Not too long ago, it seemed like Baltimore — a progressive city with lots of low-wage workers — would be an easy win for the nationwide movement to raise the minimum wage to $15 per hour. Labor unions, churches, and advocacy groups had won support for the measure from the city council. Mayor Catherine Pugh made it a campaign promise.
It was a surprising blow to an otherwise successful wave of minimum wage hikes across the country. In January, 19 states and 22 municipalities increased their minimum wages after passing laws in recent years, according to the National Employment Law Project. Some were modest increases, such as Arizona’s gradual increase to $12 an hour over four years. Others were more dramatic, like New York’s statewide boost to $15 starting next year.
In Baltimore, though, such a big change was more of a gamble. The law would have almost doubled the minimum wage within the next few years, raising the incomes of nearly a third of the city’s residents. But many businesses said it would force them to lay off workers or relocate to the suburbs, where they could pay employees much less. (The statewide minimum wage is $8.75.)
Then there was the problem of the city’s own financial woes: It faces a $130 million shortfall in school funding, and the police department is undertaking a costly reform mandated by the US Department of Justice. The city’s finance department warned that increasing the minimum wage for city workers would plunge the city budget $116 million further into the red.
In the end, those objections triumphed. The defeat in Baltimore won’t likely slow down the national movement to lift wages for unskilled workers, says Chris Tilly, an economist and urban planning professor at the University of California Los Angeles. In Seattle, for example, research shows that a 2015 minimum wage increase has had little impact on job growth so far — something labor advocates point to as evidence that such laws don’t hurt the economy. But Baltimore’s story suggests that the movement may face a tougher battle in cities with struggling budgets and high unemployment. It also suggests that some cities may suffer more than others if the federal minimum wage gets a big boost.
How the Baltimore “Fight for $15” derailed
Labor unions in Baltimore still yield a powerful influence in local politics, and last year they rallied around raising the minimum wage to $15 an hour. But well-connected business groups, such as the Greater Baltimore Committee, fought back just as hard, and warned that businesses would shut down. The first attempt to pass such a bill was defeated by one vote less than a year ago.
Ricarra Jones, a political organizer for the local Service Employees International Union in Baltimore, saw a chance to get voters involved. The union represents more than 10,000 health care workers in Baltimore, she says, and they often get paid low wages for demanding work. Last summer, SEIU members knocked on doors and made phone calls to help elect eight new city council members who endorsed the minimum wage increase.
Their work paid off, and five of the eight new council members were in favor of the raising wages. The new mayor was too. “She was a big champion of [the increase], so we thought it would definitely happen” says Jones.
It wouldn’t have been surprising if workers had triumphed. National momentum to raise the minimum wage has been building in recent years, largely from frustrations about federal inaction on the minimum wage, which remains $7.25, and growing income inequality in the wake of the Great Recession. Cities such as Chicago, Los Angeles, and Seattle, along with the District of Columbia, have all passed their own $15-an-hour wage hikes, most of which will be phased in over a period of years.
The movement has faced strong resistance from business groups, who say the wage increases harm companies, and therefore their workers, by raising labor costs. This has led business to threaten to lay off workers, cut back their hours, or relocate outside cities considering a wage hike.
That’s exactly what happened in Baltimore. Owners of an outsourcing company, a tech firm, and a call center were among those who said such a wage increase would lead them to relocate, cut jobs, or raise prices.
Russ Causey, the owner of a Baltimore-based call center, told the Baltimore Sun that the law would have put him at a competitive disadvantage. His business, CMD Outsourcing Solutions, employs up to 150 unskilled workers who earn an average of $13.20 an hour. The wage increase would have cost him an extra $500,000 in added salaries, he said. "Call centers are a low-margin business," he told the Sun. "We will have no choice but to leave the city. I chose Baltimore as a place to live 20 years ago, and I chose to open my business here. … It will break my heart if we have to leave."
These warnings eventually swayed the mayor, who said potential job losses and budget constraints posed too much of a risk for the local economy. The local chamber of commerce applauded her decision, and, in a statement to Vox, said, “we are confident that the result will not only help local businesses continue to grow and hire, but that it will also keep new businesses coming to town by strengthening Baltimore City’s reputation as a pro-growth, pro-business environment.”
Would a $15 minimum wage have killed jobs in Baltimore?
