Current Maryland Minimum Wage Law and Proposed House Version of Reform Have Too Many Loopholes and Exemptions
A couple of my EPI colleagues have recently shown and testified twice that raising the state minimum wage to $10.10 would greatly benefit Maryland workers. In my opinion, it’s not nearly enough of a raise, but it’s what’s on the table, and there’s no doubt it would help hundreds of thousands of workers. In any case, the legislative saga to make it a reality continues. On March 3, the Maryland House of Delegates’ Economic Matters Committee approved a number of changes to legislation proposed by Governor O’Malley to raise the minimum wage to $10.10. The changes weaken the law and exempt certain employers and industries from having to pay the increased wage. Two days later the full House considered over a dozen amendments—most of which were seeking to expand the committee’s exemptions—but none passed. That version of the bill was then passed by the House on March 7. What you should know is that the bill could have been much better, but a number of delegates in a Democratic-controlled House managed to greatly water down the scope and impact of the bill, and the bill also did not remove a number of exemptions that exist in current law.
The worst change to the originally proposed House version of the minimum wage law was the committee’s deletion of the provision that would index the minimum wage to inflation after 2016. That provision would have ensured that the bottom of the wage scale kept pace with the cost of living over time. Gov. O’Malley expressed his disappointment with this and plans to do all he can to get it reinserted during the remaining stages of the legislative process. Another unfortunate modification is a six-month extension of the time it will take for the minimum wage to reach its peak of $10.10. Workers earning the minimum wage are hurting now and earning near or below the poverty line; they need a raise as soon as possible, not one that’s slowly phased in through 2017.
In addition, the House bill is even worse than current law when it comes to the minimum wage for tipped workers, and amounts to a pay cut for them. Gov. O’Malley proposed that tipped workers be paid 70 percent of the minimum, compared to the current 50 percent. Instead, the House bill freezes the minimum at the current level of $3.63 per hour, regardless of any future hikes or inflation. EPI research has shown that the subminimum wage for tipped workers is associated with high rates of poverty, that restaurant workers in states with no subminimum for tipped workers have higher incomes, and that the full minimum wage has not impeded growth in restaurant employment.
Then there’s the amusement park exemption. Thanks to an amendment passed by the Economic Matters Committee, workers employed at seasonal “amusement” or “recreational” establishments that operate for no more than seven months out of the year, such as Six Flags in Upper Marlboro, and public swimming pools, will be exempted from the minimum wage increase. Six Flags has a history of lobbying for minimum wage exemptions, but the onus should be on them to justify special treatment. Nevertheless, they got it, and as a result the young people who staff places like Six Flags would continue to earn the federal minimum wage of $7.25 an hour if the bill becomes law.
There was then a lively debate on the floor of the House about expanding this exemption to year-round establishments in Ocean City and Adventure Park USA in Frederick County. One of the main proponents was Republican Delegate Mike McDermott, who is either unaware or doesn’t care what the impact of his proposed exemption would have been. Every year, thousands of foreign students in the State Department’s J-1 visa cultural exchange program come to Ocean City to staff its amusement parks and shops on the beach. These workers are exploited and underpaid, as revealed in a 2010 report from the AP: “[T]he Ocean City Baptist Church served more than 1,700 different J-1 participants from 46 countries who sought free meals … sometimes upward of 500 in one night.” Why isn’t Del. McDermott concerned that the foreign workers he wants to exempt from the minimum wage are paid so little that they have to rely on charity just to keep from starving?
In 2012, there were nearly 6,000 J-1 workers employed across the entire state of Maryland. Although it’s likely that some who are employed during peak season in recreational establishments that operate year-round would see their wages increase, in part because the rules of the program require them to be employed in occupations that are seasonal, most of the 6,000 J-1 workers are likely working in recreational establishments, swimming pools, and summer camps that do not operate year-round and would thus be exempted from paying the new minimum wage. But that’s a justification for getting rid of the exemption altogether, not expanding it, especially when you consider that employers are still likely to prefer J-1 workers over U.S. workers because J-1s cannot easily switch jobs and employers are exempt from paying payroll taxes on J-1 employees. And it’s impossible to know exactly how many thousands of additional U.S. workers employed at these businesses will be exempted from getting a raise.
An exemption that exists under the current Maryland minimum wage law and that was not modified by the House bill is for employers “engaged in canning, freezing, packing, or first processing of perishable or seasonal fresh fruits, vegetables, or horticultural commodities, poultry, or seafood.” This exemption should be eliminated, but why is it there in the first place? Most likely because employers in these industries argue their businesses won’t survive if they have to pay their workers more than the federal minimum wage of $7.25. But there’s scant evidence for this. For example, the average wage across the state for “Meat, Poultry, and Fish Cutters and Trimmers”—one of the main exempted occupations—is $10.91 per hour. But employers in these industries want to be able to put downward pressure on that wage in any way they can. One of the ways they do this is by hiring temporary foreign workers in the H-2B program. According to data from the Labor Department, in 2013 there were about 500 H-2B meat and seafood processing workers in Maryland earning less than $10.10 an hour—almost all earned very close to the federal minimum wage of $7.25—but under this exemption they would not see their wages rise to $10.10. Another 500 H-2Bs earning less than $10.10 who work in recreational establishments and as lifeguards won’t see their wages go up either.
The final exemption I’ll mention also exists in current law and didn’t change a bit: Workers who are 62 or older and employed for no more than 25 hours per week. I don’t know why it’s there, but whatever the justification is for exempting elderly part-time workers, I’m dying to hear it. This kind of blatant age discrimination should not be tolerated.
The Maryland Senate still has to consider amendments and then pass its own version of the minimum wage law, and if it differs from the House version, the two chambers will go to a conference committee to hammer out a compromise. Maryland’s current minimum wage law has more holes than a wheel of Swiss cheese and the House bill, while partly a step forward because it would gradually raise the wage, adds even more exemptions for employers and is disastrous for tipped workers. The Senate should make significant improvements as the legislative process moves forward.