Proponents of increasing Montgomery County’s minimum wage are criticizing a study County Executive Ike Leggett commissioned that found that a $15 hourly wage by 2022 would cost 47,000 jobs.
Two economists—both of whom favor raising the minimum wage—described its methodology as unsound. They urged County Council members to not consider the study when they take up their debate on raising the minimum wage this fall.
The study by Philadelphia-based research group PFM was commissioned after Leggett vetoed an earlier minimum-wage bill—passed by a 5-4 council vote—that would have incrementally raised the wage to $15 per hour for businesses in the county by 2020. The council did not have enough votes to override the veto.
Last month, Council member Marc Elrich introduced a new version of the bill with a carve-out for small businesses. Businesses with 25 employees or fewer would have until 2022 to raise their minimum wage to $15 per hour in an attempt to placate concerns raised by the bill’s opponents.
County Council members who voted for the previous bill have also dismissed the new study’s findings as not credible. They say it relied on responses from employers who could have overestimated the impact on their businesses to try to influence county policy.
Del. David Moon (D-Takoma Park), who plans to push for a higher state minimum wage during the 2018 General Assembly session, described the study as “junk science.” Moon said the study will be used by Republicans to block any effort to raise the statewide minimum wage, which is now $9.25 per hour and set to rise to $10.10 next year.
Despite the criticism, Leggett is standing behind the study and a local business leader said the report’s findings reflect the impact business owners expect.
The newly released study projected that an increase to a $15 hourly wage could mean massive job loss, an aggregate loss of income of $400 million and an increase in county employee wages of about $10 million per year. It also projected a loss of $40.9 million in county income tax revenue over five years.
The county paid PFM $149,600 for the study. In a message to county residents sent via the county’s Paperless Airplane email newsletter, Leggett said the study “is a valuable contribution to the debate we will have this fall. This is information we should have had before.”
Patrick Lacefield, Leggett’s spokesman, dismissed the criticism that the study surveyed employers, asking how else the authors were supposed to estimate the impact on jobs caused by the potential wage increase.
“If you’re trying to figure out whether increasing the minimum wage causes employers to not fill positions, reduce hours or reduce benefits—how are you going to find that out without asking employers?” Lacefield said.
The council is scheduled to debate the new proposal to raise the county’s minimum wage starting in September.
David Cooper, a senior economic analyst at The Economic Policy Institute, a nonpartisan think tank whose mission is to consider the economy through the lens of how policies affect working people, described the PFM report as “absolute junk” because of methodology flaws.
“I don’t think anyone in the county should pay any attention to it when thinking about whether Montgomery County should be raising its minimum wage,” Cooper said in an interview with Bethesda Beat Thursday. “There are so many methodological problems that it’s hard not to think either the firm had no idea what they were doing or were intentionally trying to arrive at a predetermined outcome.”
He said the study, which relied on publicly available labor statistics combined with survey responses from business owners in the county, is “divorced from decades of research on the minimum wage.”
In an analysis of the study on EPI’s website, he wrote that the authors relied on the survey results of business owners to estimate the percentage of jobs that would be lost over the next five years if the county’s current minimum wage of $11.50 per hour rose to $15 per hour.
“The closest analogy I can think of would be if the [Food and Drug Administration] was considering approval of a new drug and instead of reviewing any studies or trials, they instead simply asked the drug company, ‘what percentage of patients do you think this drug will harm versus help?’” Cooper wrote.
He added in his analysis that the job losses predicted in the study by raising the minimum wage would be “the most devastating economic shock the county has experienced in a generation, more damaging than the Great Recession.”
He said the job impacts raised initially in the study taint the rest of the report because they are used to analyze other ramifications, such as on the county’s tax revenue.
Yannet Lathrop, a researcher and policy analyst with the National Employment Law Project, who supports raising the minimum wage, said the study should have taken the survey results from business owners as an opinion.
She said the study also should have examined the economic impact of past minimum-wage increases in the county. The local wage rose incrementally from $8.40 in October 2014 to the current $11.50. Despite those increases, she said, Montgomery County’s current 3.5 percent unemployment rate remains low.
“This study should not be the basis of debating the minimum wage in Montgomery County,” Lathrop said. “If they want to do a study, they should approach economists and researchers who know how to do this.”
PFM did not respond to an email request for comment sent to the company Thursday. Lacefield said a review of the past increases was not in the scope of work and the most recent increase to $11.50 didn't happen until July 1, when the study was already underway.
Adam Pagnucco, who writes for the local politics blog Seventh State, raised what he said is another problem with the study. He reported that he received an email request to respond to the business-owner survey even though he doesn’t have an incorporated business and does not employ anyone.
The survey email noted “All responses will be anonymous, and the project team will be unable to link responses to specific businesses.”
