Montgomery County should back away from a higher minimum wage

Original Article:

  • Author: Michael Saltsman

  • Publication Date: January 2017

  • Newspaper: The Washington Post

If the Montgomery County Council needs a compelling reason to hit pause on its plans to pursue a $15 minimum wage, it should look to the states and localities that already took the plunge on unprecedented wage hikes.

Start with the District. In 2014, the District passed legislation to raise its starter wage to $11.50 by 2016; Montgomery and Prince George’s counties followed suit and enacted similar laws to reach the same number in 2017. But as the labor union-backed “Fight for $15” gained notoriety, by early 2016 the pressure was on for the District to embrace that rate.

Walmart was the first to react, pulling out of two planned locations in the District last January. The Post reported the decision was because of D.C.’s already-high starter wage and the likely enactment of further onerous wage mandates and work rules. Later in the year, after D.C. Mayor Muriel E. Bowser (D) signed a $15 minimum wage into law, popular grocer Wegmans pulled out of a planned development at the Walter Reed Medical Center. NBC4 reported that one reason was the city’s new starter wage, in addition to other threatened labor cost mandates.

These aren’t isolated anecdotes. A May 2016 survey sponsored by my organization of D.C. businesses affected by a $15 minimum wage found one-third of respondents anticipated cuts in staffing levels or employee hours. (Nearly half of the surveyed businesses had already cut back on staffing in response to the District’s 40 percent starter wage hike between 2014 and 2016.) One in five respondents said they would consider moving across the river to Arlington, where the minimum wage is less than half that passed in the District, and a similar number said they’d possibly close their doors entirely.

Such warnings are already a reality in Montgomery County. One Dunkin Donuts franchisee sent a letter to the council explaining it would have to eliminate 130 job opportunities, including the closure of a production facility in Gaithersburg, should a $15 starter wage pass. This isn’t a job-creation risk that the county can afford to take: In 2014, Census Bureau data showed the number leisure and hospitality establishments in the county fell by nearly 2 percent. In 2015, the county had just a half-percent increase in hospitality businesses, and preliminary data show declines in the first and second quarter of 2016.

The relationship between a higher minimum wage and fewer employment opportunities has been understood by economists for decades. The best and most recent economic studies have only strengthened the consensus: A review of these studies, published in December 2015 by the San Francisco Federal Reserve, found “a higher minimum wage results in some job loss for the least-skilled workers – with possibly larger adverse effects than earlier research suggested.” While the policy historically has been the subject of some partisan wrangling, even economists from the Obama and Clinton administrations opposed $15, using words such as “extremely risky” to describe the extreme wage hikes.

There are innumerable stories that document the jobs lost in the last two years from wage-raising experiments in New York and California. (Readers can view a selection of them at The Bay Area experienced so many restaurant closures at the end of 2016 that one local publication described it as a “death march.” (In September alone, nearly one-quarter of restaurant closures in the Bay Area cited labor costs as a driving factor.) And it’s not already-weak shops that are closing their doors: Locally and nationally acclaimed San Francisco restaurants such as the Abbot’s Cellar and AQ have closed, with their owners pointing to the rising minimum wage among other factors.

Rather than planning new burdens for county employers, the Montgomery County Council should take a long, hard look at the damage already done by its minimum-wage experiment. It’s too late for the District to stop its $15 starter wage, but Montgomery County need not make the same mistake. The math and real-world experience on job loss are compelling, and the County Council should not expect a different result.