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June 2, 2004

Living Wage or Loss of Employment?

Richard B. Weldon Jr.

Michael Olesker, an opinion writer for The Sun, wrote a heart-wrenching article about a Baltimore resident who works for a contracted cleaning service. Her job assignment happens to be cleaning a state-owned building in Baltimore County.

Mr. Olesker, a very talented writer, tells a sad story of this woman, her three young children, her estranged husband, and the challenges she faces from commuting to her job to buying groceries.

He uses this woman's story to attack Gov. Robert Ehrlich's veto of the "living wage" bill. Mr. Olesker suggests that $6.00 per hour to clean a state building is forcing this woman to live in a substandard fashion, possibly even endangering her young children.

In Mr. Olesker's world, government would proscribe a wage rate of $10.50 per hour for a custodial worker on a state contract, thereby freeing this poor woman to have more disposable income for childcare, food, and other necessities.

In fact, Mr. Olesker isn't the only one who sees this as just and right. The Maryland General Assembly shared his view, with almost all of the Democrats in the House and Senate supporting their leadership.

The floor speeches and post-action media statements would have made any socialist proud. "It is our responsibility" was the most common rallying cry. "If the State would take the lead, surely private industry will follow" was the logic being employed.

So, why not increase the "living wage?" Why not pay a premium for work done on State contracts? Why not try to use state agencies as a social laboratory to conduct these important studies?

Because it is catastrophically bad public policy, that's why. Raising the wage rates on state contracts will increase the costs of doing business with the State. That means that it will take more of your tax dollars to do the same amount of work that we're currently doing.

This stuff is not rocket science in spite of policy-makers attempts to make it complicated. If contractors have to pay their workers more to work on State contracts, the bids will increase to offset the higher wage rates. If the bid costs increase, taxes will have to increase to cover the difference.

Just one operating unit of State government, the Department of General Services, estimates their annual contracting costs would increase by $14 million. There are many other State government units that would be affected, and over 22,000 businesses dealing with these units.

Additionally, when these new wage rates would become effective, only larger, established companies could absorb the cost of bidding and winning a job. Small and minority-owned businesses would be at a distinct disadvantage, as they would have to pass on bidding for contracts at these rates.

The Prince George's Black (as opposed to the Hispanic Chamber, the Asian Chamber, or the regular ol' Chamber - think multicultural bunk) Chamber of Commerce testified against this bill knowing it would put minority business opportunities at risk in Maryland. Yep, I typed that correctly, Prince Georges County Black Chamber! Certainly not a bastion of anti-social, pro-business conservative thinkers!

The cost and impact on current contractors would also be terribly painful. Some companies would have to lay off workers to meet the higher wage standard, and I'm just not sure how that helps people like the woman Mr. Olesker was writing about.

The living wage bill would also impact employer costs such as Social Security, Medicare, and unemployment insurance. I haven't even attempted to probe the impact on State employee wages. Imagine a state custodian, working hard on our behalf, making $6 or $7 an hour cleaning a State building. Along comes a contractor from Acme Cleaners, making $10.50 per hour. How long do you think it would be before the State workers union comes demanding equal pay for equal work?

This is really the crux of the problem. Raising wage rates to a level that meets a subjective "living" standard cannot end with state contracts. My favorite self-created term - Legislative Incrementalism - comes into play here. As soon as living wage bill for contractual workers is signed into law, a member of the General Assembly will be drafting a bill to set the same wage standard for State employees.

Since we can't have our cake and eat it, too, we have to make tough policy choices. We can raise the "living wage" on state contracts, giving contracted employees more money so they can live a better life by raising general tax rates, or we can encourage job creation and economic growth and provide stable and long term employment for state contractors.

Mr. Olesker is in the perfect position. He gets to make recommendations that he is not responsible for, and he gets to attack others while not actually having to do anything other than write a column.

Nice work if you can get it! Wonder what it pays?

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