Living-wage bill: `disastrous' or `great benefit'?

$10.50-an-hour measure legislators OK'd faces veto

April 14, 2004|By Meredith Cohn and Stacey Hirsh | Meredith Cohn and Stacey Hirsh,SUN STAFF

When the General Assembly voted this week to require that companies doing the state's business pay their workers a "living wage" of $10.50 an hour, more than double the federal minimum wage, it became a national first and major win for labor.

The bill's advocates say it sends a message that Maryland spends its taxpayer money only on companies that treat workers compassionately.

Gov. Robert L. Ehrlich Jr. says the bill sends a very different message that Maryland is no place to do business and that if companies leave, the jobs go with them. He plans to veto the legislation that was passed after fierce debate in the final hours of the session Monday night.

"The governor believes it's a disastrous policy that will directly contribute to the loss of quality jobs in the state," said Henry Fawell, a spokesman for Ehrlich.

More than 100 localities have passed living-wage laws for their contractors since Baltimore became the first in 1994, but no other state has passed such legislation, making the potential costs or benefits to Maryland and its businesses unclear.

Advocates say it would promote higher wages and more committed workers, ease dependence on social programs and contribute to higher income tax revenue.

Opponents say it could add to the costs of state contracting and enforcement while hampering the businesses providing the jobs.

According to academic research and information from the state's nonpartisan Department of Legislative Services, there might be truth in both arguments.

The department said studies of living-wage laws have found that they push up contract costs as a percentage of local jurisdictions' total budgets by 0.003 percent to .079 percent.

A Johns Hopkins University study found that for 26 contracts in Baltimore that could be compared before and after adoption of the city's living-wage law, the total cost increase to the city was 1.2 percent, less than the rate of inflation.

Another researcher said he, too, found that a living-wage law would increase the cost of doing business for some companies, but not to a critical level.

"We could say that workers are going to get laid off because the wage is too high, but there's no evidence to show that that's going to happen," said Robert Pollin, co-director of the political economy research institute at the University of Massachusetts at Amherst and co-author of The Living Wage: Building a Fair Economy.

Pollin said that for businesses, the negative effects are small relative to other business costs. He found that the cost increases associated with living-wage laws amount to 1 percent or 2 percent of a company's sales. He noted that worker productivity goes up more than 1 percent a year.

He also found that such laws promote a higher standard of living for affected workers and their families.

In Maryland, Prince George's and Montgomery counties have joined Baltimore City in passing living-wage laws.

Baltimore's law has raised wages for workers at companies doing business with the city from $6.10 an hour in 1994, at its inception, to an expected $8.85 an hour in July this year, said Jerry Gonce, executive director of the city wage commission.

The Maryland legislation calls for workers to start at $10.50 an hour, more than double the federal minimum wage of $5.15 an hour.

Supporters hope to persuade the governor not to veto the bill.

"The three most populated jurisdictions in the state have already weighed in on it. It would be a great benefit to the people of Maryland," said Roxie Herbekian, head of Hotel Employees and Restaurant Employees Union Local 7 in Baltimore and an international union vice president.

Deborah Povich, executive director of the Job Opportunities Task Force in Baltimore, said she would like to show Ehrlich that the predicted negative repercussions are overblown.

"I think his concern is that this is unaffordable for the state, and the truth is that low wages cost the state money as well," she said.

Businesses say Maryland cannot afford to take a chance on the bill now, given the projected budget shortfall that the state legislature failed to address this session.

Donald Fry, president of the Greater Baltimore Committee, said there is a lot of concern in the business community about it. "Anyone dealing with putting together a contract proposal recognizes that if you mandate your labor costs to be higher than the market rate, it will drive up the cost of a program," he said.

About 15 percent of the approximately 148,363 private sector employers in the state would be affected by a living-wage law, according to information provided the legislature by the state Department of Labor, Licensing and Regulation. It would apply to workers at companies with state contracts of $100,000 or more.

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