As County’s Minimum Wage Rises, Clouds Remain on the Economic Horizon

Regional economist says law phasing in higher pay puts county at a competitive disadvantage

July 1, 2019 7:50 p.m.

Montgomery County’s tiered minimum wage increase law has put the county at a competitive disadvantage to its Northern Virginia counterparts, according to an economist who has studied the Washington market for decades.

The wage law, which the County Council passed in 2017, mandates that workers at companies with 50 employees or more be paid $13 per hour, and workers at smaller businesses be paid $12.50 per hour, starting today.

The hourly minimum had been $12.25 per hour for businesses with 50 employees or more and $12 per hour for small businesses. It will reach $15 by July 1, 2024.

The District of Columbia’s minimum wage rose to $14 per hour for all workers on Monday.

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Stephen Fuller, of Stephen S. Fuller Institute at George Mason University, said in an interview Monday that Maryland and the District are at a competitive disadvantage because the cost of doing business is higher.

Virginia’s statewide minimum wage, he noted was $7.25 per hour, which is the same as the national minimum wage. Maryland has a $10.10 minimum wage that is set to rise to $15 an hour within six years.

“Part of this isn’t about fairness or good versus bad, but it has to do with your neighbors,” he said. “The arguments nationally are that [$15 an hour] is probably a good target, but when the U.S. is at $7.25 and Virginia has that, it begins to raise questions about the competitive labor costs.”

More than 95% of businesses in Montgomery County have 50 or fewer employees, according to the county’s Business Portal, citing state research.

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The county launched a “Business Connect” program in May to support small businesses with free training and workshops, with plans to expand the initiative to each of the county’s regional service centers.

Fuller’s organization recently released a jobs report for June that found the Washington region had experienced 61 consecutive months of economic expansion since April 2014.

Between 2015 and 2017, the report also found that jobs in Virginia accounted for more than 52% of the region’s job gains, compared to 24% for suburban Maryland — an area that includes Montgomery, Prince George’s, Frederick, Charles and Calvert counties, according to the U.S. Census Bureau.

The report is the latest in a series of dire economic forecasts for Montgomery County by outside research organizations, including one by the Baltimore-based Sage Policy Group urging the county to grow its tax base.

Fuller said he worries that the political leadership in Montgomery County hasn’t fully grasped the problem of the expensive cost of doing business there, although he praised County Executive Marc Elrich, the original architect of the county’s minimum wage increase, for “talking and listening” to determine how to make the county more business-friendly.

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“This is more complicated than a conversation. Good ideas can be floated, but it really needs serious analysis to understand having a scorecard of understanding where Montgomery County and Northern Virginia are and how they compare,” he said.

Fuller said he met with Elrich a couple months ago and they had a “very good discussion.”

“He was all ears and his questions were wrapped around some of the same discussion… He’s working against a long history [of a negative business climate]. And he can’t do it all by himself. He’s got to get the County Council on his side too,” Fuller said.

Elrich and County Council Vice President Sidney Katz wrapped up a six-session listening tour designed to engage the county business community through the “4Business: Benchmarking to Be the Best for Business” initiative.

Fuller added that ultimately, the public sector in Montgomery County must solve the economic woes.

“Businesses can’t make this decision. They are influenced by their competition. If McDonald’s can’t hire someone at $8 an hour, they’ll pay $8.25,” he said.

Staff writer Charlie Wright contributed to this report

Dan Schere can be reached at Daniel.schere@moco360.media

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