GUILFORD, MD – Senator Ben Cardin (D-MD) is in favor of raising the federal minimum wage. In a small business forum held this week at British American Auto Care on Berger Road in Guilford, MD, Mr. Cardin met with Brian England, the owner of British American, and other small business owners to discuss his support for a higher minimum wage.
In an NFIB article posted on their website, the organization lays out their reasons for opposing the minimum wage. The article sites the low profit margins of small businesses as the cause of their dissent. The article described a scenario where a small pizza shop with ten minimum wage employees could see a labor cost increase of $20,000 if the minimum wage is raised only one dollar.
The proposal being discussed is an increase of nearly three dollars. The rent minimum wage is $7.25 per hour.
The NFIB is “energized by libertarians and the extreme right,” according to Mr. Cardin. He characterized the political extreme right as an uncooperative faction and characterized the libertarians as having a philosophy of government non-intervention. He said that the NFIB claims that a higher minimum wage “will hurt the economy.” Mr. Cardin said that the opposite is true.
He said the average minimum wage worker is about 30 years old with children. He characterized most of them as women, living in poverty, who work two jobs to support their families.
When the issue of a living wage was discussed, Lou Florenzo, the owner of CB Flooring in Columbia disagreed that the new rate would create a living wage. Mr. Cardin agreed with Mr. Florenzo’s assessment, but added, “With the earned income credit it brings you six percent above the poverty line.”
The Guilford Gazette checked with Moshe Pelberg, a Certified Public Accountant located in Baltimore, to provide a simple analysis on the minimum wage proposal.
According to Mr. Pelberg, with FICA contributions taken into account, a minimum wage employee working 40 hours per week earns $290.00 before income taxes. At the proposed minimum wage, the same employee would
earn $373.09 before income taxes. FICA, an acronym for Federal Insurance Contributions Act, is a mandatory contribution that covers Social Security and Medicare.
According to Mr. Pelberg, “State and Federal income taxes are based on a complex formula that considers a minimum income (from all sources, including wages, investments, scholarships, rents etc.) less a personal
exemption and deductions for dependents among other factors. To me, to include the effects of minimum wage on income taxes would be misleading. You’d also have to factor in the effect on the Earned Income Credit, which is impossible to determine on a macro level.”
On the other side of the spectrum, the employer would pay an additional $122.72 per week, per employee, to cover the salary increase and the employer contribution of the FICA, according to Mr. Pelberg. He added, “The FICA effects are very clear. The other effects are murky.”
Mr. Cardin called for a social safety net for low wage workers. “At $10.10 you can breathe,” he said. When asked about the effect on new businesses starting up with very little capital, Mr. Cardin said that entrepreneurs “are coming in with a lot of skin in the game” and not likely hiring employees.
According to Mr. Cardin, Maryland does not have a large number of minimum wage workers in the state, but there are some industries known for paying minimum wage. Custodial, domestic and certain health care workers are some who could benefit from a federal law raising the minimum wage to $10.10.
Article Posted 2/5/2014