Here’s a pretty safe New Year’s prediction: The first day of 2020 is going to roll around and Maryland’s economy is not going to collapse. Granted, one never knows what new imbroglio may emerge from the White House but one extremely certain event that arrives Jan. 1, an increase in Maryland’s minimum wage, is only looking better and better. For those who may have forgotten, the state’s minimum wage rises from $10.10 to $11 an hour that day on its way to $15 an hour by 2025 (for companies with at least 15 employees). Gov. Larry Hogan vetoed that legislation as a grave threat to the state’s economy and the legislature overrode that veto last March.
We raise the issue now because in the intervening nine months, quite a few other states and cities have joined in the crusade for decent salaries for lower echelon workers. And here’s the inescapable conclusion to be drawn: Dire warnings of job losses aren’t materializing as critics claimed they would. Even industries that rely on low-wage employees like fast-food chains aren’t going belly-up or having massive layoffs or even substantially raising prices. What the trend is proving is that opponents had badly overstated the potential downside to gradual increases in the minimum wage. And that only underscores how ridiculous it is that Congress hasn’t stepped up to the plate and done something about the federal minimum wage, which has remained stagnant at $7.25 an hour since 2009, the longest period of inaction in the minimum wage’s 81-year history.
In a letter to legislative leaders, Governor Hogan warned that a $15 wage would “cost us jobs, negatively impact our economic competitiveness and devastate our state’s economy.” He also singled out on neighboring Virginia which still follows the federal minimum wage standard, as a prime beneficiary. But on the subject, he might be in for a surprise. Virginia is almost certain to join the minimum wage pack when its state legislature reconvenes in January. The leader of the Virginia Senate has already filed a bill nearly identical to Maryland’s and last month’s election gave the Democrats control of both chambers for the first time in more than two decades. And while Gov. Ralph Northam hasn’t yet committed to $15, he’s acknowledged that the wage needs to go up.
So what exactly is going on in minimum wage states? A recent survey by the news website Axios found that three of the four states with job growth above the national average had adopted laws to raise the minimum wage to at least $13.50 while three of the five states with the slowest job growth had no state minimum wage at all. It’s not difficult to find examples. Republicans may like to mock California, which was the first state to pass a $15 minimum wage three years ago. But economically, things are looking reasonably sunny out there with a median household income of about $75,000 last year, which is sixth in the nation (with Maryland, New Jersey and Hawaii, all states with at least $10 minimum wages, on the tippy-top).
It is, of course, reasonable to observe that a minimum wage can’t be raised too far, too fast. Businesses need time to absorb added costs and states’ circumstances vary. Maryland, for example, has a relatively high cost of living, so a higher minimum wage makes more sense than, say, Indiana where homes sell well below the national average. But the marvel of increasing the minimum wage is that it helps boost salaries of all workers in a way that raises and stock giveaways to top executives do not. That’s why Maryland’s approach — 90 cents in 2020, 75 cents more in 2021, 75 cents in 2022 and so on — makes a great deal of sense.
Meanwhile, Maryland stands to reap myriad rewards from its willingness to look out for hourly-wage workers. Better paying jobs mean those workers will spend their paychecks, become less likely to require government assistance and create more jobs. Might certain low-wage industries choose to locate elsewhere? Perhaps, but that ought not shape economic policy. It’s far better for Maryland, a state better suited for a knowledge-based economy, to pursue what it does best: bio-health and life sciences, cybersecurity, advanced manufacturing, government contracting, aerospace and defense and financial services. Losing sub-minimum wage jobs won’t devastate Maryland’s economy but ignoring the plight of low-income households just might.