Running Head: MINIMUM WAGE INCREASE1

Vida Kwofie
Coppin State University
Family Nurse Practitioner Program
Health Policy- Nurs. 505
Policy Analysis Paper
Dr. Phillipsen
04/17/2015

MINIMUM WAGE INCREASE

Statement of Policy Problem

House Bill 0004: Maryland Wage and Hour Law; State Minimum Wage Rate Increase
was sponsored by Delegate Cheryl D. Glenn, a democrat from district 45, Baltimore. The
objective of this bill is to increase the minimum wage rate, repeal, re-enact and amend provisions
of certain laws that hinder this rate increment. HB 0004 will allow employees to be paid
$10.10/hour beginning July 1st 2015. The current law/provision does not allow a minimum wage
increase of $10.10/hour until July 1st until 2018 (General Assembly of Maryland, 2015).
Description of Policy Background

House Bill 0004 was first requested on November 20th 2014 and introduced on January
14th 2015 (General Assembly of Maryland, 2015). The Policy will allow employees to earn a
minimum rate of $10.10/hour beginning July 1st 2015. The effort to increase the minimum wage
is a societal struggle that should not be opposed but must be supported by all. Increasing
minimum rate will benefit low class Marylanders and improve the overall quality of life of
employees who work hard but being underpaid.
Madrick (2012) indicates that there has been low-wage, high employment policy
government in the rich world, and especially in the United States for a generation. The rich keep
getting richer whereas the poor continue to suffer. Bernhardt et al (2013) write that the violations of
minimum wage in American continue to be a disregarded issue despite several decades on scholarship and
economic restructuring in the country. They argue that violations of employment and labor laws exist
across low-wage industries and occupations and affect a wide range of workers.

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Grindling & Terrel (2010) find that increases in minimum wages lead to a reduction in poverty
and they cite the case of Honduras as an example of how wage increases can reduce poverty in a country.
Von Scheven & Light (2012) indicate that states can influence the influx of low-wage immigrants by
adjusting their minimum wages. Minimum wage therefore does not have only an economic impact on
communities but it also has a social impact since it determines how some groups settle in certain
communities.

Identification of Stakeholders Who Support the Policy/Description of interest

Governor Martin O'Malley, supports this policy by indicating that it is only fair for
individuals who work hard to receive a better pay (Dresser, M. 2014). Delegate Glenn in her
support for the policy believes that this will enhance economic growth. Another stakeholder who
supports this bill is Labor Secretary Thomas E. Perez; in his speech for supporting the policy,
Secretary Perez indicated, when you put money in people's pockets, people spend it," (Dresser,
2014). He believes this will improve revenue and will also benefit Maryland employees. Senator
Nathaniel McFadden also favors this bill by indicating that this will help the state and improve
the overall economy (Dresser, M. 2014).
Mejeur (2014) writes that several states support minimum wage increases. Connecticut
and Hawaii joined Maryland to increase minimum wages to $10.10 an hour. Lawmakers in 38
states including Delaware, Massachusetts, Michigan, Minnesota, Rhode Island, Vermont, West
Virginia, and the District of Columbia have enacted laws to increase minimum wages.
Identification of Stakeholders Who Oppose the Policy/Description of interest
Stakeholders who are against this policy include; General Assembly Republicans who believe this
will put more strain on small businesses (General Assembly of Maryland, 2015). State's leading business
organizations; they indicates that this will put more burden on small businesses and might lead to job

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loss(General Assembly of Maryland, 2015). Sen. Allan Kittleman, a Republican also opposes this policy
by implying that this will negatively affect small businesses (General Assembly of Maryland, 2015).

Hayes (2007) identifies the strong opposition that has historically existed in political
circles to efforts to increase the minimum wage. He writes that minimum wage increases were
more achievable when workers organized themselves into potent forces and pushed for fair
wages. He concludes that lawmakers respond better to groups that succeed in mobilizing since
organization represents a significant source of power. Metcalf (1999) also writes about the tendency
of the wage system to drive down the price of labor to the lowest level is influence by forces that control
the labor market to the disadvantage of hard working citizens.

