Businesses with fewer employees will have smaller increases
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Montgomery County’s minimum wage will increase to $14 an hour on Wednesday — up $1 from the current wage.
The wage will only apply to businesses with 51 or more employees. Businesses with 11 to 50 employees will see an increase from $12.50 to $13.25.
The wage for employees of businesses with 10 or fewer employees will rise from $12.50 to $13.
The increases are part of the county’s November 2017 legislation to increase the minimum wage to $15 an hour in phases.
By July 1, 2022, the largest employers in Montgomery County will reach $15 per hour. The county was the first jurisdiction in the state to implement a $15 minimum, and after Washington, D.C., the second jurisdiction to do so in the Washington region.
The legislation was controversial and took more than a year to approve.
In January 2017, the council approved, by a 5-4 vote, an initial version that would have required the increase by 2020.
It was vetoed by then-County Executive Isiah Leggett, who was concerned that it would place the county at a competitive and economic disadvantage compared to other jurisdictions that had lower wages.
The bill eventually passed unanimously 10 months later, when it was modified to implement the wage increase in increments, over several years, for businesses of different sizes.
Boris Lander, a partner with Luis Group Management, which franchises with Dunkin’, spoke against the wage increase in 2017. He told Bethesda Beat on Tuesday that he’s still concerned about how the increases will affect his business, especially during a pandemic.
In 2017, Lander told the county that he expected the increase to potentially eliminate 130 jobs.
“I think we’re pretty spot on with our estimates in terms of job losses,” he said Tuesday.
The company’s production facility, where doughnuts are made for its shops, closed a week ago, which resulted in 30 workers being laid off. Luis Group Management franchises 20 stores.
“There’s been cutbacks across the board because we reduced hours in stores and we’ve had to cut back labor because we can’t afford it,” he said.
Since the health crisis began, more than 100 people have had to be laid off at the company.
“I think [the wage increase] is going to make it harder for small businesses like ours,” Lander said. “We’re going to have to continue to optimize, but it’s probably going to mean more reduced hours, less staff and longer wait times [for customers].”
As far as job cuts because of the cost of the minimum wage increase, Lander said it is possible.
“I think a lot of the damage is already done. We’ve been taking a dollar increase in the minimum wage since 2014,” he said. “We’ve kind of already learned how to adjust for it. Not to say that’s made it any easier.”
Lander said he requested the Greater Bethesda Chamber of Commerce to advocate for the county to place a moratorium on the wage increase because of the pandemic.
“It doesn’t make any sense that they would freeze the county workers’ pay, but they would saddle small businesses with minimum wage increases in the middle of this,” he said. “We’re not out of it.”
Ginanne Italiano, president and CEO of the Greater Bethesda Chamber of Commerce, said she has received complaints about the wage increase from members starting a few weeks ago. They asked the chamber to help stop the increase from happening.
Italiano said she contacted county officials about a delay, but they said there are workers who need the money from a higher minimum wage.
“In the same instance, they need a job and the job can’t afford them now,” she said. “It’s one of those situations where both sides lose out on this.”
According to the legislation, a “safety valve” provision in the bill allows a temporary delay in the implementation of an increase under specific conditions.
On or before Jan. 31, Rich Madaleno, the county’s finance director, has to ensure that economic conditions can support an increase. If he determines that any of the following conditions have happened, County Executive Marc Elrich would have the option to suspend the increase so it does not take effect.
The conditions include:
● Total private employment in the county decreased by 1.5% over the period from April 1 to June 30 in the previous year
● Total private employment for the county decreased by 2% over the period from Jan. 1 to June 30 in the previous year
● The gross domestic product of the United States experienced negative growth for the preceding two quarters
● The National Bureau of Economic Research determined that the U.S. economy is in recession
As long as one condition isn’t met, Elrich could, on or before Feb. 10, temporarily suspend the increase, delaying it by a year. A suspension can only be done twice.
Elrich, a County Council member at the time the bill was passed, spearheaded the legislation. He could not be reached Tuesday afternoon for comment.
“That’s going to be one of our top advocacy issues starting in July,” Italiano said of a delay. “We’re keeping track of this. Unless everything turns out really fast, they need to stop it as it is at the state level.”
County Council Vice President Tom Hucker said the increased wage still falls short of where it should be.
“I understand these are difficult economic times, but they’re difficult for workers, as well,” he said. “I’m glad the minimum wage is going up. … It [still] doesn’t reflect the cost of living.”
Montgomery County has moved farther on increasing the minimum wage than Maryland has. The state’s minimum wage rose from $10.10 to $11 in January. It will hit $15 in 2025.
Tricia Swanson, vice president of government relations at the Montgomery County Chamber of Commerce, said members haven’t reached out with specific concerns about the minimum wage increase, but have reported that they’re struggling with cash flow.
Swanson said for the last three months, the chamber has been lobbying for different levels of government to delay tax payments for businesses.
“[A minimum wage increase] is definitely going to be a cost that falls on the backs of businesses at a really obviously difficult time,” she said. “But it’s balancing our consumer-spending economy with how important businesses and small businesses are within our economy.”
Briana Adhikusuma can be reached at briana.adhikusuma@bethesdamagazine.com.
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