I have seen reports all over social media and the “real” media that the Maryland House of Delegates has passed an increase in the minimum wage that will eventually lead it to $15 per hour by 2025. I’m not up on just who is who in the House these days but I presume a 96-44 vote is pretty much party line – there may have been a Democrat who voted against it, but I don’t know and it likely doesn’t matter in the scheme of things because it’s a vetoproof majority and the way Democrats are ramming this through it will be passed at a time when the veto can be overridden in session. (With Larry Hogan’s record, I can no longer say “inevitable veto.”)
It should be pointed out first of all that the “fight for $15” is sort of a misnomer because the raise from the current $10.10 per hour – a rate established last July – to $15 an hour would not be complete until January, 2025. This is a significant change from the original bill, which mandated the raise be in place by July, 2023. (The House bill has been amended while the cross-filed Senate bill remains as it was originally intended, so it works well for comparison.) But since the state began regularly raising its minimum wage in January, 2015, workers have already received a 26.3% bump in four years – well beyond the rate of inflation and a far cry from the normal 2-3% annual raises many workers receive if they are lucky. Whether it takes eight years or ten years, a salary increase of 87.5% for gaining absolutely no skills is far more than the market would naturally allow.
I’ll circle back to that point in a moment, but it’s also worth considering that union workers who have their wage rates tied to a point above the minimum wage will also get a raise. And when workers get a raise, guess who else does?
In today’s climate of dramatic minimum wage increases of 50% or more, unions — predominantly in the service sector — can also directly benefit from minimum wage increases because their members’ pay is less than the new minimum. Take California, for instance, which passed a $15 minimum wage last year. The Employment Policies Institute (EPI) usedCensus Bureau data to estimate that roughly 223,000 union members in the state will receive a direct pay increase by the time the law is fully implemented.
It’s bad news for taxpayers, but a solid investment for unions. A powerful California-based SEIU local spent about $1.6 million to collect the signatures needed to qualify the $15 ballot measure that forced Gov. Jerry Brown to back such a mandate. EPI estimated that California unions can expect a return on investment of roughly $9 million in additional dues per year.“Why Do Unions Fund The Fight For $15 Minimum Wage? Because They Gain A Financial Windfall In Return,” Ed Rensi, Forbes, January 19, 2017.
You can bet your bottom dollar that Big Labor here in Maryland has similar deals with business owners held hostage to these union contracts.
Now circle back with me if you would and think about who earns minimum wage from a job. Generally they are people just entering the job market or those who don’t develop their skills beyond the point of being barely hireable. My first “real” W-2 job was working in the on-campus dining halls at college, and it was a minimum wage job – just as my roommate who snagged a cushy library job made. Since I was essentially a temporary worker, it didn’t matter to the school that I was making $3.35 an hour to run a dishwasher. And since most of my money went to the local sub shop or to buy the occasional 12-pack when I became legal, I didn’t much worry about it, either. In fact, my first job out of college at a department store was minimum wage – but this college graduate quickly parlayed his degree into a 49% raise when the architectural firm I interviewed with a few weeks earlier offered me a position less than a month after I started working at the store. More skills and a little bit of work experience = higher wages. I created more potential value from my labor.
This is the problem with minimum wage as I see it. Do you think Maryland workers are going to instantly create another 75 cents to a dollar’s worth of value to their employers each hour just because the calendar flipped from 2020 to 2021 or 2024 to 2025? Of course they won’t – but if a business owner had 20 minimum-wage employees who worked an average of 20 hours a week, it’s an extra $300 or $400 they need to clear.
I’ll grant there’s a bit of merit to the argument that raising the wage creates people with more money to spend, but what are the chances enough people will take their extra money and spend it at the business in question? When the percentage of workers who make minimum wage hovers in the low single-digits, there’s not enough of an impetus for that so-called “extra” money to make much of an impact on the economy at large but, at the same time, it can be devastating to a business that requires a lot of unskilled labor.
There’s also the impact on workers who make slightly to significantly more than minimum wage to consider. They won’t get an automatic raise, but their standard of living declines by the amount that businesses have to raise their prices to cover costs. It may only be an extra percent or two in scattered businesses, but eventually that adds up. Note that amendments to Maryland’s most recent minimum wage bill not only slowed down the increase by 18 months but also scrapped the automatic increase based on inflation – probably to make it an issue for the 2024 or 2026 elections.
I have often said, and will continue to say because it’s true, that the real minimum wage is zero – the amount you make when the job you may have secured when the minimum wage was $8 an hour and you weren’t a significant risk to the employer if you didn’t work out is the job that’s no longer available at $10.10 an hour.
Regardless, it’s all but certain that a minimum wage increase will pass in Maryland this year. The Left needs that victory and many others in order to try and tank the state and national economy for the 2020 election. (Notice the lack of enthusiasm over the 2.9% GDP increase despite the fact it’s our best since 2015 – losing by a fractional .0009% – and close to the first 3% annual calendar year growth rate since 2005. One could argue the Schumer-Pelosi-Trump shutdown may have cost us that 0.1 percent.) Apologists for the Obama economic record (“Analysts have called into question just how much a particular president actually impacts the economy during his tenure”) now expect a recession to hit by the next election (“While the fourth-quarter cooling isn’t quite as extreme as some economists feared, the metric does little to placate existing concerns about a global economic slowdown.”)
But someone believes in magic, as in that people will magically produce more value through an arbitrary wage increase. Cue the pixie dust and unicorns.