It’s hard to know how many jobs in Baltimore would have actually disappeared with the wage increase — if any. Economists have long been fascinated by this question, and their research is mixed: Some models show that raising the minimum wage has a negligible effect on the number of jobs, others show substantial losses.
The University of Washington is currently studying the impact of the $15 minimum wage hikes in Seattle and Chicago, which are slowly being phased in over the next few years. In Seattle, the law went into effect in April 2015, boosting the minimum hourly wage from $9.47 to $11 in the first phase. That year ended up being good for Seattle’s economy, with job growth about triple the national average. Yet researchers believe that had more to do with hiring in the tech sector and construction industry. In their analysis, they concluded that the minimum wage increase may have had a modest impact, leading to slightly fewer work hours and slightly lower employment in the city.
The vast majority of research so far, though, has focused on the impact of modest increases of a few dollars, not a steeper hike to $15.
Harry Holzer, a former chief economist at the US Department of Labor, who now teaches at Georgetown University, says most cities can handle a $10 minimum wage without losing too many jobs.
Holzer isn’t aware of any studies that look specifically at the impact on poorer cities like Baltimore, though “economic logic clearly suggests that Baltimore would be a particularly bad place to try this,” he says, referring to the city’s budget problems and unemployment rate.
Even so, raising the minimum wage would have been an undeniably easy way to boost the incomes of Baltimore’s poorest families, and would move many workers out of poverty.
The liberal Economic Policy Institute looked at the city’s minimum wage bill last year and concluded that it would likely raise wages for 98,000 workers — about 27 percent of all Baltimore workers, and two-thirds of Baltimore workers who live in poverty. About half of those 98,000 workers live in households making less than $50,000 a year
By 2020, the average worker who got a raise due to the increase would have been earning about $4,400 more each year than today. (The analysis was conducted on a slightly different version of the recent bill.) That’s assuming that none of the negative consequences businesses warned about came true: The study did not take into account the impact of potential job losses or reduced work hours that could result from the new law.
What other cities can learn from the fate of the Fight for $15 in Baltimore
There are two ways to look view Baltimore’s defeat, says Tilly, the UCLA economist and urban planning professor, and two questions to ask going forward.
First, can a city afford a high minimum wage?
Post-industrial Baltimore is not a city flush with cash like, say, the booming tech hubs of Seattle and San Francisco. It has twice the poverty rate of both West Coast cities, and Baltimore’s budget deficit has reached $20 million, in addition to its even higher school-funding deficit.
Pugh, who campaigned on the promise to support a minimum wage increase, says she had a change of heart after looking at the impact on the budget. The city’s finance department estimates it would cost $116 million to the city over the next seven years. That’s because the city employs many unskilled workers who make less than $15 an hour. If businesses do end up relocating to the suburbs, it could also deplete the city’s business tax revenues.
“It looks like the city was going to have trouble balancing the budget, and I think that mattered more than the threat of jobs leaving,” says Tilly.
Second, can a city handle some job losses?
Though it’s unclear if Baltimore businesses would lay off workers or move away with a $15 minimum wage, the chance it could happen matters more in a city with higher-than-average unemployment. In January, the unemployment rate in Baltimore was 7.2 percent, compared to 5.3 percent nationwide, according to the Bureau of Labor Statistics. Decline in the manufacturing and shipping industries, plus a steadily shrinking population, has made it harder to find blue-collar jobs in Baltimore.
“The argument that [a $15 wage] might reduce the number of jobs is going to get a stronger hearing in a city like Baltimore than places like Seattle and San Francisco,” says Tilly.
Because raising the minimum wage has become such a popular idea, he doesn’t believe the loss in Baltimore signals that the country is shifting on the issue. “There is a broad perception that people at the bottom of the economy are struggling,” he says. The question then becomes, how much of a minimum wage increase will cities and states tolerate?
In Baltimore, low-wage workers can still expect a small income gain in the years to come, as the state of Maryland will increase the minimum hourly wage to $10.10 in 2018. That’s $1.35 higher than it is now.
Jones, whose union campaigned to increase the statewide minimum wage too, said that is hardly enough of a raise. “You need to make $28 an hour just to afford a decent one-bedroom apartment [in Baltimore],” she said. “It doesn’t scratch the surface in helping people earn what they need to support their families.”