downtu rn. Each of these change
s
could alter the impact of the legislation on impacted individuals and businesses.
1
By 2022 for businesses with 25 or fewer employees
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Findings
Given the multiple potential impacts from an increase in the County minimum wage,
the findings
have been organized into broad categories. These encompass the impact on the
County, local
economy, County businesses, and socioeconomic impact.
Impact on the County Economy
1.
Based on the study's assumptions, the County is projected to exper ience
a loss of
approximately 47,000 jobs by 2022 as a result of an increase in the minimum
wage
from its July 2017 level of $11.50 to $15.00 per hour.
The majority of the projec
ted
job loss - approximately 45,300 positions - will be experienced by workers in low-wa
ge
positions.
Table 23: Direct Economic Impact
-
Jobs
Calendar Year
Direct Jobs Lost
2017
2018
2019
2020
2021
2022
18,318
22,566
35,587
44,215
44,797
45,384
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2.
As a result of the projected job losses, the aggregate estimated loss of income in
the County would be approximately $396.5 million from 2017 to 2022.
This figure is
the net amount after accounting for loss of income among those who have lost their jobs,
and those who received a higher take home pay as a result of Bill 12-16. The aggregate
income loss associated with job reductions arising from a higher minimum wage is
consistently greater than the baseline income projection at the current minimum wage
level, even accounting for the increased income for those who remain employed.
Table 24: Direct and Indirect Economic Impacts
-
Income
Year
Direct Income Lost
$240,785,166
$224,287,542
$329,383,264
Indirect Income
Lost
Total Income
Lost
$280,466,561
2017
2018
2019
2020
2021
2022
$39,681,395
$36,962,587
$54,282,362
$261,250,129
$383,665,626
$386,709,948
$391,600,709
$396,509,842
$331,996,865
$336,195,663
$340,410,235
$54,713,083
$55,405,045
$56,099,607
3.
Survey and focus group responses indicate that $11.00 per hour is approximately
the marke t rate for Montgomery County where employers are able to attract and
retain quality lower-wage emplo yees.
Economic research shows that increasing the
minimum wage beyond the market rate causes increased job loss as more people are
seeking jobs but companies are looking to hire fewer employees. Given the current
minimum wage in the County is $11.50 per hour, this suggests that current policy is
reflective of the market, and not likely to cause substantial disruption if left in place. The
market rate is specific to a particular location and will change over time.
Impact on County Government
1.
The County budget is projected to require an additional cumulative funding of
$10.0 million from FY2019 to FY2023 because of adjustments to the Minimum
Wage/Seasonal Salary Schedule to reflect the new minimum wage and avoid wage
compression.
This reflects the impact of adjustments for employees on the minimum
wage/s easona l schedule. It does not include the costs for adjustments to the other
County salary schedules, which are collectively bargained. Should these other
schedules and employee pay be adjusted to avoid wage compression for higher-earning
County employees, the total cost of the salary adjustment will increase. This will also
increase the County 's pension liability for eligible employees.
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2.
The County would also experi ence a projected loss of income tax revenu e of $40.9
million from FY2018 to FY2022.
These projections are based on the projected direct
job losses among low-wage workers that will occur as a result of the minimum wage
increase.
3.
The County is likely to see an increase in contract costs, as businesses subject
to
its Prevailing and Living Wage Statutes will pass on to the County its increased
personnel costs driven by the minimum wage increase.
The project team was
unable to quantify these costs due to data availability issues.
Impact on County Businesses
1.
Survey responses and focus group feedback sugge st that County businesses are
likely to lay off emplo yees, replace unskilled or lower-educated emplo yees with
more qualified emplo yees, cut remaining emplo yee hours and benefits, suspend
existing plans to invest in new locations or hire additional emplo yees, and, at
worst, close their businesses in responses to rising personnel costs driven by a
minimum wage increase. The survey results are summa rized in the following
table.
Table 33: How likely are you to do any of the following if the minimum wage increases to $15.00
per hour? (Employee Impacts)
Very Unlikely
Reduce hiring
Reduce hours per employee
Reduce number of employees
Decrease benefit offerings to hourly employees
Increase experience required for employees
Increase education required for employees
Reduce training
24.3%
27.7%
27.3%
28.3%
NIA/Don't
Know
12.5%
13.1%
15.3%
19.4%
Very Likely
63.2%
59.2%
57.4%
52.3%
33.8%
42.9%
55.8%
16.0%
21.1%
20.5%
50.1%
36.0%
23.8%
Business owners indicated that the level of job loss would accelerate as the minimum
wage rose, estimating that they would reduce their lower-w age workfor ce by an averag e
of 23 percen t should the minimum wage reach $15.00 per hour. This sentiment aligns
with minimum wage impact analysis done by Neumark, which showed that low-wage
workers are the cohort most likely to lose jobs as the minimum wage increases. This is
compounded by the County 's schedu le of five increases over a period of time (compared
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to a one-time increase, as was evaluated in other studies). A recent study of Seattle's
minimum wage ordinance, which also features a series of increases to $15.00 per hour,
indicated that low-wage workers experienced a decline in both the hours worked and
number of jobs.
