ANNAPOLIS — Opponents of raising the minimum wage in Maryland highlighted a study released Monday that examines some of the economic downsides an increase could have on small businesses, particularly in food services and the hospitality industry.
The study by George Mason University economist Stephen Fuller was released in Annapolis, a day before a scheduled hearing on a proposal to raise the minimum wage in Maryland from $7.25 to $10.10 by 2016.
Gov. Martin O’Malley, a Democrat, supports the increase, because he says it will help the economy by providing people with more money to spend. Fuller, however, concluded that raising labor costs brings negative overall economic consequences, unless the wage hike is compensated by greater operational efficiencies or increased product and service quality that offset price increases from higher labor costs.
“There will be a subsequent reduction in employment and income,” Fuller said at a news conference. “The state’s competitive position is weakened. Adjacent states with lower minimum wages will be able to produce goods and services for less.”
Fuller concluded that while there may be strong public support to raising the minimum wage, residents may not realize the economic consequences on businesses that will end up affecting consumers.
“The economic impacts are significant in as much as they affect all residents of the state, not just the beneficiaries of the wage increase,” Fuller said.
Larry Stottlemyer, chief executive officer of the Adventure Park USA amusement park in New Market in Frederick County, said he has hired people between the ages of 15 and 17 for years to work at just above minimum wage, with an annual payroll at that level of about $600,000 a year. If he would have to pay more than $10 an hour, Stottlemyer said he would hire older employees instead.
“I just can’t afford to pay entry-level people and train them where they are working four months out of the summer, most of them, and spend that kind of money to train somebody and for them to leave me in four months and go off to college or so forth,” Stottlemyer said.
Dave Norman, president of DavCo Restaurants Inc., which operates Wendy’s restaurants in Maryland and employs thousands of teenagers a year, said it’s important to remember that businesses actually pay more than the minimum wage rate once unemployment insurance and workers compensations costs are factored into the amount. He estimated 10 to 15 Wendy’s restaurants in Maryland would close over time if the minimum wage were increased.
“We’re going to lose business,” Norman said. “We’re going to lose jobs, and, you know, for what benefit?”
The study was prepared for the Maryland Foundation for Research and Economic Education.