Minimum Wage Fiasco
Have you ever been on a see-saw when each side is able to push the other up equally, creating a lasting ride? This is exactly what the General Assembly measure (HB 295/SB331) will create with using the Consumer Price Index (CPI) to generate how raises are to occur in the Maryland Minimum Wage Act of 2014.
Before this year, the Maryland Minimum Wage Act was set for pay that is equal to that of the federal minimum wage, with several exclusions. Not all states go by the federal rate, but determine the needs based on local economies and costs of that region. Twenty-three states are currently above the rate, 20 retain the federal rate, and 4 are below. Five states have no minimum wage law.
If passed, this bill will take effect July 1, 2014, changing the current federal rate of $7.25 to a new state rate of $8.20, increasing every year until 2016 where the amount will be $10.10 per hour. That, of course, is not where this stops. In 2017, the CPI will then be the determining point of what the increase will be.
For the last 10 years the CPI has inflated each year at an average rate of 2 percent, supported by the costs of goods and services. Included in this is the cost of energy, food, housing, transportation (including vehicles), and medical expenses.
The CPI also includes the pay for Urban Wage Earners and Clerical Worker's. According to reports, this is about 32% of the nation's population.
Understanding the CPI is difficult, due to the ever-changing markets. One questionable change was in 1983, when the commission changed from measuring homeowner costs to how much each house would rent for. The Bureau of Labor Standards (BLS) provides that the reason was to remove investment items which may influence the costs. Also, this approach measures the value of shelter to owner-occupants as the amount they forgo by not renting out their homes. This is not the only change that has been made.
When you link the minimum wage requirements to the CPI (as Maryland did with the never-ending increases in gas taxes) there will never again have to be a vote after 2016; this will be decided by the state commissioner. It will be based on the costs of a federally-ran committee that changes each year. What they find should be inclusive in making a determination.
When you see a raise in the costs of employees in a region that are not urban, or rely mainly on small businesses, there will be many businesses that fail.
The raise will cut into profits of the business, in turn decreasing the amount of employees, or they will have to raise prices to afford to even stay in business.
If the business raises the costs of goods and services, the CPI will increase.
Interestingly, Prince George’s and Montgomery counties’ governments passed a bill in 2013 to raise the minimum wage in increments. These areas are heavily represented in the General Assembly due to their populations. They are also the sponsors and co-sponsors of the House and Senate bills this year, even though those they represent are already going to see the changes.
Another factor is sustainability. Maryland county unemployment rates measure from 4.5 in Montgomery and Howard County to 14 percent in Worcester County, as of November 2013. Although I rarely trust these figures entirety, this is what we have documented.
As a local worker in Frederick County and someone who doesn't cross the county line for employment, I cannot name one person making minimum wage.
I can however name people who are making a few dollars above the 2016 rate and struggling, yet don't qualify for food, housing, or energy subsidies. Some of these workers, who have proven skills and earned increases, will not be affected by this increase; the gap will just be closed for skilled versus unskilled labor.
I can list occupations taken over by college interns, with job seekers forced to go into another profession or continue to search for work. This system, which may have been brilliant upon origination, has caused businesses to achieve free labor or at the students/taxpayers expense, (3 credits of costs) landed court cases and final determinations to transform and regulate the labor, and lower the amount of paid jobs for particular skill sets.
I can name people who won't work because they are taught that they can get more in benefits than from working. Some of these also know that remaining single and unmarried with children will generate more per child.
I can name people who work enough hours to get a large tax refund, through minimal employment. If they are not working, they find a way for children to be claimed as dependents from someone employed.
State Sen. Ron Young (Frederick 3) used the recycled example of Henry Ford. He believed that every worker should be able to afford the good that they made.
Here are a few facts: In 1908 Ford created the Model T, while building the Detroit car industry. At this time, the price for the car was $825. The price fell due to improvements and efficiency until 1920. The skilled labor and improvements drove costs down and made this affordable.
Henry Ford crafted his concept before The New Deal and extreme government interference in the free market.
Clearly, in upholding this concept our history guy in the Senate has little clue as to the ramifications in his jurisdiction by upholding such a bill.
Del. Kelly Schulz has studied this timelessly and is prepared to take this on in the Economic Matters Committee on February 11th and would like to have written – or in person – testimony on this bill.
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