2.
Prior research indicates_ that a minimum wage increase would have benefits for
employers as well.
Higher earnings tend to improve employee morale, which would
reduce turnover and the costs associated with hiring and training new employees.
Additionally, research indicates that employee productivity can increase as the result of
a wage increase, either through employees working "harder and smarter," replacement
of unskilled labor with more qualified employees, or increased use of automation.
3.
Survey and focus group responses indicate philosophical support for minimum
wage increases, particularly among representatives of non-profit organizations.
However, non-profit organizations raise significant concerns that increased personnel
costs will force a reduction in critical community seNices. Given the low-wage worker
job loss projections, these cuts may come at a time when demand for services among
unemployed individuals in the County will be increasing.
4. Non-profit organization feedback indicated that the proposed increases under Bill
12-16 would cause them to seek funding increases and look to new funding
sources.
In many instances, funding formulas and other program constraints mean that
there is little opportunity for non-profit organizations (and the programs they run) to pass
along additional costs. Because new sources of grants and private funders are limited,
this would mean that they would primarily rely on seeking additional funds from the
County.
Socioeconomic Impacts
1.
Research indicates that increasing the minimum wage would have socioeconomic
benefits for employees.
Increased wages are associated with improved mental health,
reduced hunger and decreased stress for workers and their families.
2.
Raising the minimum wage may also reduce wage inequality, particularly given
the numbe r of women working at or below the minimum wage level.
This may have
a significant impact given the number of women who receive minimum wages.
3.
Non-profit and focus group feedback indicated that the proposed increases under
Bill 12-16 would cause non-profits to seek funding increases and look to new
funding sources.
This would include asking the County for additional funds as well as
looking to grants and private funders.
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4. The business owners interviewed were often supportive of raising the minimum
wage and providing a true living wage for their emplo yees.
However, there were
doubts that their organization could withstand the increase and remain profitable.
5.
The majority of minimum wage earners would continue to be eligible for social
programs with a minimum wage increase to $15.00 per hour.
Workers currently
eligible for program benefits while earning $11.50 per hour would remain eligible for the
same program after raising the minimum wage beyond $11.50 per hour.
Modifications to Minimum Wage Increase Structure
1.
There was support among County business owners for a subminimum wage rate
for workers during their initial training period.
While most business owners indicated
that the youth worker subminimum rate of 85 percent of the County minimum wage rate
would be acceptable, to make the rate meaningful for them from a business perspective,
they need the ability to pay that rate for more than the six months allowed under State
law.
2.
While some benchmark jurisdictions have alternate phase-in schedules for their
minimum wage increases, none of them completely exemp t small businesses.
While a complete exemption for small businesses is not common, should the County
consider altering the 2016 increase proposal to include one, it would need to weigh the
impact of its definition of a "small business" against the desired breadth of impact it
desires the increase to have.
Conclusion
The proposed increase in the County minimum wage has the potential to provide some
important benefits.
An
increase in earnings for low-wage County workers will have tangible
positive impacts for low-income workers and their families. This should also lead to reductions
in poverty, improvement in mental health and a reduction in hunger and stress among minimu
m
wage workers. From the perspective of County employers, additional research shows a
relationship between higher wages and employee productivity and morale, which would reduce
turnover and the costs associated with hiring and training new employees.
At the same time, it is also projected that the wage increase will lead to a significant loss of low-
wage jobs. This loss of jobs would lead to a loss of income among County residents. This also
has the spillover effect of reduced income tax revenue for the County. Additionally, an increas
e
in the minimum wage will lead to a cost for the County to bring its own salary schedules in line
with the new wage rate to avoid wage compression. It may also require the County to increas
e
its funding for non-profit organizations to ensure that they can maintain essential services.
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Ultimately, the decision on how to proceed will require the weighing of multiple issues and
impacts. It is likely that multiple stakeholders and policymakers will find support for their
respective (even if dissimilar) positions from the findings and analysis within this study. This is,
after all, a topic that has generated - and will continue to be the subject of - considerable
debate. The project team believes that the economic, financial and socioeconomic analysis
from this study will advance the discussion of key public policy issues in Montgomery County
and beyond.
9
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_.,t~
~.·.
~ /
~
}.~·)
MONTGOMERY COUNlY COUNCIL
ROCKV ILLE, MARYL AND
ROGER BERLI NER
COUNC IL PRESID ENT
DISTR ICT
1
CHAIR MAN
TRANS PORTA TION, INFRA STRUC TURE
ENERG Y & ENVIR ONMEN T COMM ITTEE
August 15, 2017
TO:
FROM:
SUBJECT:
Isiah Leggett, County Executive
Roger Berliner, Council President
Questions for PFM, re: Minimum Wage Impact Study
On July 31,20 17, the Council received the Minimum Wage Impact Study conducted by
PFM, and
the Council plans to meet with the consultants on September 19, 2017 to discuss the study.
