Study on Montgomery’s Proposed Minimum-Wage Increase Predicts Gloomy Economic Impact

County-commissioned analysis projects 47,000 jobs lost by 2022 if wage rises to $15


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Supporters of the minimum wage increase rally outside the Montgomery County Council building

Andrew Metcalf (Beat file photo)

A new study released Tuesday evening by Montgomery County finds that raising the minimum wage to $15 per hour would result in a loss of 47,000 jobs in the county and an aggregate lose of nearly $400 million in income.

County Executive Ike Leggett hired Philadelphia-based research company PFM to study the local impact of the proposed wage increase after vetoing a bill that would have raised the county’s minimum wage to $15 per hour incrementally by 2020.

The County Council approved that bill 5–4, but that fell short of the six votes needed to override Leggett’s veto.

The new report used publicly available employment data and surveyed more than 500 local business owners.

The county’s current minimum wage is $11.50. The study concluded that an $11 hourly wage was the local market rate needed to attract and retain employees. It found that increasing the wage would cost the county an additional $10 million per year to increase county employee wages.

The report found there are about 88,000 “low-wage jobs” in the county, in which employees make $1,250 or less per month, that could be affected by the minimum-wage increase.

It also found benefits to increasing the minimum wage, such as improving employees’ mental health and reducing their hunger and stress. The report cost the county $149,600, according to county spokesman Patrick Lacefield.

The report’s authors said the study is not conclusive. “It is likely that multiple stakeholders and policymakers will find support for their respective (even if dissimilar) positions from the findings and analysis within this study,” they reported.

Last month, Council member Marc Elrich introduced a new version of the previous minimum-wage bill that Leggett vetoed. The new version attempts to address some concerns raised by the business community during initial debates over the wage increase by allowing businesses with 25 employees or fewer until 2022 to raise the wage to $15 per hour, rather than 2020, the deadline for larger employers. The council is scheduled to debate the new bill this fall.

Council members who voted for the previous bill are skeptical about the study.

“The study is ludicrous,” Council member Hans Riemer said Wednesday morning, pointing out that it focused on employers’ views. “It’s not like math—there’s no knowable answer right now. We have to use good judgment and be careful.”

He said it's important to find the right balance between employer concerns and making sure local workers are paid a livable wage. MIT’s living wage calculator estimates that people need to earn $15.80 an hour in the county to support themselves adequately.

“I have always been seeking an approach that finds the right balance,” Riemer said. “The natural thing to do is to make some adjustments to what has been proposed. Unfortunately, neither side was willing to negotiate last time and we have to get to the right place this time.”

Council member George Leventhal said he received the study Tuesday night and was still examining it, but was concerned about the methodology.

“It only interviewed employers, not employees,” Leventhal said. “I don’t think it’s reasonable to think we’ll stop at $11.50 [per hour] forever.”

He added that he hopes employers will discuss an increase schedule that’s agreeable to them, rather than oppose any further increases.

“I’m not wedded to the dates in the second bill,” Leventhal said.

He said the wide body of research on increasing the minimum wage is largely inconclusive, with some studies finding that raising it decreases employment and others saying it decreases inequality and provides positive emotional and financial benefits to employees.

Elrich, Leventhal, Riemer, Nancy Navarro and Tom Hucker voted for the original bill, while Council members Roger Berliner, Craig Rice, Nancy Floreen and Sidney Katz voted against it.

Berliner, the council president, said Wednesday that the study underscores why the council must approach the issue carefully.

“The study argues that raising the minimum wage to $15 in our county will hurt more than help low-wage workers and reduce income by almost $400 million,” Berliner said. “Those results underscore why four of us on the council and the county executive wanted the study before acting.”

He has scheduled a briefing on Sept. 19 to give the full council an opportunity to question the study’s authors about the results.

“There will undoubtedly be questions about the methodology used by the authors,” Berliner said. “I will continue to work with my colleagues and our community to move this issue forward in a way that helps low-wage workers without harming our economy.”

In surveying employers, the study’s authors asked how many employees they have earning minimum wage and how likely they were to reduce hiring or lay off employees if the minimum wage were increased:

The survey also asked employers how likely they were to move out of the county if the minimum wage were raised to $15 per hour:

The study analyzed a new National Bureau of Economic Research minimum wage study that found Seattle single-site employers reduced the hours of its minimum-wage workers and put off new hiring after the city began incrementally raising its wage to $13.50 per hour. The June study estimated the average low-wage worker lost $125 a month because of the minimum-wage increase.

However, that study has been criticized because it didn’t include multi-site employers, such as chain restaurants or large retail stores, that account for about 40 percent of the city’s low-wage workforce.

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