Rationale for Being on the Agenda

I fully favor the minimum wage increment policy because it is in accordance with the overarching
principle of the U.S. Constitution. The Preamble of the U.S Constitution assures justice/fairness and
promotion of general welfare of its citizens. Brown et al (1983) outline an important benefit of increasing
the minimum wage. According to the authors, a 10% increase in the federal minimum wage can decrease
teenage employment by 1%. The fact that an increase in minimum wage can reduce unemployment makes
the upward adjustment of minimum wage a laudable idea and a proposition which can make the economy
stronger and society better.
Mulder (2008) makes the argument for minimum wage increase by stating that the purchasing
power of wages decline over time. She confirms that the minimum wage of $5.15 per hour in 1997 has
the buying power of $4.06 in 2007. Von Scheven & Light (2012) find that states can influence the influx
of low-wage immigrants by adjusting their minimum wages. Minimum wage therefore does not have only
an economic impact on communities but it also has a social impact since it determines how some groups
settle in certain communities.

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Madrick (2012) writes that there has been low-wage, high employment policy regime in the rich
world, and especially in the United States for a generation. Leicht (2010) argues that the policies that
ignore the economic fundamentals of minimum wage in favor of policies that favor unearned income
while promoting easy credit and debt have done considerable damage to the American economy. The
author makes the case that increasing the minimum wage will help to restore the economy. Kogan (2014)
makes reference to President Barack Obamas call to raise the minimum wage in his State of the Union
address and makes that case that it is time to raise the minimum wage to an acceptable level.

Policy Goals and Objectives

The goal of the minimum wage policy is to require employers in Maryland to pay a minimum
wage of $10.10 to employees starting July 1, 2015 (General Assembly of Maryland, 2015). The objective
of the minimum wage policy is to compensate employees fairly. Historically, Maryland has been at the
forefront in the fight to improve minimum wage for employees. Luce (2011) mentions the modern
U.S.wage movement which started in Baltimore in 1994 to advocate for fair wages for employees. This
resulted in the City of Baltimore eventually passing a living wage ordinance that required firms that hold
service contracts with the city to pay their employees an hourly rate high enough to meet the federal
poverty line.

Financial Considerations
The financial impact for implementing the minimum wage policy will be an additional $10.9
million payroll costs in fiscal year 2016 mainly for higher education student employees in Maryland
(General Assembly of Maryland, 2015). There will also be a $5.5 million increase in payroll costs in
fiscal year 2018 (General Assembly of Maryland, 2015). The projected increase in general fund tax
revenue to the State is expected to be minimal and not be sufficient to offset the increased payroll costs
that the minimum wage policy will create.

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The financial implication is that the State will have to think through viable options for funding
the Minimum Wage policy bill in such a way that it will not create a financial burden for the State. The
implementation of the minimum wage policy should be done in such a way that the benefit will outweigh
the cost. Betsy and Dunson (1981) warn that some level of unemployment can be created when a
minimum wage is imposed above prevailing levels. These potential challenges that can result from
implementing minimum wage increases must be overcome in order to successfully move forward the
effort to increase the minimum wage.

Criteria to Meet Objectives

Criteria that are available to meet objectives include assessing the financial impact that the
minimum wage policy will bring upon the citizens of Maryland and develop measures that will minimize
the financial impact of the bill while maximizing the benefits that the policy will have on employees in
Maryland. The objectives of the bill will be met when legislators are able to create the minimum wage bill
in such a way that it can compensate employees fairly at the $10.10 minimum wage rate while providing
incentives that can stimulate businesses and position them to comply with paying the new minimum wage
while they grow in a supportive economy.
Practical criteria for meeting the objectives of the minimum wage policy include determining the
distinctive needs of State employees as being different from those of private company employees and
considering whether the policy should be applied at different schedules for State employees and private
company employees. State employees are paid from public funds while private company employees are
paid mostly from the funds generated from the operations of the business and therefore when the business
does not do well then funds will not be available to pay workers and this will make it difficult to achieve
the objectives of the bill.

Evaluation of Options Based on Criteria

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Clearly the minimum wage bill presents challenges for business owners. In order to compensate
employees fairly at $10.10, employers will have to find additional funds to pay their employees at the
new rate. State employers appear to be better positioned to honor the demands of the minimum wage bill
than provide company employers who have to now operate their businesses at new levels that can make
additional funds available to pay their employees at the higher rate.
Crofton et al (2009) evaluate the effect of minimum wage increases and conclude that higher
levels of real minimum wages have differing effects on high school dropouts among various races. The
researchers used varieties of model specifications and explanatory variables including real income,
unemployment rate, teen pregnancy rates, and educational attainment to measure the effect of minimum
wage increases and found that minimum wage levels affect educational attainment of various groups in
society. Decisions on whether or not to increase the minimum wage should therefore consider the broader
implications that wage levels have on various groups in the community.