Thank you for sharing your letter to PFM this morning asking them to re-eva
luate the
methodologies used in the study. As we discussed yesterday, attached are a list of questi
ons for PFM
from the Council for the purpose of better understanding the study, its methodologies, and
its findings.
The Council requests that your staff forward these questions to PFM and that PFM provid
e written
answers to the Council by September 5, 2017 to include in the packet and augment the discus
sion for the
September 19 briefing. Thank you for your assistance with this matter.
c:
Councilmembers
Bonnie Kirkland
Alex Espinosa
Attachment
STELLA
8.
WERNER OFFICE BUILDING •
100
MARYLAND AVENUE,
5n-t
FLOOR, ROCKVILLE, MARYLA
ND
240-777-7828
OR
240-777-7900, TTY 240-777-7914, FAX 240-777-7989
WWW.MONTGOMERYCOUNTYMD.GOV
20850
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Attachment
Montgomery County Council's Questions on PFM's Minimum Wage Increase Impac
t Study
I.
Data Collec tion
1) Did PFM consid er alterna tive approa ches to estima te the impac t on the Count y's
minim um wage
increa se?
a.
If
so, please provid e the approa ches that were consid ered.
b. Why did PFM choose the approa ch in the final report?
2) Can PFM provid e the list of questi ons that were asked during the intervi ews and
focus group s?
If
the set of questi ons were differe nt for each, please provid e both.
3) What source s were used to identif y busine ss owner s for the interviews, focus groups
, and survey s?
4) What types of suppo rting docum entatio n were reques ted for substa ntiatin g claims
by busine ss
owner s?
5) Can PFM clarify how the electro nic survey was admin istered ?
a. Was the survey design specif ied by the Execu tive or was it PFM's propo sal?
b. Were the survey questi ons or wordi ng provid ed, edited , or approv ed by the Execu
tive?
c. How were busine sses identif ied for the survey ? In addition,
i. How did PFM verify that the selected busine sses had emplo yees?
d. What was PFM's proces s to ensure that the data collec ted was repres entativ e of the
busine ss popula tion in Montg omery Count y? In additio n,
1.
What efforts , if any, were made to contac t immig rant busine
sses and/or busine ss
owner s not profic ient in Englis h?
ii. Was the survey availa ble in other langua ges other than Englis h?
e. How did PFM contro l for reliability of the survey respon ses?
In
additio n,
1.
How did PFM check that the respon dents' respon ses were
accura te?
11.
How did PFM contro l for how its survey questi ons could
illicit certain respon ses?
Many questi ons appea r leadin g (e.g., it is assum ed that busine sses will reduce
trainin g becau se of the increa se in minim um wage, not increase it or keep it the
same) .
6) Was Table 16 on page 42 (i.e., the "Elast icity Exerci se") provid ed to busine sses
throug h the
electro nic survey ? The table is not includ ed with the survey questi ons in the appen dices.
a.
If
the table was not provid ed with the survey, how was this questi on admin istered
to
Count y busine sses?
1.
How were busine sses identif ied to compl ete the table?
ii. What was PFM' s proces s to ensure that the data collec ted was repres entativ e of
the
popula tion in Montg omery Count y?
m. How did PFM contro l for reliabi lity of the survey respon ses?
b. Why did the table begin at $11.50 per hour but retain the "cumu lative [percent] increa
se"
from $9.55?
c. Did PFM calcul ate a margi n of error for these respon ses?
In
other words , what confid
ence
does PFM ascrib e to the top-lin e projec tions?
i.
If
so, can PFM provid e the margin of error that was applie d when calcul ating the
direct impac t from the minim um wage increa se (i.e., was it 47,000 jobs lost+ or -
500 jobs)?
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II. Jobs - Direct Impact Calculation
1) How did PFM account for jobs in Frederick County when utilizing the Silver Spring-Frede
rick-
Rockville dataset to estimate and project the number of "low-wage jobs" in Montgomery
County?
2) Why was $9.55 chosen as the base rate for calculating the percent increase in the minim
um wage?
3) Can PFM define what was meant by "usable response" on page 42? In addition,
a. What process did PFM utilize to determine which survey responses were "usable" and
those that were not "usable"?
4) Can PFM provide a step-by-step computation for analyses in Table 21 (i.e., the "Direc
t Impact")
and clarify in writing how the derived elasticities were applied to determine the direct impac
t? It
appears that the elasticities are applied as a direct percent reduction.
5) How does PFM justify its projected job loss when compared to the sample jurisdictions
included
on page 112, which detail a more subdued impact?
6) How did PFM account for the overall changes in the national and regional economy (
e.g., national
contraction or expansion in the labor market)?
7) Assuming the same derived elasticity, what would be the direct impact from the previo
us
minimum wage bill in 2013? Including,
a. How many businesses opened and closed?
b. How many jobs were created or lost?
8) Did PFM consider if/how the impact would differ for low-income seniors?
a.
If
so, can PFM provide details about how this population group would be impacted by
the
increase in minimum wage?
III. County Impact
1) Based on the projected impact for S-level County employees, can PFM provide an estima
ted
impact or range of impact to the County for other salaried positions? Realizing that these
schedules are negotiated, it still would be of benefit to the Council to recognize a potential
range.
