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County Council Approves Increasing Minimum Wage to $15 by 2020, Critics Say Move is Too Much, Too Soon

January 18, 2017

The Montgomery County Council yesterday approved Bill 12-16 that will gradually increase the County minimum wage to $15 per hour by 2020. Five amendments to the original bill were approved before the Council voted 5-4 to approve the amended bill, making Montgomery one of the first jurisdictions in the nation to approve a $15 per hour minimum wage.

   Five members of the all-Democratic County Council pushed Bill 12-16 through despite an existing plan to raise the minimum wage in Montgomery County from the current $10.75 an hour to $11.50 per hour on July 20, 2017.

   The new Bill, which was sponsored by Councilmember At-Large Marc Elrich, calls for the increase of the County minimum wage incrementally beyond the $11.50 per hour minimum, effective July 1, 2017. The new Bill 12-16 will extend the incremental increases set in County law to go up to $15 per hour effective July 1, 2020, for employers with 26 or more employees. Under the bill’s transition provisions, the County minimum wage for these employers would increase to $12.50 in 2018, $13.75 in 2019 and $15.00 in 2020.

   The new Bill will also require, beginning in 2021, annual adjustments to the minimum wage by the annual average increase, if any, in the Consumer Price Index for urban wage earners and clerical workers for the previous calendar year.

   Councilmembers Tom Hucker (District 5 – Takoma Park/Burtonsville), George Leventhal (At-Large), Nancy Navarro (District 4 – Olney/Wheaton) and Hans Riemer (At-Large) were co-sponsors of Bill 12-16, and all five voted to approve the amended bill. Councilmembers Roger Berliner (District 1 – Bethesda/Poolesville), Nancy Floreen (At-Large), Sidney Katz (District 3 – Rockville/Gaithersburg) and Craig Rice (District 2 – Germantown/Clarksburg/Damascus) voted against the amended bill.

   The County Council had an opportunity to pause and conduct an economic study of the impact that increasing the minimum wage would have on the County. Prior to the vote on the amended bill, the Council considered a proposal to conduct a study and delay voting on a Bill 12-16 until after the study was completed.

   However, the same five Councilmembers that pushed the Bill through voted against conducting an economic study on the impact of the actions.  The proposal to conduct the study was defeated by a 5-4 vote with Councilmembers Elrich, Hucker, Leventhal, Navarro and Riemer voting against conducting the study. Councilmembers Berliner, Floreen, Katz and Rice supported conducting a study.

   The bill now goes to County Executive Ike Leggett for his signature. Bill 12-16 is not quite set in stone yet; there is still a chance the Leggett might veto the bill as constituted. The County Council must pass a bill by a 6-3 margin to avoid the possibility of a County Executive veto.

   However, after Leggett raised concerns about the way Bill 12-16 was constructed in November, Elrich and the other supporters introduced amendments to the bill to help sway Leggett’s support for the final bill.

   Among the amendments approved was one proposed by Councilmembers Elrich and Leventhal that changes the minimum wage schedule for businesses employers with 25 or fewer employees so that they reach $15 per hour two years later than larger employers. The phase-in schedule for those the smaller businesses employers will be $12 per hour effective July 1, 2018; $12.75 per hour on July 1, 2019; $13.50 per hour on July 1, 2020; $14.25 per hour on July 1, 2021; and $15 per hour on July 1, 2022.

   Another amendment proposed by Councilmembers Elrich and Leventhal and approved would give the County Executive the ability to stop pause implementation of a scheduled increase if economic conditions worsen. The conditions that could trigger a pause are: if total private employment for Montgomery County decreases decreased by 1.5 percent over the period from April 1 to June 30 of the previous year; total private employment for Montgomery County decreased by 2.0 percent over the period from Jan. 1 to June 30 of the previous year; the Gross Domestic Product of the United States experiences negative growth for the preceding two quarters: or the National Bureau of Economic Research determines that the United States economy is in recession.

   An amendment proposed by Councilmember Riemer and approved will require the County’s Office of Legislative Oversight to monitor the impact of increases in the County minimum wage and provide annual reports to the Council on the impacts.

   “I can’t look at this issue any other way than from the bottom up,” said Councilmember Elrich. “With this increase, we make it clear that we believe that an honest day’s work should result in an honest day’s pay and not leave a working person mired in poverty. Helping people lift themselves out of poverty benefits all of us.”

   “Raising the minimum wage means that the tens of thousands of families that will be affected,” said Elrich, “will now be more likely to meet their basic needs, and enjoy greater stability. And local businesses will benefit when more of our residents have more money to spend in the local economy. I understand the concerns of some business owners, and we have extended the phase-in period for small businesses until 2022, and we have provided provisions for a pause in the increases when economic conditions warrant it. But I do not think that those concerns should trump what is a fundamental social justice issue: people who work should be able to make a living, put a roof over their heads and feed and clothes their families.”

