Scaled-Back Minimum Wage Law Is a Positive Step but Leaves the Job Unfinished

At the start of this year’s legislative session, newly elected Gov. Moore introduced a bill to fulfill his campaign promise to accelerate and strengthen Maryland’s $15 minimum wage. As introduced, the bill would have boosted paychecks for 175,000 workers. Lawmakers ultimately passed the bill in significantly weakened form, delaying implementation by three months and stripping a provision to secure the wage floor’s purchasing power in future years. The legislation Gov. Moore signed this week is an important accomplishment, providing relief to 163,000 workers who are currently being squeezed by rapid price increases. However, the law misses opportunities to provide workers long-term protection and make our minimum wage more inclusive.

Gov. Moore’s original Fair Wage Act consisted of two important pieces:

• Phase in the full $15 minimum wage for covered workers at all employers effective in October 2023
• Adjust the minimum wage for inflation beginning July 1, 2025 to ensure that the minimum wage maintains constant purchasing power over time

The Senate Finance Committee amended the bill, pushing the wage boost back to January 2024 and eliminating the provision to index the wage floor to inflation. Both chambers ultimately passed the Finance Committee’s version of the bill.

Fair Wage Act Benefits Low-Paid Workers and Families

The Fair Wage Act as enacted is a meaningful step forward, providing temporary relief from recent years’ rapid price increases. Here’s what the law will do in 2024:

• Raise wages for about 163,000 workers (7% of workers statewide)
  • On average, affected workers would see their wages increase by $0.54 per hour, equivalent to $782 per year.
  • Altogether, the bill will increase wages by $128 million in 2024.
• Raise family incomes for 120,000 children (9% of children)
  • Research links a boost in family income during childhood to a wide range of lifelong benefits, although most research focuses on sustained, rather than temporary, increases.
• Make our economy more just and inclusive
  • 66,000 white workers will take home higher wages (5% of white workers statewide)
  • 60,000 Black workers (9%)
  • 24,000 Latinx workers (10%)
  • 6,800 Asian and Pacific Islander workers (4%)
  • 5,900 workers belonging to other racial or ethnic groups (9%)
  • 94,000 women (8%)
  • 71,000 workers whose family income is less than double the federal poverty line (23%)

Senate Amendments Leave Future Workers Behind

Lawmakers’ decision to strip inflation indexing from the Fair Wage Act exposes workers to the risk of eroding living standards in the long term and renders the bill’s wage effects null before the end of 2026.

• Without indexing, while the dollar value of the minimum wage stays constant over time, its purchasing power continuously declines due to inflation. In other words, without indexing, workers must constantly watch their standard of living erode, day by day.
• Without indexing, the purchasing power of Maryland’s minimum wage is on track to fall below its current value ($13.25 per hour) before 2029. As the last two years have made clear, unexpected spikes in inflation would erode the wage floor’s value sooner.
• Failing to index also further tilts an already lopsided balance of power. Without indexing, employers that seek to maximize profits through low wages receive an automatic, continuous reduction to their responsibilities in real terms.
• Inflation indexing is a well-established policy tool. Today, 18 states and the District of Columbia index for inflation or have adopted indexing policies that will go into effect soon, more than half of all states that set a wage floor above the federal standard.
• Indexing is consistent with a thriving economy. A robust body of credible research shows no significant link between the minimum wage and the number of jobs available. These empirical findings apply just as much to inflation adjustment as they do to other minimum wage changes.

Despite false narratives advanced by some policymakers and media outlets, inflation indexing does not in any way alter the General Assembly’s authority to set the state’s minimum wage. Lawmakers would retain their ability to raise, lower, or restructure the minimum wage, through ordinary legislation, at the time of their choosing. Indexing simply ensures that when lawmakers do nothing, workers do not automatically lose.

All Workers Deserve Bedrock Protections

This year’s bill also misses opportunities to right historical wrongs and make our minimum wage more inclusive.

When Congress enacted the federal employment law framework in the 1930s, New Deal proponents made concessions to win the votes of racist southern Democrats, generally denying protections to workers in disproportionately Black industries and occupations or weakening these protections. Some, but not all, of these exemptions remain on the books at the federal level and in Maryland.

• Agricultural Workers: Agricultural workers make vital contributions to Maryland communities and our economy, but many receive no protections under current wage law. Including agricultural workers in the minimum wage increase would have benefited another 1,200 workers and 950 additional children (based on the bill’s original October phase-in).
• Tipped Workers: Our wage law currently allows employers to pay tipped workers a subminimum wage of only $3.63 per hour. Because tipped workers cannot rely on a stable, decent wage, they are often at the mercy of customers for adequate pay, contributing to higher levels of sexual harassment in tip-heavy industries. Guaranteeing the full minimum wage to tipped workers effective in October 2024 would have increased wages for an additional 47,900 workers and increased family incomes for 27,900 additional children. Because our tipped subminimum wage is so low, extending full protection to these workers would have increased the bill’s dollar impact by a factor of five. A separate bill that would have gradually phased in the full minimum wage for tipped workers never received a committee vote.

Young workers are another important group left behind by our current wage protections. Despite its other benefits, the 2019 minimum wage bill weakened protections for certain young workers. Young workers’ earnings may serve as a lifeline for many struggling families who rely on extra income to stay afloat, especially during difficult economic times. Guaranteeing the full minimum wage for young workers would enable them to help keep their families afloat, contribute to their education, and build economic security for the future.