Solutions Recommended with Evaluation Options

The minimum wage bill demands that employers pay employees at a new higher rate of $10.10
by July 1, 2015. This timeline is too short to provide employers with adequate time to plan their
operations in a way that can enable them to comply with the bill. A solution that can be considered will be
to delay the implementation of the minimum wage bill for six months. The implementation date of the
minimum wage bill can be moved from July 1, 2015 to January 1, 2016. This will provide employers with
six months that they can use to prepare and organize their resources to enable them to comply with the
minimum wage bill.
In addition, the January 1, 2016 will be a better start date for the minimum wage policy. Most
businesses have calendar year budgets and they can plan ahead and incorporate the new higher rate of
$10.10 into their budget for effective planning. Requiring businesses to implement the minimum wage
bill by July 1, 2015 will not only present a financial burden to businesses but it will also create budgetary

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headaches for businesses since employers will be forced to move resources around their existing budgets
to make funds available to pay employees at the new minimum wage of $10.10. A recommended solution
is to extend the implementation date of the minimum wage policy to January 1, 2016 to provide
employers with sufficient time to prepare their organizations to comply with the new minimum wage rate
of $10.10.

Conclusion
The new minimum wage of $10.10 is a good idea. It is good for employees and employers. It will
put more money into the pockets of employees who are expected to spend it to stimulate the economy and
make businesses grow which will benefit employers. Even though the new minimum wage has the good
intention of fairly compensating employees, it presents financial challenges for employers since they will
have to find new resources to pay employees at the new rate of $10.10.
A solution to this challenge will be to extend the implementation date of the new minimum wage
bill to January 1, 2016. This will provide employers with sufficient time to prepare and plan their
operations to make then ready to comply with paying employees at the new rate of $10.10. This will
create a win-win situation for both employees and employers since employees will receive higher wages
while employers will have adequate time to plan resources to pay the new higher wages in a way that can
boost their businesses and make the economy grow.

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References

Bernhardt, A., Spiller, M. W., & Polson, D. (2013). All Work and No Pay: Violations of
Employment and Labor Laws in Chicago, Los Angeles and New York. Social Forces,
91(3), 725-746.
Betsy, C. L., & Dunson, B. H. (1981). Federal Minimum Wage Laws and the Employment of
Minority Youth. American Economic Review 71(2), 379.
Brown, C., Gilroy, C., & Kohen, A. (1983). Time-Series Evidence of the Effect of the Minimum
Wage on Youth Employment and Unemployment. Journal of Human Resources, 18(1), 331.
Crofton, S. O., Anderson, W. L., & Rawe, E. C. (2009). Do Higher Real Minimum Wages Lead
to More High School Dropouts? Evidence from Maryland across Races, 1993
2004. American Journal of Economics & Sociology, 68(2), 445-464.
Dresser, M. (2014). O'Malley signs Maryland minimum - wage increase into law.
http://articles.baltimoresun.com/2014-05-05/news/bs-md-minimum-signing20140505_1_minimum-wage-increase-minimum-wage-bill-minimum-wage
General Assembly of Maryland (2014). Maryland Wage and Hour Law - State Minimum Wage
Rate Increase. http://mgaleg.maryland.gov/webmga/frmMain.aspx?
id=HB0004&stab=01&pid=billpage &tab=subject3&ys=2015RS
Gindling, T. & Terrell, K. (2010). Minimum Wages, Globalization, and Poverty in Honduras.
World Development, 38(6), 908-918. doi:10.1016/worlddev.2010.02.013
Hayes, M. T. (2007). Policy Characteristics, Patterns of Politics, and the Minimum Wage:
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Kogan, A. (2014). Raising The Wage is All The Rage. In These Times, 38(4), 9.
Leicht, K. T. (2010). Nickels and Dimes Wont Fix This: The Future of Work and Pay in
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Occupations, (4).
Mejeur, J. (2014). Minimum wages hit $10. State Legislatures, (7), 15.
Metcalf, D. (1999). The low pay commission and the national minimum wage. Economic
Journal, (453), 46.
Mulder, C. P. (2008). The Minimum-Wage Debate and Its Implications for Unions. Journal of
Collective Negotiations, 32(1), 5-17. doi:10.2190/CN.32.1.b
Von Scheven, E,. & Light, I. (2012). Minimum Wage and Mexican and Central American Influx.
Sociological Perspectives, 55(4), 613-636. doi:10.1525/sop.2012.55.4.613

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