2) Did PFM request the HHS report that estimated the increase for County contract costs
referenced
on page 74?
a.
If
so, why was it not provided to PFM?
b.
If
not, why did PFM not request it but reference it?
c. Based on PFM's analysis on prevailing wage requirements for the Count y's contracts,
does
PFM believe that the $20 million increase is reasonable?
3) What other options are available to the County that benefit low-wage workers but the
cost is not
born by the general population through a tax increase (e.g., EITC Program)?
IV. Data Requests
1) Can PFM provide a table that aggregates all responses for the business and non-profit
surveys?
2) Can PFM provide the calculated number of"low -wage jobs" by occupation (Table 14)
for 2017-
2022?
V. Miscellaneous
1) Why was there no analysis on the costs of poverty, both from the household perspective
and the
Count y's fiscal perspective?
2) Why did PFM cite only one source (Neumark) for the foundation of its analysis when
there is a
large body of economic studies that suggest a minimum wage increase would have minim
al or
negligible impact?
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3) Why does PFM only cite the Seattle report that suggest the result was a decrease in jobs
and
wages when there is another study suggesting the opposite?
4) Can PFM clarify how many jobs in Montgomery County currently earn minimum wage?
5) Did PFM's projections account for a potential rise in consumer spending following a
rise in the
minimum wage?
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OFFICE OF THE COUNTY EXECUTIVE
Isiah Leggett
County Executive
ROCKV ILLE, MARYLAND 20850
August 15, 2017
Mr. Randall Bauer
Director
PFM Group Consulting, LLC
801 Grand Avenue, Suite 3300
Des Moines, IA 50309
Dear Mr. Bauer:
The purpose of this letter is to formally request that Public Financial Man
agement (PFM)
revie w the methodology and findings included in the report, "Minimum
Wage Increase Impact Study,"
which was prepared for Montgomery County.
I have consistently expressed my concerns about the size of the fiscal
impact especially as it
relates to the number of job losses. In addition, we have received nume
rous inquiries from the public
and from our County Council members about the job losses and how
they could possibly be as high as
those expressed in the conclusions of your report.
As a matter of fact, on July 7, 20 I 7, before the report was finalized, Robe
rt Hagedoom with the
Coun ty's Department of Finance expressed his concern in an email to
PFM about the size of the
economic impact and the amount of job losses included in your repor
t. He requested at the time that
you "please review the methodology and data input to make sure this
is correct. .. " See the attached
email.
And now today we have received word from your finn that there migh
t be a problem with the
methodology and calculation of fiscal impact and resulting job impacts.
You have indicated that the
job losses might be less than what is expressed in the report.
The County is scheduled to discuss and potentially act on the proposed
legislation on this
matter commenciµg on September 12, 201,7, and therefore I am form
ally requesting a comprehensive
review
of
the findings in your report. The $15 per hour minimum wage
issue is an important policy
decision that requlres sound financial analysis. I am requesting your
immediate attention to this
review and I look forward to your response.
Sincerely,
_J}~~
Isiah Leggett
County Executive
cc:
Roger Berliner, MC County Council President
Dean Kaplan, Managing Director, PFM
Michael Nadal, Managing Director, PFM
®
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From;
Hagedoorn, Robert
Sent: Friday, July 07, 2017 8:07 AM
To:
'Randall Bauer' <BAUERR@pfm.com>; Hetm
an,Dennis
<Dennis.Hetman@montgomerycountymd.gov>; Espin
osa, Alexandre A.
<Alex.Espinosa@montgomerycountymd.gov>; Kirkl
and, Bonnie
<Bonnie.Kirkland@montgomerycountymd.gov>
Cc:
Alyssa Meh alick <mehalicka@pfm.com>; Mer edith
Bret t <bre ttm@ pfm. com >; Jay Fullenwider
<full enw iderj @pf m.co m>; Jon Hokeynos <jon@txp.co
m>; Jeanette Rottas <irottas@txp.com>; Mar ia
Roberts <mfrizelle@mfrconsultants.com>; And rew
Speizman <aspeizman@mfrconsultants.com>; Jake
Schwertner (mschwertner@mfrconsultants.com) <ms
chwertner@mfrconsultants.com>; Connor Loftus
(cloftus@mfrconsultants.com) <cloftus@mfrconsultant
s.com>
Subject:
RE: Mon tgom ery County Mini mum Wage draf
t repo rt
Good mor ning Randy,
thanks to ever yone for a great draf t report. I have
one remaining issue and that is the size of the job
impact from raising the mini mum wage. Including a
small indir ect effect, the total negative impa ct in
CY2022 is close to 47,000 jobs lost. That is a.bout 8.5%
of all resident emp loym ent in the County and
appears very stee p to me. I saw it yesterday when
reading thro ugh the repo rt but gave it some mor e
thou ght last nigh t and decided to raise it with you and
your team. I fully expect job losses due to all the
economic and business reasons clearly described in
the repo rt, but that num ber seems very high. How
does it com pare to othe r jurisdictions?
