How Can Maryland Help The Working Poor?

A Primer on the Minimum Wage

Thomas A. Firey Feb 4, 2014

Lawmakers in Annapolis and Washington, D.C. are considering raising the minimum wage, which currently is $7.25 an hour under both Maryland and federal law. Supporters of an increase argue that it would help the working poor by boosting their income; opponents argue that it would weaken employment for low-skill and first-time workers by artificially raising labor costs.

This paper examines the economic theories and empirical evidence that both sides use to support their positions. It concludes that there is substantial evidence that raising the minimum wage would weaken employment for low-income and new workers. It further notes that indexing the increased wage to inflation, which is part of the Maryland proposal, would be especially harmful to those workers’ employment prospects. However, some policy activists may accept those negative effects in return for other perceived benefits of raising the wage. The paper concludes by suggesting three alternative policies that offer more promise for helping low-income households.