Maryland Launches First Statewide Living Wage

By: - August 31, 2007 12:00 am

As Americans celebrate Labor Day, the wealthiest state in the union prepares to take an unprecedented step to ensure that some workers paid with tax dollars earn a “living wage.” Supporters say the law is an important symbolic gesture but question how many workers it will benefit.

Maryland is the first to require government contractors to pay their employees at least $11.30 per hour in urban areas and $8.50 in rural regions of the state. Maryland’s so-called living wage law, signed by first-term Democratic Gov. Martin O’Malley in May, is scheduled to take effect Oct.1. But it will include only those workers under new state contracts of $100,000 or more, and many companies are exempt.

Speaking outside the Maryland State House Friday (Aug. 31) before a gathering of union activitists and supporters, O’Malley said the new law “wasn’t about getting rich” but about “rewarding work and the dignity of every individual.”

“The phrase ‘working poor’ should not be in the American lexicon,” he said. He challenged state contractors to “do better than the law.”

But while state labor advocates applaud the groundbreaking law, they complain that it excludes so many contractors it leaves thousands of employees at the poverty level without health or retirement benefits.

“Of course we support the bill; you have to start somewhere. But we will continue to fight so that other state employees who aren’t covered by the living wage will get higher pay and be able afford to live in the state where they work,” said Michele Lewis, Maryland legislative director for the American Federation of State, County and Municipal Employees (AFSCME).

In the mid 1990s-after thousands of government workers had lost their jobs to a nationwide privatization movement-cities and counties began demanding that government contractors pay their workers enough to live above the poverty line. Baltimore, Md., was the first in 1994, and 144 other local governments followed. But until now, no state had joined the movement.

Because the Maryland law covers only future contracts, it is impossible for the state to estimate how many jobs will be affected, said a spokesperson for the State Department of Labor, Licensing and Regulation.

Among those exempt from the new law besides private businesses are nonprofits, public-service companies, emergency-service providers, individual contract workers and companies with fewer than 10 employees. Also exempt are contractors with state universities, the lottery, the retirement and pension system, energy administration and more than a dozen other departments.

Notably, the company that operates the Baltimore Orioles’ baseball stadium Camden Yards-which recently has come under attack for paying cleanup workers less than minimum wage­-is exempt from the new law.

Workers under 18 are not covered nor are those who work fewer than 13 consecutive weeks under a contract.

The cost of employer-provided health insurance or retirement benefits can be deducted from the new mandatory wage, making the living wage of $11.30 or $8.50 apply only to workers with no benefits.

By comparison, the lowest-paid worker employed directly by the state makes $9.80 per hour but receives health and retirement benefits worth another $3 or more, bringing the comparable hourly rate to at least $12.74, AFSCME’s Lewis said.

While national labor groups and advocates for low-and middle-income families support the law, small-business organizations such as the National Federation of Independent Businesses and the National Restaurant Association oppose it, saying the new mandatory pay will make it harder for unskilled workers to find jobs.

Required wage hikes force employers “to find workers that have the skills and experience to justify that wage,” said Trevor Martin of the American Legislative Exchange Council (ALEC), an association of conservative state lawmakers.

But living-wage supporters say Maryland’s one-of-a-kind law establishes an important principle that tax dollars should not be used to support poverty-level jobs. It also sets a standard for “decent pay” that will put pressure on other employers in the state, said Sean Dobson, director of Progressive Maryland , the state’s lead advocacy group for higher-than-minimum wages.

“It would be surprising if other states don’t follow our lead,” Dobson said. “You fight poverty, reward a strong work ethic and ultimately you save states money by cutting down the number of people who need welfare,” he said.

Still, national labor advocates say they don’t expect a groundswell of support for state living-wage laws in the near future.

Unlike the idea of living wages, minimum-wage levels have been around for a long time and people understand them, said Jen Kern of the Living Wage Resource Center at the Association of Community Organizations for Reform Now (ACORN) , a national advocacy group for low-income families. States have outpaced the federal government in raising minimum wage rates, though Congress voted this year to hike the federal minimum for the first time in 11 years.

Living-wage laws-which Kern said are much easier to pass at the city and county level-are complicated, and many consider them a lower priority because they affect only a fraction of all workers, she said.

To help a bigger slice of American workers, Kern said her organization has targeted Maryland and six other states-Arkansas, Minnesota, New Jersey, North Carolina, Pennsylvania and Wisconsin­-for campaigns to raise the minimum wage next year. ACORN also plans to raise awareness in dozens of states for the need to provide paid sick leave, curb predatory lending and offer higher earned-income tax credits to low-income families.

Despite the small number of workers affected, national advocates say, living wage laws are important. Michael Ettlinger of a labor advocacy group, the Economic Policy Institute (EPI), said the laws set a standard for “what people ought to be paid who work full time.” It is unfortunate, he said, that it is not politically feasible to raise the minimum wage to the same level.

Ettlinger noted that because living-wage laws affect commercial and state pocketbooks in such a small way, they should be easy to legislate. The Maryland Legislature estimated its new law would cost only $114,780 in the first year.

Local governments in every state except Alabama, Idaho, Maine, North Dakota, Oklahoma and West Virginia have enacted at least one living-wage ordinance, according to ACORN research. Local living-wage minimums range from $6.25 in Milwaukee to a high of $12 in Santa Cruz, Calif., according to EPI .

Although a handful of state legislatures have considered living-wage bills, none besides Maryland have enacted laws. In California, where at least 20 local living-wage ordinances exist, former Gov. Gray Davis (D) vetoed a bill in 2003 that would have required state contractors to pay workers a minimum of $10 per hour.

Why did Maryland labor advocates succeed where others failed?

National labor advocates say persistence and leadership made the difference. It took five years and a supporter inside the Statehouse to pass the Maryland law, said ACORN’s Kern.

Del. Tom Hucker (D), who led Progressive Maryland’s campaign for living wages before joining the Legislature last year, supported the bill along with its sponsor, Del. Herman L. Taylor, Jr. (D). O’Malley-who campaigned on support for working families­-was also instrumental, political experts said.

After more than two years of grassroots campaigns, a living-wage bill passed Maryland’s House of Delegates by a wide margin in 2004, but was vetoed by then-Gov. Robert L. Ehrlich Jr. (R).

This year, a new living-wage bill faced stiff opposition from business interests, but O’Malley forged a compromise by creating two wage levels to reflect a lower cost of living in the state’s rural regions, exempting small businesses and including a host of other exemptions.

Under the state’s current minimum wage of $6.15, full-time workers earn $12,792 annually, just above the federal poverty level for a single person and well below the poverty line of $20,650 for a family of four. About 28,000 Marylanders earn the minimum wage, and some 548,000 live below the poverty line, according to research by the Maryland Legislature. According to the U.S. Census Bureau, the 2006 median income in the state was $65,144, the highest in the country.

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Christine Vestal

Christine Vestal covers mental health and drug addiction for Stateline. Previously, she covered health care for McGraw-Hill and the Financial Times.