Can you please review the meth odol ogy and data inpu
t to make sure this is correct?
thanks, Rob
Robert Hagedoorn
Chief, Division of Fiscal Man agem ent
Mon tgom ery County, MD
240-777-8887
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OFFICE OF THE COUNTY EXECUTIV E
ROCKVILLE, MARYLAND 20850
Isiah Leggett
County Executive
MEMORANDUM
September 13, 2017.
TO:
FROM:
SUBJECT:
;:;;.;;::i~-
Bill 28-17, Human Rights and Civil Liberties - County Minimum Wage -
Amount - Annual Adjustment
Roger Berliner, President
The purpose of this memorandum is to transmit to the County Council a
suggested approach on how to move forward on the consideration of establishing a $15
minimum wage on employers in the County. When I vetoed the original legislation, I
recommended that we undertake a study of the relevant issues relating to the fiscal and economic
impacts of increasing the minimum wage to $15 on our businesses, both large and smali, on non-
profit providers and on County government. I believed the study would help guide us to a better
decision that could be based in part on the consultant's research and conclusions about the
projected impacts on businesses and our economy.
Conducting an empirical study on this issue is highly challenging and has resulted
in some confusion on methodology and long-term economic impacts. Because there are few
communities that have adopted the minimum wage at the $15 level, there is very limited actual
historical data to evaluate. The analytical basis relies on creating assumptions about what firms
might do in the future. In addition, these challenges have been compounded
by
a performance
issue with our consultant. As you know, after receiving the initial report from our consultant,
Public Financial Management, Inc. (PFM), the firm discovered an error in its calculation of the
economic impact and number of job losses that led them to revise the conclusions of the initial
report. While PFM has addressed some of these concerns found in the initial report, my staff has
a number of outstanding questions and concerns and continues working with PFM to resolve
those concerns. Due to the uncertainty over whether those concerns and questions can be fully
resolved in a timely manner, which could preclude addressing the overall issue now, I am
recommending that the Council move forward with consideration of an amended version of Bill
28-17, Human Rights and Civil Liberties - County Minimum Wage - Amount - Annual
Adjustment.
montgomery countymd.go v/311
'53:
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lt
Maryland Relay 711
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Roger Berliner, County Council President
September 13, 2017
Page2
As you will recall, I vetoed the initial minimu m wage legislation, Bill 12-16,
before we even began considering a study.
It
was my belief then, and it is my belief now, that the
bill was too much too fast. I felt that moving to
a
$15 minimu m wage so quickly would put
Montgomery County at a competitive disadvantage compared to our neighboring jurisdictions
and lead to negative consequences. I also expressed my belief that because we are not a
"destination city" that draws great numbers of business travelers and tourists for short-term visits
like other jurisdic tions that are moving to a $15 minimu m wage, our residents would bear the
burden of rising costs that would result.
It is my hope that properly modified, Bill 28-17 can move forward and gamer the
support of the Council and my signature. With this in mind,
I
would recomm end the following:
Amend the size of small employers to be 50-or fewer employees.
Amend the timeline for reaching the $15 minimu m wage to:
o
July 1, 2022 for large employers; and
o
July 1, 2024 for small employ ers and non-profits.
Establi sh a 90-day period after employ ment during which an employ er may
pay a new employee 85% of the minimu m wage.
Enact a County opportunity wage so that the County is not automatically tied
to the State opportunity wage, which is 85% of the State's minimu m wage for
workers under 20 years of age for the first 6 months of employment. The
intent of the opportunity wage is to provide an incentive for employers to give
opportu nity for work experience to younge r workers.
This is an issue of great importance to our community, and the Council should act
expeditiously. By adoptin g a revised bill that addresses these issues, I believe we can work
toward a broade r consen sus and a better outcome.
IL/bk
®
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Agenda Item 6
January 17, 2017
Action
MEMORANDUM
January 13, 2017
TO:
FROM:
County Council
Josh Hamlin, Legislative Attome .
Gene Smith, Legislative Analys
SUBJECT:
Action:
Bill 12-16, Human Rights and Civil Liberties-County Minimum Wage-
Amount - Annual Adjustment
I
The Health and Human Services Committee did not make a recommendation on Bill 12-16
Bill 12-16, Human Rights and Civil Liberties - County Minimum Wage - Annual
Adjustment, sponsored by Lead Sponsor Councilmember Elrich, and Co-Sponsors
Councilmembers Leventhal, Riemer, Navarro and Bucker, 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, July 18 and December 7, 2016. The Committee made no recommendation
on the Bill.
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 Bill 27-13, 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 2016, 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.
The County minimum wage law has been amended twice since being established by Bill 27-13. Bill 59-14
modified some of the effective dates for increases, and Bill 24-15 modified the method for calculating the "tip
credit" allowed to employers of tipped employees.
1
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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
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
Flagstaff to $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.
