Yesterday, Maryland Senate Majority Leader Robert Garagiola (D) and the advocacy group Progressive Maryland launched a campaign to increase the state’s minimum wage from $7.25 to $10—a 38 percent increase. If successful, the supporters of the effort will end up hurting the very employees they intend to help.
According to analysis of a study from economists at Trinity University and Miami University, an estimated 7,200 jobs were lost for Maryland teens between 2005 and 2011 due to federal minimum wage increases during that time period. The unemployment rate for young adults in Maryland is currently 21.8 percent; in the Baltimore metro area, it’s 26 percent.
The economics aren’t tough to understand. Businesses in Maryland that hire entry-level employees and pay them minimum wage—restaurants or grocery stores, for example—keep 2-3 cents in profit from each sales dollar, and can’t just absorb the 38 percent increase. Raising prices on cost-conscious customers typically isn’t an option, because sales fall as a result. Businesses are instead forced to provide the same product with less service—that means more self-service, and fewer job opportunities for entry-level and low-skill workers.
It’s no wonder that eighty-five percent of the most credible economic research on the minimum wage from the last two decades points to job loss following a wage hike.
Maryland teens: you’ve been warned.