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Raising Baltimore's minimum wage is a foolhardy Robin Hood move

"It's time to share the wealth." That's Councilwoman Mary Pat Clarke's latest slogan in her campaign for a $15 minimum wage in Baltimore. Like most sound bites, this one is both simplistic and misleading. It wrongly assumes a Baltimore with strong labor demand. It foolishly imagines that fixing the price of entry-level and unskilled labor half again higher than that payable a few miles away will produce no competitive ill effects.

The sad reality is that misguided policies like this one have made Baltimore non-competitive with its surrounding suburbs and rival cities for decades. As a result, we've been in economic decline for so long we hardly know what organic growth and widely-shared prosperity looks like anymore.

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Ms. Clarke points to some post-Great Recession job recovery and recent growth in the assessed value of real property as signs that "we're in about the best position we can be in." This is a dangerous misreading of the data.

It's true that the city has slowly recovered 15,000 of the 17,500 jobs it lost from 2007 'til we hit bottom in 2010 — but that still leaves us 2,500 jobs short of our pre-recession level.

And compare that to the rest of the metropolitan area (Towson, Columbia, etc.). Our surrounding suburbs not only started their recovery from the recession sooner, but they have generated job growth at a much higher rate. Since the recession ended in 2009, the suburbs have gained 107,600 jobs; they now have 78,500 more jobs than they did pre-recession — while the city remains under water.

The longer-term trend is even more discouraging. Since 1990, the city has lost 95,700 jobs, while our neighboring suburbs have gained 336,100. Back then, 40 percent of metro area jobs were in the city; today only 26 percent are. If this is a good competitive position, one shudders to think what a bad one would look like.

But what of all the downtown construction and growth in the city's assessed value of real estate? As The Sun's Luke Broadwater has noted, a major portion of this has been bought with tax subsidies. Because of the city's non-competitive property tax rate (at least double that in the surrounding counties), virtually all large-scale development in the city involves up-front "tax-increment financing" (TIFs) or other schemes that reduce developers' effective tax rates — sometimes to near zero.

Such subsidies do, indeed, incentivize some much-needed investments that might otherwise go elsewhere — but they don't add proportionally to the city's tax revenue. And given the state's flawed funding formula for aid to education, the fact that so much of this new property is tax-privileged contributes to the city's current school budget crisis.

The bigger problem (as those discouraging job numbers illustrate) is that treating the city's non-competitive tax rate with special breaks for the connected is not just unfair but ineffective. The tax barriers that necessitate TIFs for the favored few remain in place for the disfavored many, so hoped-for "spillover benefits" from subsidized projects rarely spread very far or stimulate broad-based growth.

And now the city intends to pile non-competitive labor costs on top of its non-competitive capital costs. Economic development officials in rival jurisdictions probably can't believe their good fortune.

We often talk of city "food deserts," but wait until the new wage law becomes binding. Over time we'll notice retail deserts, restaurant deserts and more as myriad enterprises find it advantageous to invest, hire and grow just a few miles away. Then how many city residents, finding an ever-broader and cheaper array of goods and services across the county line, will decide living there makes sense, too?

The truth is that we've been fueling such flight for a very long time. Playing Robin Hood — "sharing the wealth" via aggressive taxation of capital and income to fund redistributive programs — has been Baltimore's guiding ideological principle since the middle of the last century.

Of course, the problem with wealth redistribution at the local level is that it can be avoided by a change of address. When, for example, Baltimore raised its property tax rate 19 times between 1950 and 1975, many thousands of home- and business-owners voted with their feet and became suburbanites.

The real lesson of Robin Hood is that when you rob every rich sucker who comes through Sherwood Forest, eventually they catch wise and steer clear; before you know it, there's not much wealth to "share." We in Baltimore are about to see how that works — and not for the first time.

Stephen J.K. Walters (swalters@loyola.edu) is the author of "Boom Towns: Restoring the Urban American Dream" and a professor of economics at Loyola University Maryland.

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