Despite the fact he’s trailing by sixteen points in the latest poll, I still think it’s worth the time to dissect the policy proposals of Democrat gubernatorial hopeful Ben Jealous. In recent days, he’s reshuffled his priority list, displacing his previous #1 priority of education and replacing it with a jobs agenda he calls “Make It In Maryland.” As always, though, the devil is in the details.
Jealous begins by complaining that we have fallen behind Virginia in something called the New Economy Index. It turns out, interestingly enough, that Maryland is the bottom of the three states comprising the Delmarva region – although being on the bottom is still sixth-ranked in the nation. Here’s what the Information Technology and Innovation Foundation said about our three states:
Virginia comes in fourth with some of the fastest-growing companies in the country, and its proximity to the nation’s capital attracts high-skilled workers for the numerous R&D-focused firms in the region. Fifth-place Delaware is perhaps the most globalized of states, with business-friendly corporate law that attracts both domestic and foreign companies and supports a high-wage traded service sector…Sixth-ranked Maryland holds its place among the leaders primarily because it has a high concentration of knowledge workers, many employed with the federal government or with federal contractors in the suburbs of Washington, D.C.
In theory, then, a downturn in federal government employment would hit both Maryland and Virginia hard, displacing them from the top tier of the rankings. But the bulk of his “Make It In Maryland” outline speaks to something federal workers seldom have to endure: working for minimum wage. Over the next five years, Jealous would increase the minimum wage in Maryland to $15 an hour for regular workers, with tipped employees reaching the plateau three years afterward.
While Jealous claims that a $15 per hour minimum wage would increase the pay for 573,000 Maryland workers, such a raise would place those just over that threshold at risk for a significant decrease in their standard of living. After all, the extra expense businesses would have to shoulder would have to come from someplace, and that someplace generally lies in two regions: increasing prices or decreasing labor costs by lopping off the least productive or lowest-skilled employees. As I often say, the true minimum wage is zero, from being jobless.
In a properly functioning marketplace, the wage one makes is just a shade less than the amount of value that employee creates – the small difference keeps the business profitable and viable. Obviously this is a relatively subjective category, best expressed by those who work on a straight commission and/or own their own business. And it doesn’t always take a lot of skill: for example, not to pick on landscapers but doing yard work isn’t the most highly skilled job – however, it is time-consuming so there’s a market of people who don’t want to take the time and effort to maintain their lawns that’s being met by entrepreneurs of all sizes who make it their job to take care of yards.
In fact, my first job was helping my brother take care of an older lady’s lawn – for 2 to 3 hours of work after school once a week I was paid the princely sum of $5. Luckily we could ride our bikes there – about 2 miles – and we used her lawnmowers and gas can filled with $1 a gallon gas. So it was not a high-skill job but it was one she was too old and frail to do, so she found two teenage boys willing to do it. That was the value to her, since she wasn’t able to perform it herself. And as it turned out, if we were efficient I would come close to making the minimum wage, which at the time hovered around $3 an hour. (Since my brother got $10 for riding the tractor to do a maybe 3/4 acre yard while I did the trimming with the push mower, he was already making minimum and then some.)
My second job was somewhat similar, but there was a catch. For most of three academic years I made minimum wage working in the dining halls at college. If we were busy, I was creating value by ensuring the cafeteria maintained a stock of clean dishes. On the other hand, if it was early in the shift all of us standing around were a money pit. The same was true at my first job out of college, working in a department store – again, for minimum wage. If there was a customer I could assist in some way and that customer made a purchase, well, I was creating value for Hudson’s. If not, I was a money pit. Luckily, I had acquired a good education so my time there was short – just weeks later I had my first architectural job, one that I spent four years at college learning the ropes to secure. In turn, I got quite the education learning in the workplace. In the next half-decade through on-the-job training I went from being a ink-on-mylar draftsman to a CAD operator (way back with AutoCAD version 11) which made me more valuable to them. Increasing skills and knowledge to maximize production: that’s the way it’s supposed to work.
Conversely, if you artificially raise the wage without getting a corresponding increase in value, do you know what you get? Kiosks at McDonalds or self-service checkouts at Walmart. Unfortunately, those were among the jobs that people in my generation got to grasp as the first rung on the ladder, but increasing the minimum wage is going to leave those people behind – particularly in areas where the wage support isn’t already present. (There are places in the state where $15 an hour is pretty much a de facto minimum, particularly in the DC area.) In any case, increasing the minimum wage isn’t going to help very much in areas with persistent unemployment because there’s little there with which to create value.
But one place increasing the minimum wage will help? State coffers. While some will lose their jobs, I’m sure the Jealous campaign is banking on enough income being created out of whole cloth to help grease the wheels on some of their other pipe dreams. So I honestly don’t know what it will cost, but I’m sure we will all pay the price nonetheless.
Now, there’s actually more to this section than just the minimum wage. But I liked this here piece so much that I decided to split “Make It In Maryland” in two and cover the rest next time.