“If I had filled it out (and I didn’t!), by its own admission above, the survey administrator would have had no way to filter out my responses or flag them as fraudulent,” Pagnucco wrote. “Lord knows who else got the email and exactly who filled out the survey!”
PFM reported that it received 307 usable survey responses that accounted for businesses with 10,969 minimum-wage employees—about 18.7 percent of the 58,532 minimum-wage jobs in Montgomery County.
Elrich on Thursday said the study was out of PFM’s league.
“It’s like they ignored the real world entirely,” Elrich said in an interview with Bethesda Beat. “People don’t take this seriously because the job loss number is so laughable.”
The PFM report included a comparison table of impacts estimated in studies commissioned by other jurisdictions. They showed far fewer jobs lost as a result of raising the minimum wage to $15 in places such as Washington, D.C., and Los Angeles:
George Leventhal and Hans Riemer, two other council members who supported raising the minimum wage, said Tuesday they were also concerned about the study’s reliance on employer opinions.
Moon said he believed the study would be used by opponents of raising the minimum wage.
“My fear is that Ike Leggett’s junk science is going to give cover for Republicans in Annapolis who are trying to block the ‘Fight for 15’ effort,” Moon said Thursday. “My hunch is given the circumstances of how the county executive decided to commission this study, its purpose is to provide political cover for the veto he previously exercised. … It’s hard to take this as anything but a press stunt that benefits Ike Leggett that’s financed by Montgomery County taxpayers.”
He said it should have been obvious that business owners who likely oppose an increase in the minimum wage would overestimate potential job losses if the wage were to increase in the county.
Moon criticized the rollout of the study as having the appearance of a “disinformation campaign.”
“People of good will can disagree on what level, time and circumstances of a minimum wage increase are appropriate without highly irresponsible personal attacks,” Lacefield responded, in a statement provided to Bethesda Beat. “The last time I checked the Maryland General Assembly was controlled by Democrats and there were four County Council members who opposed the increase to $15 here in Montgomery County, all Democrats.
“This is simply David Moon not being selected as a State Senator and him blaming others, including the County Executive, for that not happening,” Lacefield continued. “This kind of rhetoric from him just reflects why the Democratic Central Committee made another – wiser – choice.”
The central committee chose former Del. Will Smith to fill the District 20 state Senate seat vacated by Jamie Raskin over Moon in December.
The results of the study were first reported in a news article in The Washington Post at the same time the paper published an editorial saying it “vindicated” Leggett’s earlier veto and that it offered “sobering news” for $15 minimum wage advocates. The study was publicly released about 30 minutes after the Post news story and editorial were published.
Lacefield said the study was given in advance to The Washington Post “to more broadly get our message out.”
Lacefield also noted that the study found business owners “were often supportive” of raising the minimum wage, but doubted they could withstand the increase to $15.
“There was no unanimity among employers on some minimum wage increase,” Lacefield said.
The report found 65 percent of business owners surveyed either opposed or strongly opposed increasing the minimum wage to $15 per hour while only 24 percent supported or strongly supported doing so.
Lacefield also said PFM had been used in the past in the county and produced studies the county found credible.
Last year, Leggett commissioned the firm to study the county’s Department of Liquor Control, which controls the wholesale distribution of alcohol and retail sale of liquor in the county. The firm was asked to look at how changing the department’s structure or eliminating it would affect county finances.
A PFM author describing the firm’s DLC report to a workgroup examining the agency last year described privatizing the department that generates about $30 million in profits for the county as “Armageddon” and warned that doing so could endanger the county’s AAA bond rating. The county ultimately decided not to change the structure of the department.
Ginanne Italiano, the president and CEO of the Greater Bethesda Chamber of Commerce, said in an interview with Bethesda Beat Thursday that she understands proponents of the minimum-wage bill are questionig the study. But she said the results are similar to what she hears from business owners about the impact of increasing the minimum wage.
She said she sat in a focus group that PFM conducted with local business owners this year. She heard owners explain how they would likely hire more experienced workers instead of workers just entering the work force, cut staff or reduce hiring if the minimum wage increases.
“I’m not saying the numbers are correct or not,” Italiano said. “[But] if those are the numbers they’re calculating, I’m not going to question it.”
She said business owners in the county are already burdened with other requirements that are not in place in jurisdictions such as Northern Virginia and elsewhere in Maryland, such as the county’s new sick leave policy and recent increases in property and recordation taxes.
“We have higher costs in Montgomery County than anywhere else in the state,” Italiano said.
The minimum wage in D.C. is $12.50 and is set to rise incrementally to $15 by 2020. The minimum wage in Fairfax County is the same as the federal minimum wage of $7.25 per hour. The minimum wage in Prince George’s County is $10.75 and set to rise to $11.50 in October.