A 'living wage' bill Baltimore can't live with

It will hurt businesses and won't do much to help city workers

July 19, 2010|By Marta H. Mossburg

A new "living wage" will make Baltimore City no more livable than stilettos will make Sen. Barbara Mikulski a forward for the WNBA.

Yet Baltimore City Council members refuse to give up their almost religious belief in disproven economic theories that have made the city a siphon of state tax dollars and a repellant to business and people for decades.

Councilwoman Mary Pat Clarke wants to require retailers with gross sales over $10 million to pay workers an hourly rate of at least $10.57 per hour. That is more than $3 above the state's minimum wage. A hearing is set on the bill for July 22.

Rob Santoni, CFO of Santoni's Supermarket in Highlandtown, said if the bill were to be enacted tomorrow, it would put him out of business and his 100 employees out of their jobs.

"It will be an ugly scene," said Mr. Santoni.

William Anderson, an economics professor at Frostburg State University, echoes Mr. Santoni.

He said the bill should be called, the "'Raise the Rate of Unemployment in Baltimore Ordinance', for there is no more sure way to put people out of work than to price their labor out of the market."

But that is not all. "Not only would this law create more unemployment, but it also would strain the resources of every retailer in the city, putting some people out of business altogether," he said.

The reason: Grocery stores are not Wall Street investment banks. They get by on margins of about 2 percent. So a wage hike can mean the difference between turning a profit and closing. Part of the reason is that higher wages mean higher payroll taxes and higher premiums for workers' compensation, so one seemingly small change for a few workers can have a spiraling negative effect.

And some smaller chains may be able to get around the law by individually incorporating each store to avoid hitting the $10 million threshold. How is that fair to everyone else?

The worst part about the bill is that it is targeted to help a small number of workers — who may or may not live in Baltimore City.

According to D. Mark Wilson, a former deputy assistant secretary at the U.S. Department of Labor under President George W. Bush, "The bill is unlikely to have a substantial impact on city jobs." He added, however, that "It will discourage other large employers from providing job opportunities in Baltimore City."

With official unemployment hovering around 10 percent locally, the city should be doing everything it can to court retailers rather than repel them.

Besides, the bill does not have evidence on its side. Baltimore passed the first living wage law in 1994, and statistics do not speak in its favor. The 2008 population is down almost 100,000 from 1990. And the number of people employed in Baltimore dropped to about 327,000 last year from nearly 370,000 in 2002, according to Maryland's Department of Labor, Licensing and Regulation.

While the living wage law cannot be blamed for the entire flight of people and wealth from the city, it nurtured a culture that views business as something to be milked for the benefit of government. The recent income and other tax hikes are no different and will only accelerate the city's decline.

As the millions leaving California and New York show, people migrate to find better opportunities. Thousands are leaving Maryland, too, each year, and those exiting the state tend to have higher incomes than the smaller number of replacements moving in.

If Councilwoman Clarke really wanted to help the people of Baltimore City, she would work to end the entitlement culture that has so blatantly failed to produce a rich, thriving city. Lowering property taxes is one way already identified by civic leaders appointed by the previous mayor as a key way to generate business and attract people.

She can keep proposing tired liberal ideas that have not worked. But Baltimore does not need more groupthink if it is going to be livable for the few remaining taxpayers who support city services. I doubt that I am the only one to return home from trips to other U.S. cities depressed by overgrown paths and unmowed grass in parks, pot-hole filled streets, aggressive "squeegee boys" like those in New York City in the 1980s — and a higher tax bill. At some point, enough is enough.

Marta H. Mossburg is a senior fellow at the Maryland Public Policy Institute and a fellow at the Franklin Center for Government and Public Integrity. Her column appears regularly in The Baltimore Sun. Her e-mail is martamossburg@gmail.com.

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