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A key component of Democratic Gov. Wes Moore’s push to accelerate the state’s minimum wage could face tough sledding in the legislature.
For the first time in nearly a decade, Democrats control both the legislature and the executive branch. By and large, both branches appear to be rowing in the same direction on top issues. Below the surface, there are some points of disagreement.
A key House of Delegates committee remains noncommittal on the inclusion of language that would tie annual increases of the minimum wage to inflation. And the leader of the Senate said the Finance Committee may also balk at Moore’s desired provision.
“Indexing is a tough issue that I don’t think the committee is overly supportive at the moment and so I know there’s ongoing conversations,” Ferguson said during a meeting with reporters in advance of a hearing Monday before the House Economic Matters Committee. “If you look across the country where indexing is in place, almost all of those have happened as a result of a ballot initiative. There are very few places where indexing is in place because of, as part of a legislative initiative. I would say this will be the third time that we will have touched minimum wage in 12 years and so it makes sense to me that we are back every year for a reason. And so indexing to me seems like it’s unnecessary where we have a legislature that meets every year to take up the issue.”
Moore in his first term wants to accelerate Maryland’s transition to a $15 per hour minimum wage as part of his “Work, Wages and Wealth” legislative agenda.
House Bill 549 requires employers to bump the wage $1.25 per hour by Oct. 1. The bill mandates future annual increases tied to annual inflation rates. A hearing on an identical Senate bill is set for Wednesday in the Senate Finance Committee.
“I think it’s a conversation, said House Economic Matters Chair C.T. Wilson (D-Charles). “I think delegates are generally concerned. We’re here to make the tough decisions. Putting on CPI takes that decision away from us.”
Moore told the House Economic Matters Committee on Monday that linking the wage to inflation ensures low-income wage earners can keep up with the economy.
“Make no mistake, without indexing Maryland families will fall further and further behind over time,” said Moore. “If we do not ensure the minimum wage keeps pace with inflation, it will be worth less in 2029 than it is today.”
An unspoken and pragmatic fact of the debate is that an automatic increase tied to inflation would remove the potential for politically difficult annual debates on a hot button issue.
A fight over minimum wage four years ago included a debate over automatic increases. That provision was ultimately rejected.
Under the plan passed in 2019, the state is on a path to increase its minimum wage to $15 per hour for most employers by 2025. Some smaller employers would follow along a year later.
Currently the hourly rate stands at $13.25 after an increase that went into effect in January. Businesses with under 15 employees have to pay at least $12.80 per hour.
Moore’s plan, if passed, would require at least $15 per hour for all businesses by October 1.
The first increase linked to inflation would come in March 2025. That would be based on the annual rate of inflation for the previous 12 months. Increases would be capped at 5%. The Board of Public Works could vote to pause an inflation related increase in the case of extreme circumstances.
Increases linked to inflation would give businesses predictability, Moore said.
“Indexed wage increases are smaller,” he said. “Business owners know when they are coming and can plan around them.”
Amy Thompson, executive director of the Ocean City Chamber of Commerce called automatic increases “problematic” for small businesses. The state, she said, already has few tools on hand to offset inflationary concerns.
“It feels like we’re playing whack-a-mole with one hand tied behind our back,” she said.
Seventeen states currently have laws that include an automatic annual increase tied to inflation, according to Andre Griffin, who represents the Maryland Chamber of Commerce.
The average limit on those increases is about 3.5%, he said.
Griffin said votes to increase the minimum wage often boil down to raw politics, something which would likely affect the debate at the Board of Public Works that counts the governor and comptroller — both elected statewide — as members.
The solution, he said, would be to include an automatic trigger to pause increases in the event of sharp inflationary pressures such as those seen over the last 18 months as inflation spiked at a rate not seen in nearly 40 years.
“It’s unlikely that they’re going to vote to pause the minimum wage,” said Griffin.