5
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
in 2016, 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
0 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
A chart showing the federal minimum wage rates from 1938-2009 is at
http://www.dol.gov/whd/minwage/chart.htm
3
A summary of jurisdictions approving some form of$15 minimum wage is at
http://www.nelp.org/content/uploads/PR-Minimum-Wage-Year-End- l 5.pdf
4
In March 2016, the Center on Wage and Employment Dynamics (CWED) prepared a Policy Brief examining
potential impacts of a $15 per hour minimum wage in New York. That Policy Brief can be accessed at:
http://irle.berkeley.edu/cwed/briefs/2016-0 l .pdf
5
http://www.nj.com/politics/index.ssf/2016/08/christie vetoes democrats 15 an hour minimum wage.html
6
http://www.metrowestdailynews.com/article/20160605/NEWS/160607750
7
https://leginfo.legislature.ca.gov/faces/billNavClient.xht~l?bill id=201520 l 60SB3
2
®
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certain economy or budget conditions are met.
8
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 follo
wing:
For workers in New York City employed by large businesses (thos
e with at least 11
employees), the minimum wage would rise to $11 at the end of 2016, then
another $2 each
year after, reaching $15 on 12/31/2018.
• For workers in New York City employed by small businesses (thos
e 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 12/31/2019.
• For workers in Suburban New York City (Nassau, Suffolk and Wes
tchester Counties), the
minimum wage would increase to $10 at the end of 2016, then $1 each
year after, reaching
$15 on 12/31/2021.
• For workers in the rest of the State, the minimum wage would incre
ase to $9.70 at the end
of 2016, 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
of the Division of Budget (DOB) in consultation with the Department
of Labor.
• Beginning in 2019, the State DOB Director will conduct an annual analy
sis of the economy
in each region and the effect of the minimum wage increases state
wide 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.
9
The law passed unanimously, and was signed by Mayor Muriel Bow
ser 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 mini
mum 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 incre
ase 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 inde
xing 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.
10
After reaching $15 per hour, the minimum wage will
be adjusted each year to
match increases in the cost ofliv ing 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
Economy conditions:
the Governor has the ability to pause an increa
se 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 increa
se 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.
9
http://lims.dccouncil.us/Legislation/B21-0712?FromSearchResults=tr
ue
10
https://baltimore.legistar.com/LegislationDetail.aspx?ID=2692688&
GUID=F0B89A4C-DD59-42FF-B459-
5B40DD8E8391 &Options=} 0% 7CText% 7C&Search=mi~imum+wag
e
8
@
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phase-out the sub-minimum wage for tipped employees by increasing it from the curren
t 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
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 Comm
ittee,
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 now that
the new
City Council is seated.
11
Bill12 -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 minim
um 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 annua
l average
increase, if any, in the Consumer Price Index for Urban Wage Earners and Clerical Work
ers (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 standa
rd that
was higher than the State standard. In that case, the plaintiffs argued that State law had preem
pted
the field of minimum wage. In rejecting that argument, the Court held that the City of Baltim
ore
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 0MB and Finance Fiscal and Economic Impact statement is at ©5-12. 0MB 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
http://www.baltimoresun.com/news/maryland/baltimore-city/bs-md-ci-minimum-wage-final-vo
te-20160815-
story.html
4
11
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consensus among economists on the effects of the 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.
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, SEID 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 of the Bill (see ©29, Boaz Young-
El)
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 of the 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 Count y'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 of Nonprofit 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
5
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annual increase in labor costs (©56). Tim Wiens of Montgomery County Inter
ACC/DD said that
the organization shares the goal of the Bill, but estimated $20,558,048 in incre
ased 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).
HHS Committee Worksessions
The HHS Committee held three worksessions on the Bill, on July 11, July
18, and
December 7, 2016. At the first two worksessions, the Committee considered
the many issues
related to continuing to increase the County minimum wage, and Committee mem
bers and other
Councilmembers requested that staff research some matters further and provi
de additional
information for the Committee's consideration. The issues considered in these
two worksessions
are immediately below, and the additional information requested during these
worksessions is
presented in the next section of this memorandum, beginning on page 20.
At the December 7, HHS worksession, eight Councilmembers were prese
12
nt and
participated in the discussion. The Committee was addressed by Carlos Jimen
ez of the Metro
Washington Council, AFL-CIO, and Ilaya Hopkins of the Montgomery Coun
ty Chamber of
Commerce. Matters discussed at the first two worksessions were revisited,
and the additional
information requested at those worksessions was also discussed. At
the worksession,
Councilmembers Floreen, Katz, and Berliner all advocated pursuing a study of
the impacts of the
minimum wage increases already implemented pursuant to Bill 27-13 and poten
tial impacts of the
Bill's proposed increases
prior to acting on the Bill.
13
At the conclusion of
the worksession,
Committee Chair Leventhal polled Committee members on their respective posit
ions on the Bill:
Councilmember Leventhal in favor, Councilmember Rice opposed, and Council
President Berliner
abstained. The Committee did not make any amendments, nor did it make a recom
mendation or
take formal action on the Bill.
Items Discussed at the July Worksessions
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 of years. The County
minimum wage is
currently $10.75, and under the provisions of Bill 27-13, as amended by Bill
59-14, will go to
$11.50 per hour on July 1 of this year. This Bill would continue these annua
l 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 sever
al members of
the business community at the public hearing questioning the need to enact the Bill
quickly without
In addition to all three Committee members, Councilmembers Elrich, Floreen,
Hucker, Katz, and Rice were
present.
