For 15 years, Donte Lockman had his own business selling clothes and tennis shoes in Baltimore. He ran the business himself and was the only employee but was unable to keep it afloat. Last year, he started working as a janitor in a downtown building and is an ardent supporter of raising the minimum wage.
“When you pay your bills right now, there’s nothing left,” he said. Granted, Lockman makes $12.70 an hour, which is above the current state minimum wage of $8.25. But that’s still not enough to make a decent living, he said.
In July, the state minimum wage is slated to increase by 50 cents, from $8.25 to $8.75, as part of a phased increase to $10.10 by July 2018.
“How can you pay your bills at $8.75? My rent alone is $800,” said Lockman.
Many in the business community don’t dispute Lockman’s point but contend that the intent of the minimum wage wasn’t designed to help families make ends meet.
“If you go back to original intention of minimum wage (…) it’s a floor for entry-level, low-skill seasonal employees. It was never a wage set for families or anything like that,” said Donald C. Fry, president and CEO of the Greater Baltimore Committee.
Business owners in Maryland have had a year to plan for this increase. Some are thankful for the time to plan; others have gone above state requirements and already pay their employees well above the minimum wage.
In Baltimore, business owners are keeping a wary eye not on the upcoming state increase but a proposal in the City Council to set a minimum wage of $15, which also would be phased in over a period of years.
“One thing businesses thrive off of is certainty and predictability,” said Fry about the state minimum wage law. “The phase-in has provided that to them.”
The majority of minimum wage workers are in the food services industry. DavCo, a large Wendy’s franchisee in the Mid-Atlantic region and a vocal opponent of minimum wage legislation in 2014, said Friday that the chain has had to close “several” locations in the past two years and may have to close up to 15 more sites in coming years because of the wage increase.
“Business success is directly related to productivity,” said Rick Borchers, president and chief operating officer of DavCo. “Unskilled and untrained employees can’t bypass the productivity curve.”
DavCo has long pushed the narrative that entry-level, fast-food jobs can lead to larger, more lucrative management opportunities within the company. All you need is a high school diploma.
Starting wages at DavCo are determined by the location of the restaurant and the worker’s skill levels, but it’s rare for an hourly employee to be paid the minimum wage. Borchers did not disclose the average starting salary for a DavCo worker in Maryland, but self-reported entries on Glassdoor show that a crew member, an entry-level position, makes between $8 and $9.
An assistant manager, which is a step above a shift supervisor, makes between $30,000 and $54,000 as of November 2015. Co-managers make between $34,000 and $61,200 and general managers make $44,500 to $81,000, the company said.
In May, Wendy’s announced that its going to install self-service machines in a handful of locations in response to rising minimum wages, particularly in New York and California. Both states recently passed legislation to increase their minimum wages to $15.
DavCo is also looking into getting automated machines for its restaurants. The franchisee has 148 locations, including 103 in Maryland.
“I think that’s probably a natural part of any business as you try to automate,” said Borchers.
Preparing for July 1
Claudia Towles, owner of aMuse Toys in Baltimore’s Fells Point neighborhood, has been adjusting compensation packages for her employees for the past year in preparation for the July state minimum wage increase.
While Towles pays her employees above the minimum wage, she struggles with how to fairly compensate people when the pay floor goes up. Towles spoke against Baltimore $15 minimum wage proposal at a City Council hearing on June 15.
“There’s a lot of talk about that minimum … how adjusting the bottom creates a ripple effect through the top,” said Towles. “We don’t necessarily start there.”
Scott Nash, founder and CEO of MOM’s Organic Market, a Rockville-based grocery chain, has been a strong supporter of raising the minimum wage. Last month, he raised his company’s minimum wage to $12 per hour.
Even with a voluntary increase, Nash faced the question other business owners face when the minimum wage goes up: How do you treat other employees who have worked their way up to pay levels above the minimum?
“If someone is (already) making $12, we just bump them up to $12.50,” said Nash.
His business will not be affected by next month’s state increase, he said.
“With the state, we understand that we need to increase wages. It was a thoughtful, negotiated rate hike that we still haven’t understood yet,” said Towles, “But we’re planning for it.”