Minimum Wage Study Authors Estimate Job-Loss Figure Will Be Cut in Half After Error Fixed

Firm said it used wrong number from business-owner survey responses, causing inflation


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The cover page for the PFM minimum wage study in Montgomery County

A computational error in a study on the impact of a $15 hourly minimum wage in Montgomery County incorrectly led to a doubling of the estimated number of jobs lost, according to the research firm.

Philadelphia-based research firm PFM said Thursday that it used a wrong number to determine that Montgomery County would lose about 47,000 jobs by 2022 under a $15 hourly minimum wage. The actual loss, when the calculation is fixed, probably will be about half as much, said Dean Kaplan, PFM managing director.

Kaplan said in an interview Thursday that the firm used the wrong data from its business owner surveys, which inflated the job loss number and other results in the study.

“The error was merely we pulled the wrong number out of our data,” Kaplan said. “We essentially used survey results at a higher level, which created a higher level of job loss than actual numbers.”

The study has been the subject of controversy since it was released Aug. 1, with supporters of a $15 minimum wage lambasting the results that predicted about 8.5 percent of the county’s overall employment would be eliminated. Skeptics have said that relying on surveys of business owners is not a reliable gauge, since owners might try to influence the policy decision facing the County Council by exaggerating potential job losses.

This week, County Executive Ike Leggett, who commissioned the study, ordered the firm to review its analysis after hearing about the error. The county paid $149,600 for the report.

Kaplan said the county asked PFM to survey business owners to determine the potential impact of the proposed minimum wage increase, which the council is mulling for a second time this year. He said the county did not ask the firm to analyze the local economic impact of previous minimum-wage increases, which have brought the wage up from $7.25 in 2013 to the current $11.50.

“I think it’s important to say the study wasn’t intended to take a position on the minimum-wage increase,” Kaplan said. “We were asked to provide information. We think the corrected model in the final report will provide a valid approach to estimating the economic impact of the proposed change. We think it will have value.”

He also said, that from his experience, he believes the vast majority of survey respondents “are very straightforward.”

“They’re going to tell you what they think and how they feel about things,” Kaplan said.

He added that after the firm corrects the error, the county’s household income number would show a different trend. The original report found that income would decline. Actually, household income would increase, he said.

He said the firm will work to make sure the report is accurate.

“We recognize how important this issue is to residents of the county and its leadership and its businesses,” Kaplan said.

County Council members are scheduled to take up whether to raise the minimum wage this fall. Earlier this year, Leggett vetoed a bill that the council approved 5–4 that would have raised the minimum wage to $15 per hour by 2020. Leggett commissioned the study shortly after the veto to gauge the possible economic impact of raising the wage.

Council members who voted for the initial bill, such as Marc Elrich, George Leventhal, Hans Riemer and Nancy Navarro, have since said they don’t believe the study is reliable.

“It was clear to me from the beginning that this study was extremely flawed,” Navarro said in a statement on Friday. “Even staff from the County’s Department of Finance seemed to have pointed this out to the county executive, but the study was released anyway.”

Also Friday, the county’s “Fight for $15 Coalition”—made up of labor groups such as the Service Employees International Union, UFCW Local 400 and political groups such as Progressive Maryland, CASA and the Maryland Working Families Party—criticized Leggett for releasing the flawed study.

“County residents deserve more responsible leadership,” the coalition said in a statement.

PFM plans to provide an updated version of the study prior to the council beginning debate on the minimum wage this fall.

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