13
Council action on whether to pursue such a study is Item 5 on the Counc il's Januar
y 17 agenda, immediately prior
to action on Bill 12-16
6
12
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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,
14
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 I, 2016, making the DC minimum
wage $11.50 per hour. In this regard, the District was in the position that the County will be in
later this year. Also, a ballot initiative likely to be voted on in the 2016 election 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 of years. 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
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,"
15
but given the cost of living in Montgomery County, independently
maintaining even a modest standard of living on 40 hours a week at $15 per hour would be
challenging, if not impossible. In fact, the
2012
Self-Sufficiency Standard, representing the annual
income required for a family of three (one adult, one preschooler, and one school-aged child) to
live in Montgomery County without financial assistance, was$ 77,933.
16
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.
17
This view is reflected in the
draft 2016 platform for the Democratic Party, which includes a $15 federal minimum wage.
18
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 ://www. wash ingtonpost. com/local/md-po Iitics/th is-large-dc-suburb-wi ll-consider-a-15-an-h our-min
imum-
wage/2016/03/3 l/cfc0806a-f74 l- l l e5-a3ce-f06b5ba2 l f33 story.html
15
The County has a living wage law, applying to County contractors, which requires them to pay their employe
es at
least $14.47 per hour. This amount is adjusted every year based on the increase
in
the CPI-U.
16
http://www.montgomeryplanning.org/research/housing/rental housing study/documents/MD12-SSS-Fin
al-Print-
012412.pdf
17
https://www.washingtonpost.com/news/wonk/wp/2013/02/28/how-the-recession-tumed-middle-class-jobs
-into-
low-wage-jobs/
18
The draft reads "Democrats believe that the current minimum wage is a starvation wage and must be increase
d to a
living wage. No one who works full time should have to raise a family in poverty. We believe that America
ns should
earn at least $15 an hour and have the right to form or join a union," See: http://www.politico.com/story/20
16/07/dnc-
platform-draft-225046
7
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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.
19
Increasing the minimum wage would also benefit a significant number of women,
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) of all workers who would benefit from increasing the federal minimum wage to $10.10."
20
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 reducing job losses or mitigating
losses with the creation of new jobs.
21
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 enrollment in public assistance programs by
working families.
22
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 of the 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 of that magnitude may have
negative consequences for workers.
23
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.
24
It
provides a useful background and is equally applicable to the consideration of further increases in
the County minimum wage to $15 per hour.
http://www. b Is. gov/ opub/reports/m in im um-wage/archive/characteristics-of-minim um-wage-workers-20
14. pdf
https://www.whitehouse.gov/sites/default/files/docs/20l40325minimumwageandwomenreportfina1.pdf
21
http://raisethem inimumwage. org/pages/stimulus
22
See pages 14-15 of
Local Minimum Wage Laws: Impacts on Workers, Families and Business
es
at
http://murray.seattle.gov/wp-content/uploads/2014/03/U C-Berkeley-IIAC-Report-3-20-2014.pdf
23
http://www.brookings.edu/research/opinions/2015/07115-dollar-minimum-wage-hann-economy-holzer
24
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/Files/bill/20l3/Packets/20131126 7 .pdf
20
19
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Some labor economists perceive that there is monopsonistic competition in the
low-skill,
low-wage labor mark et-th e buyer (employer) has a disproportionate amount
of power in the
market for low-wage, low-skill labor.
25
Governments respond to this imperfect mark
et by requiring
employers to pay minimum wage s-the results of which may include increased
employment (by
increasing an individual worker's incentive to work), increased economic activi
ty, 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 requi
ring 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 employme
nt.
The following is a summary of the economic channels through which an incre
ase in the
minimum wage might flow:
Earnings:
Hourly wages for individual employees earning below the new minim
um wage
would increase. Increasing the wage in 2018 from $11.50 to $12.50 would clear
ly increase the
hourly wage of workers earning $11.50 by $1.00
(j
8.7%). Employers may respo
nd to changes in
the minimum wage by reducing the hours of their emp loye es-if wages are incre
ased 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 minim
um wage would
have on those workers currently earning $12.25 (just below the 2018 minimum
wage) or $12.75
(just above the 2018 minimum wage). Employers required to pay a higher minim
um 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 Geor
gia 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 experience
d employees as a
result of the increase in the Federal minimum wage.
26
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).
27
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 prop osal-
to increase the
Federal minimum wage to $10.10 per hour -wou ld increase total employme
nt in Maryland by
2,000 FTEs.
28
Another think tank (the Employment Policies Institute) proje
cted that the 2012
If you tuned out at
monopsonistic
here is the short version: whereas in a monop
oly a very small number of sellers
enters a market place with many buyers, in a monopsony a very small numbe
r 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 Virgi nia-Jo
hn Stuart Mill first opined on this topic
in 1848.
26
Minimum wage channels ofadjustment.
