County’s Report Says Increasing Minimum Wage to $15 Could Lead to 45,000 Lost Jobs

Just days after the Montgomery County Council re-introduced a bill aimed at increasing the County’s minimum wage to $15 per hour by 2020, a study commissioned by the County finds that increasing the minimum wage would cost the county thousands of jobs.

On July 25 Councilmember At-Large and candidate for County Executive in 2018, Marc Elrich, introduced Bill 28-17 which, if approved, would gradually increasing the County’s minimum wage to $15.

While introducing the bill Elrich said, “I know that some of my colleagues had been hesitant to support the $15 minimum wage. I think this revised bill addresses some of the major concerns.”

Six days later on July 31, the study conducted by Philadelphia-based PFM Group Consulting, LLC, concluded that “based on the study’s assumptions, the County is projected to experience a loss of approximately 47,000 jobs by 2022 as a result of an increase in the minimum wage from its July 2017 level of $11.50 to $15.00 per hour. The majority of the projected job loss – approximately 45,300 positions – will be experienced by workers in low-wage positions.”

That sort of job loss would be counterproductive to intended benefits of increasing the Minimum Wage.

The study was commissioned after County Executive Ike Leggett vetoed last year’s Bill 12-16, also introduced by Elrich, and approved by a 5-4 vote of the County Council in the Fall of 2016 which attempted to increase the minimum wage to $15 by 2020.

The executive summary of the study states, “This study addresses issues raised by the County Executive from four perspectives: the impact on County government, the impact on the County workforce and budget, the impact on the County economy and businesses, and the socioeconomic impact. As the findings detail, there are significant potential benefits, as well as significant economic costs associated with moving to a higher County minimum wage as proposed by Bill 12-16.”

The study found that while the impact on businesses would be the lose of jobs and “the aggregate estimated loss of income in the County would be approximately $396.5 million from 2017 to 2022.”

The study found that the increase in minimum wage would also result in the County needing to raise an “additional cumulative funding of $10 million from FY2019 to FY2023 because of adjustments to the Minimum Wage/Seasonal Salary Schedule to reflect the new minimum wage and avoid wage compression.” As well as “a projected loss of income tax revenue of $40.9 million from FY2018 to FY2022.”

While the study did say, “The proposed increase in the County minimum wage has the potential to provide some important benefits. An increase in earnings for low-wage County workers will have tangible positive impacts for low-income workers and their families. This should also lead to reductions in poverty, improvement in mental health and a reduction in hunger and stress among minimum wage workers. From the perspective of County employers, additional research shows a relationship between higher wages and employee productivity and morale, which would reduce turnover and the costs associated with hiring and training new employees.”

However the report went on to say, “At the same time, it is also projected that the wage increase will lead to a significant loss of low wage jobs. This loss of jobs would lead to a loss of income among County residents. This also has the spillover effect of reduced income tax revenue for the County. Additionally, an increase in the minimum wage will lead to a cost for the County to bring its own salary schedules in line with the new wage rate to avoid wage compression. It may also require the County to increase its funding for non-profit organizations to ensure that they can maintain essential services.”

The full study conducted by PFM Group Consulting, LLC can be found on the County’s website.

Elrich is joined by co-sponsors Councilmembers George Leventhal, Hans Riemer (both At-Large) Tom Hucker (District 4) and Nancy Navarro (District 5) in pushing to increase the minimum wage.

Last fall, Elrich, and his four co-sponsors approved Bill 12-16 by a 5-4 vote. 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 which would have raised the County’s minimum wage to $15 per hour by 2020. However, the bill was vetoed by County Executive Ike Leggett because it was “too much, too soon.”

The current minimum wage in Montgomery County is $11.50 per hour. It increased on July 1, 2017, in accordance with the County’s existing Minimum Wage requirements enacted in 2013.

File Photo by Germantown Pulse. Charts from PFM Group report.