Legislators in Maryland are again debating raising the state minimum wage, this time from $7.25 to $10.00 per hour (a 38 percent increase) and indexing it to the cost of living so that future changes would be automatic, with no vote or legislative accountability required. Also included is an increase in minimum wages to employees who receive most of their compensation in tips. The bill would raise the minimum wage for tipped workers from 50 percent to 70 percent of the full minimum wage.

This is motherhood and apple pie legislation. Who can be opposed to paying employees a wage that allows them to live more comfortably? If $10 an hour is good, why not require $20 an hour, or maybe $50?

The answer is obvious. Markets set wages. To stay in business and keep people employed, businesses have to be competitive. The cost of wages is reflected in the price of the product or service to the consumer. When labor costs go up, employers have two choices. They can attempt to pass the price increases on to customers (and perhaps lose their customers) or find a way to cut costs.

Maryland businesses that have to compete with surrounding states are already disadvantaged by sales and corporate taxes and fees that make them less competitive. For Maryland restaurants, whose employee compensation is largely tip income, the requirement to pay 70 percent of the increased $10 minimum wage forces a 93 percent increase in required restaurant wages. That would result in increasing menu prices, cutting employees or maybe closing the doors. (More than 50 percent of restaurants fail in their first year of business, and 90 percent of those who make it through year No. 1 don’t make it through their second year.)…..

Read article here