   However, critics of Bill 12-16 say increasing minimum wage too quickly will force employers to cut jobs, or employee hours, or benefits.

   “We think that the increase in minimum wage to $15 in 2020 is too much too soon,” said Marilyn Balcombe, president & CEO of the Gaithersburg-Germantown Chamber of Commerce. The first County bill passed in 2013 raised the minimum wage almost 60 percent from $7.25 to $11.50 in the span of four years with the final increase going into effect on July 1, 2017.  Montgomery County already has one of the highest minimum wages in the Country. The latest bill increases minimum wage another 30 percent through 2020. That is a HUGE number by itself and does not include payroll taxes and benefits that are tied to wages. It will be very difficult for some businesses to adapt to the level of increases stipulated by this legislation.”

   As one might expect, Chambers of Commerce throughout the County opposed the Bill. However, the Clarksburg Chamber of Commerce said that many of the businesses which make up its roster of businesses would be badly hurt by the increases.

   “As a Chamber we are disappointed,” said Ibi Teleki Sofillas, president of the Clarksburg Chamber. “We were opposed to the bill as were many of our member businesses. Our members told us that they would be devastated by the increase. As a Chamber, we remain very hopeful that County Executive Ike Leggett is going to veto the decision so that we can see what happens with the implementation of the increase which is already slated to happen in July of 2017.”

   Balcombe said that the GGCC was concerned about the far-reaching and unconsidered impacts of raising the minimum wage so high, so quickly.

   “We have asked the Council to slow down and look at how the increases could impact jobs and the local economy,” said Balcombe. “At the very least, they should have taken the time to see how the increase in minimum wage will affect the County’s own budget. At this point, we don’t know how much this legislation will cost the County or how the County intends to pay for it.”

   Indeed, the expectation is that this increase will also impact County employees’ salaries, County contracts, and County grantees. At this point, there is no indication of what that impact will be. The County Council recently approved an increase in both the property tax and the recordation tax paid when you sell your home, it seems clear that the passage of an increase in the minimum wage would require that there be an additional tax increase to pay for the increase in County personnel costs, say critics of Bill 12-16.  

   “I have listened to County businesses who testified on this measure and carefully studied the information available to us,” said Councilmember At-Large Hans Riemer. “The truth is we are entering uncharted waters, and no one can predict with accuracy what our economy will look like in five years. For that reason, I was glad to support amendments designed to meet concerns raised by the County Executive, which will slow the increases for small businesses and allow for the Executive to slow the increases overall in the event of a recession.”

     Councilmember Nancy Floreen said, “I certainly support increasing the minimum wage to $15 nationally or even regionally. However, for Montgomery County to raise our minimum wage when surrounding jurisdictions do not raise theirs risks putting us at a competitive disadvantage for job creation. What people want most is a job, and we need to make sure we have an environment that supports job growth.”

   In November, Councilmember Katz, who voted to oppose the bill, said in a memo to the County’s Health and Human Services Committee regarding Bill 12-16, stating “There might also be unintended consequences that an economic impact study could bring to light. For example, we're learning that low-income parents in Seattle are being particularly pressured by the new minimum wage when their own pay increases don't keep up with child care costs. For our local budget, an increased minimum wage could push more families out of eligibility for state child care subsidies and drive them toward the county program, which is unable to keep up with demand even now.”

   Later in the same memo, he wrote, “I have spoken with several county businesses who love operating here and would like to stay and, hopefully, expand. However, because of elements like wage compression, this increase will impact employers at all pay scales. Some will either need to close their doors or relocate over county lines — taking their jobs with them. Others will be forced to layoff some existing employees or hire fewer people than planned because these businesses cannot afford the additional payroll. Without striking the right balance, we will increase the wage for some individual workers, while also potentially reducing the overall number of jobs. In an area like ours, where moving a business just a few miles down a road can take you into a new jurisdiction, this is a concern we cannot ignore.”

   Katz finished the letter which was also sent to other members of the Council asking for the County to undertake a “robust economic impact study” because it “is the most responsible way for us to proceed and I ask my colleagues to pursue one before enacting any legislation.”

   However, the supporterss of Bill 12-16 decided to push forward. “When FDR put forward the original minimum wage,” said At-Large Councilmember Elrich, “it was explicitly to ensure a wage that meets basic needs. Sadly, that link between the minimum wage and meeting basic needs has been shattered, and it is time to recouple wages to the original purpose of the minimum wage.  I thank my colleagues and all the many people who worked for and supported this bill.”

    “I am proud to vote for Bill 12-16,” said Councilmember At-Large George Leventhal after yesterday’s vote. “Today’s vote sends the message that I stand with hard working families struggling to get by on poverty wages.”

 

 

 

 

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