A minimum wage hike just went into effect in Maryland, but it may not actually help the people it was meant to help.
Gov.-elect Larry Hogan is already facing a $1.2 billion budget shortfall and leftover legislation from previous administrations. At the forefront is the $8/hour minimum wage hike that went into effect on Jan. 1. The minimum wage is set to rise by 25 cents in July of this year, and by July 2018, it should hit $10.10.
As a result, many employers are scrambling to find ways to make up for the elevated cost of labor. Some plan to reduce employee hours, training and benefits, and others may have to slow expansion and hiring processes.
Unfortunately, this is likely to impact the people who need jobs most: young adults. Maryland’s current youth unemployment rate is an alarming 13.4% already, and it’s possible that cash-strapped employers won’t be able to take a chance on younger workers. As a result, young adults will have restricted access to the work experience that could help them embark on a career path.
Essentially, the higher minimum wage could reduce opportunities for entry-level employment, especially if employers begin to automate certain jobs to save money. It’s generally cheaper for banks to install ATMs than hire bank tellers, and many supermarkets have dozens of self-checkouts supervised by a single employee. The change could hit repetitive or routine jobs especially hard.
Young people who are deprived of entry level jobs because of rising labor costs could have more trouble getting hired in the future, since most employers look at job-related experience, relevant skills, knowledge, aptitude and qualifications when deciding whether or not to hire. On-the-job training is usually given precedence.
Even the nonpartisan Congressional Budget Office reported that Maryland’s minimum wage proposal may not be helping the people it was designed to help. Only 19% of the increased earnings will go to families below the poverty line, since many people currently making minimum wage actually live above the poverty line.
Without more employment opportunities, a higher minimum wage may only be a stopgap solution. Proponents of the wage hike, however, argue that putting more money will result in increased sales, which may balance out the changes.