IZA DP 6132.
http://www2.gsu.edu/-ecobth/IZA HKZ Min WageCoA dp6 I 32.pd f
27
Labor market institutions and the distribution ofwages: 1973-1992.
http://www-personal. umich .eduH dinard o/Pub s/dfl 1996. pdf
28
Raising the minimum wage to $JO.JO would give workingfamiles, and the overal
l economy, a much neede d boost.
http://www.epi.org/publication/bp357-federal-minimum-wage-increase/
9
25
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Harkin-Miller prop osal -to increase the Federal minimum wage to $9.8
0 per hour -wo uld reduce
total employment in Maryland by approximately 3,800 to 11,500 jobs.
29
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 mini
mum wage by decreasing
employment of younger workers.
3
Critics ofNe uma rk 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 studi
es 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 foun
d that the most precise
estimates were heavily clustered at or near zero effects on teen employm
ent.
31
°
Workforce composition:
Allegretto, Dube and Reich (2011), in their study
of employment
from 1990-2009, found no statistically significant effect of the minimum
wage on teens as a whole
or on white, black, or Latino teens.
32
In a separate study, Dube, Lester
and Reich (2012) found no
evidence that employers changed the age or gender composition of the
workforce in the restaurant
sector in response to changes in the minimum wage.
33
Efficiency:
While the direct quantifiable evidence is sparse, Hirsch, Kauf
man and Zelenska
found in their interviews with restaurant managers in Georgia and Alab
ama that about 90% of
managers planned to respond to the minimum wage increase with incre
ased performance standards
(requiring better attendance and punctuality, raising productivity expe
ctations, 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 wage
s 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 oflo sing their job, workers may work harder (increase productiv
ity) 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 resta
urants in response to an
increase in New Jerse y's minimum wage in the 1990s, observed that
the non-wage benefit most
The impact ofa $9.80 Federal minimum wage.
https://www.epionline.org/wp-content/uploads/2014/07/EPI Thelm
pactof980Federa1Minimum Wage .pdf
30
Minimum wages and employment.
IZA DP No. 2570. http://ftp.iza.org
/dp2570.pdf
31
Publication selection bias in minimum wage research: A meta-regre
ssion analysis.
http://onlinelibrary.wiley.com/doi/10.1111
/j
.1467-8543 .2009 .00723
.x/full
32
Do minimum wages really reduce teen employment? Accou nting for
heterogeneity and selectivity in state pane l
data.
http://www. irle. berkeley.edu/workingpapers/ 166-0 8.pdf
33
Minimum Wage Effects Acros s State Borders: Estimates Using Conti
guous Counties.
http://escholarship.org/uc/item/86w5m90m#page-
I
10
29
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frequently offered was free or reduced price meals.
34
Their study indicated that restaurants
did not
respond to an increase in the minimum wage by changing their free or reduced price meal benefi
ts.
A more recent study by Simon and Kaestner (2004) found small or no effect on non-w
age
benefits.
35
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 expen
d on
training. Neumark and Wascher tend to find negative effects of minimum wages on trainin
g, but
they acknowledge that most other recent research finds no evidence of an effect. Some econo
mists
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
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%."
36
Other studies have reached different concl usion
s-
for example, Dube, Naidu and Reich found that prices "increased significantly" at fast
food
restaurants, but not at table service restaurants.
37
Profits:
Firms could accept reduced profits in response to an increase in the minimum
wage. There has been very little study of this in the United States, though a study of the impac
t of
a British minimum wage law found that profitability was negatively affected by introduction
of a
minimum 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 Metro
politan
Division).
38
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: health
care
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 worke
rs
Minimum wages and employment: A case study ofthe fast food industry in New Jersey and
Pennsylvania.
http://d avidcar d.berke ley.edu /papers /njmin- aer.pdf
35
Do minimum wages affect non-wage job attributes? Evidence on.fringe benefits and workin
g conditions. NEER
Working Paper 9688.
http://w ww.nb er.org/ papers/ w9688
36
The effect of the minimum wage on prices.
JZA
DP No. I 072.
http://ftp.iza.org/dp 1072.p
df
37
The econom ic effects of a citywid e minim um wage.
http://di gitalcommons. ilr. come 11. edu/ cgi/vi ewcont ent.cgi ? artic Ie= 12 93 &context=i lrreview
38
Prior to 2015, this was known as the "Bethe sda-Ro ckville -Freder ick Metrop olitan Divisio
n.
II
34
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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 $10.00/hour. Montgomery County
workers in those occupations are likely to be making the current minimum wage of
$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 of data, 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 change d since the enactment of Bill 2 7-13?
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 of 2016 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.
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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 change d since the enactment of Bill 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 indust ries-su ch as the
fast food indust ry-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 of fast 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).
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 of cashiers 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- -dema nd 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
$11.50/hour.
How have wages change d since the enactment of Bill 27-13?
Average wages of Montgomery County workers have increased over the past two years,
from $28.89/hour in 2013 to $29.28/hour in 2014 and then to $29.89/hour 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 $57.39/hour to $60.20/hour).
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