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Firm that projected massive job losses with Montgomery County minimum wage increase says it was wrong

By Rachel Chason

August 16, 2017 at 4:36 PM

The study that projected massive job losses in Montgomery County if the hourly minimum wage increased to $15 is flawed, according to the consulting group that conducted the survey.

PFM, the Philadelphia-based consulting group behind the study, initially predicted 47,000 jobs would be lost by 2022 if the county raised its hourly minimum wage to $15. But on Sunday the group recognized "a computation error," said PFM Managing Director Dean Kaplan. They are now reexamining their methodology and expect to have a revised projection, which they expect will be lower than the initial estimate, Kaplan said.

"We take full responsibility for this error," Kaplan said. "We've identified what went wrong and plan to release a revised report in the next week. We will stand by our analysis."

The development marked a victory for Montgomery County lawmakers leading the charge for the $15 minimum wage, who have said the study's results are not valid.

County Executive Isiah Leggett, who commissioned the study when he vetoed an increase to the minimum wage in January, sent a letter to PFM on Tuesday requesting that the group review its "methodology and findings" before the council begins discussing new legislation to bring the hourly minimum wage from $11.50 to $15 by 2022. PFM notified Leggett's office about the study's errors on Monday, Kaplan said.

"They're going to double check the numbers," Leggett said. "We want to make sure all our I's are dotted, and our T's are crossed."

PFM's mistake, Kaplan said, was failing to accurately reflect responses from business owners, which were collected through electronic surveys and both phone and in-person interviews.

"This is kind of a case of somebody just using the wrong input," he said.

County Council member Marc Elrich (D-At Large), who introduced new legislation to raise the minimum wage in July, said PFM should return the $149,600 it was paid by the county for the study. Kaplan said the group would be willing to discuss funding with the council.

Elrich, who is running to replace Leggett as county executive, said it's not possible to fix the study. The question — which asked business owners to predict the effect of raising the minimum wage rather than look at the impact of an actual wage hike — is designed to produce negative results, Elrich said. He also questioned the qualifications of PFM, which he said has little experience conducting analysis of minimum-wage hikes.

"Anybody who reads this study honestly would see it is a piece of garbage," Elrich said.

The 47,000 jobs that PFM projected the county would lose represent 8.5 percent of Montgomery County's total current employees. That figure drew the attention of Robert Hagedoorn, chief of Montgomery County's fiscal management department, who emailed PFM in July, before the study was published, saying the number sounded "very steep" to him. Despite Hagedoorn's reservations and what Leggett said were his "consistently expressed concerns," the study was released by the county Aug. 1.

When Leggett commissioned the study and vetoed an increase to the minimum wage in January, he cited concern that the wage hike would put Montgomery County at a "competitive disadvantage" with other jurisdictions.

The only locality that has adopted a $15 minimum is the District of Columbia, which will require employers to pay that wage by 2020.

[D.C. gives final approval to $15 minimum wage]

Leggett left the door open to accepting possible revisions to the bill, and in July Elrich introduced his new bill to bring the hourly minimum wage up to $15. The bill attempted to address opponents' concerns about the impact of an increase by giving nonprofit organizations, adult day-care providers and companies with fewer than 26 employees until 2022, instead of 2020, to raise wages.

Unemployment decreased in Montgomery between 2013 and 2017, during the same time period that the hourly minimum wage in the county increased from $7.25 to $11.50, which Elrich said indicates that increasing the current minimum wage over the course of the next five years would also have little affect on overall unemployment.

But Leggett maintained in an interview Tuesday that if even half of the projected job loss was accurate, then the county should pay attention.

"These are extraordinary numbers were talking about here," he said.

This story has been updated.


Rachel graduated from Duke University in 2017 and is a reporting intern covering local politics.

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