- The Washington Times - Wednesday, February 15, 2006

Maryland small business owners are bemoaning higher labor costs as the state’s minimum wage increases today from the federal threshold of $5.15 per hour to $6.15.

The law, which the state legislature approved in the 2005 session, goes into effect because the General Assembly last month overrode a veto by Republican Gov. Robert L. Ehrlich Jr.

“A dollar an hour is a huge jump — people have no idea how that affects your payroll,” said Mike Kostinsky, who owns Sorrento of Arbutus, a pizza restaurant in Arbutus, Md., southwest of Baltimore.

In addition to paying higher wages and more payroll taxes, other employees currently earning well above the minimum wage might become disgruntled, Mr. Kostinsky said.

“If I had somebody who’s been here for a couple of years and they’ll only make $8 or $8.50, now that’s only a shave over minimum wage. That hurts.”

Mr. Kostinsky, whose family has owned Sorrento for 41 years, said he typically adds four or five high school students at minimum wage during the summer to allow his 30 or so permanent employees to take vacations.

As a result of the wage increase, “I won’t let anybody go, but I probably won’t hire anybody else,” he said.

Other employers criticize the new law for not exempting tipped employees, such as waiters and waitresses, whose minimum wage will increase from $2.38 per hour to $3.08.

“These people are doing well; they have houses, they have cars, they live like the middle class because their overall earnings are in the middle class,” said Jeff Levin, manager of the restaurant and retailer Fields of Pikesville. “What you’ve done is you’ve made their restaurant less able to employ them.”

Mr. Levin said he may raise the cost of meals to offset the wage increase.

John Schulze, owner of Pizza Hut of Maryland, will have store managers from his 48-restaurant chain next week calculate the hours worked under the new wage law for each of 388 tipped employees.

“It is a big deal for me. It’s going to cost me several thousands of dollars and probably more than that once we’re done,” he said.

Business groups and proponents of the wage increase have conflicting predictions about the law’s impact on the state economy.

“I think you might see some jobs lost,” said Aaron Greenfield, president of the Maryland Business Council. “You might be in a position to reduce your work force a little bit to adjust so you’re at least making some profit to keep the business sustained.”

Tom Hucker, executive director of the liberal group Progressive Maryland, said the economy will benefit from a minimum-wage increase because employees will put their additional earnings back into local businesses.

“Minimum-wage workers, when they get a little more money, they’re spending it in the local grocery store or they might be able to go out to eat once in awhile,” Mr. Hucker said.

Despite hurting some employers, economist Anirban Basu said the overall state economy will not be affected by the wage increase.

“From a macro standpoint, I think this is a nonevent,” said Mr. Basu, chairman and chief executive officer of Sage Policy Group Inc. “In an economic environment in which the unemployment rate has dipped below 4 percent, it is hard to believe that a large proportion will continue to accept wages at or near the previous minimum wage.”

Mr. Basu called the wage increase “largely election-year symbolism.”

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