Under Maryland Senate Bill 543 and House Bill 664, the state’s minimum wage would rise from $9.25 to $15 per hour by 2023. Del. Shelly Hettleman, D-Baltimore County, the lead sponsor of the House bill, claims the increase “is a critical step in restoring fairness.”

Hettleman is right. The $15 minimum wage in Maryland will restore “fairness” because it will ensure that nobody wins. Low-skill workers, businesses, and Maryland will all inevitably pay the price. Despite what Hettleman and other supporters insist, three quarters of economists oppose the “Fight for $15” movement, citing concerns for reduced employment levels and business competitiveness.

The Maryland Chamber of Commerce is therefore right to worry that the minimum wage increase would hurt employment and competitiveness. Since the $15 campaign succeeded in California, 64 restaurants closed in the winter of 2017, claiming high labor cost as a deciding factor. A new study by Harvard Business School found that a $1 increase in the minimum wage leads to 14 percent increase in the likelihood of closure for an average restaurant.

Similarly, Maryland businesses that tend to employ minimum-wage workers will have to make a difficult decision: scale down, shut down, or relocate to a nearby state. Luckily for them, Virginia’s minimum wage is only the federally mandated $7.25 per hour.

Comparing Maryland to Virginia helps to understand why Maryland cannot afford a $15 minimum wage. According to Forbes’ ranking of 50 states, Maryland is 32nd in cost of doing business and 43rd in regulatory environment while Virginia ranks 5th overall for doing business and 2nd in regulatory environment. Maryland and Virginia’s corporate income tax rate is 8.25 percent and 6 percent respectively.

Therefore, a $15 minimum wage for Maryland would be like adding salt to a wound. If a business operated in Maryland instead of Virginia, the owner would have to pay a full-time low-skill worker at least $31,200 per year, as opposed to $15,080 in Virginia. This is similar to paying $16,120 more in corporate income taxes. In order to avoid such a burden, one just has to drive a few miles to Virginia where business climate isn’t so hostile.

A $15 mandate will also hurt workers by forcing businesses to cut jobs and workers’ hours to survive, inducing job losses and higher unemployment. A National Federation of Independent Business Research Foundation report estimates that the proposed wage hike will reduce Maryland’s private sector employment by 99,000 jobs over a decade.

Experience in other states supports this conclusion. A 2017 study of Seattle’s minimum wage hike showed that nine months after it rose to $13 per hour, about 5,000 low-skill jobs had disappeared. The number of hours worked dropped by 3.5 million hours and overall wages dropped by $6 million.

Most troubling, a raft of research on the effects of minimum wage hikes shows this disemployment effect falls hardest on especially vulnerable people: young, minority males. Instead of building the work histories and basic job skills they need to find steady, better-paying work, they will find it even more difficult to take the first step on the ladder to economic security.

There is nothing fair about giving raise to some workers who are already employed while forcing other low-skilled workers out of the labor market for good. Over 40 percent of job-seeking Baltimore residents who live below the poverty line aren’t struggling because they have minimum-wage jobs, but because they have no jobs at all.

The “Fight for $15” is thus a lose-lose game. Business owners lose their workers and growth, workers lose their jobs, and Maryland loses its competitiveness. If “fairness” is truly the end goal, Maryland legislators should focus on raising Maryland’s competitiveness, not its minimum wages.

Instead of imposing an additional $16,120 per employee tax burden on Maryland low-skill employers, lawmakers should incentivize those businesses to invest in their employees. For instance, by reducing corporate income tax burden, businesses can afford to hire more workers and raise their wages. More importantly, they will be encouraged to remain in Maryland.

Wealth must first be created in order to make workers wealthy. An improved business climate and regulatory environment would create wealth to address Maryland’s inequality and poverty. While the $15 minimum wage is a lose-lose game, a competitive and thriving Maryland is win-win for all.

Until then, Maryland’s businesses may flock to Virginia or other states, and we will have only ourselves to blame. 

Carol Park is a senior policy analyst at the Maryland Public Policy Institute.