The Washington PostDemocracy Dies in Darkness

Montgomery business owners divided over effects of a $15 minimum wage

Richard Gorinson, owner of J&S Shoes Stride Rite, said the minimum wage proposal could put him out of business. (Bill O’Leary/The Washington Post)

The last time the Montgomery County Council voted to increase the minimum wage in Maryland’s largest jurisdiction, Richard Gorinson slashed his employees’ payroll hours by 26 percent. Sales had been flat since the 2008 recession at his shoe store in the Westfield Wheaton mall, and he said he couldn’t afford to pay his workers more without also cutting their hours.

Now the council is weighing a bill to increase the hourly minimum even further — a revised version of legislation that was approved by the council but then vetoed earlier this year. “It would put me out of business,” said Gorinson, owner of J&S Shoes Stride Rite. “There’s just no way I could staff the store properly and have to pay $15 or more.”

Yet for Dana Lande, who owns a Rockville-based online jewelry design and manufacturing business, the cost of hiring, recruiting and training new staff is more daunting than a $15 minimum wage.

She said the bill — which will be the focus of a public hearing in Rockville on Tuesday evening — would probably mean reduced turnover in the long term.

“One of the benefits I see of having higher wages is retaining employees,” said Lande, who opened Dayna Designs in 2004. “It’s a silver lining for employers.”

The all-Democratic council has debated a $15 minimum wage before.

Lawmakers narrowly approved legislation in January that would have made the wealthy suburb the first jurisdiction in Maryland — and the second in the region after the District — to require $15 an hour by 2020 (businesses with 25 or fewer employees would have until 2022 to implement the higher wage).

County Executive Isiah Leggett (D) vetoed that bill, concerned about putting businesses in the county at a competitive disadvantage with those in neighboring Maryland jurisdictions. Six votes were needed to override Leggett's veto. Only five of the council's nine members — the same five who voted for the bill in the first place — were in favor.

Leggett then commissioned a study to quantify the effects of a $15 minimum wage. The research, conducted by the Philadelphia-based economic consulting group PFM, initially predicted that 47,000 jobs would be lost by 2022. But in August, the group admitted to "a computation error" that overestimated the number of lost jobs, handing a win to county lawmakers who had questioned the study's results.

Over the summer, council member Marc Elrich (D-At Large) introduced a revised bill that attempts to address Leggett’s concerns that the original legislation was too much, too fast.

The proposal gives nonprofit organizations and adult day-care providers, as well as small businesses, until 2022 to begin paying $15 an hour. It is not yet clear whether that change is enough to win over an additional council member and create a veto-proof majority. With at least seven of the nine lawmakers running for another term or for a different office in 2018, their positions for or against a higher minimum wage could have political consequences.

“I’m hoping we can get more than six,” Elrich said. “I think we’re going to be able to pass the bill.”

Leggett has made clear that the changes in the bill are not enough to satisfy his concerns. He is asking council members to expand the definition of small businesses to those with 50 or fewer employees — which would cover 96 percent of businesses, and 50 percent of county employees, according to Leggett’s office. Leggett also suggested a new timeline so large businesses would have until 2022 to raise wages to at least $15 an hour, and small employers and nonprofit organizations would have until 2024.

“My view is that if the legislation looks like the original one, I’m not prone to approve that,” Leggett said in an interview. “That’s the bottom line.”

Elrich said “the definition of small businesses was a debatable issue” but rejected calls to push back the timeline.

“I appreciate [Leggett] is concerned about how will small businesses adjust at a higher wage,” Elrich said. Then he offered this counter: “How do poor people adjust to not being able to feed and clothe and house themselves?”

Business owners who support a $15 minimum wage include Michael Lastoria, founder of &Pizza, which has locations in Maryland, New York, Pennsylvania and Virginia as well as the District, whose council voted last year to require a $15-an-hour minimum wage by 2020.

Lastoria said higher wages help connect people to their employers and, by reducing turnover, also reduce training costs.

The company pays its D.C. employees $13 to $15 an hour. Workers at the Montgomery outlets — in Bethesda, north Bethesda, Gaithersburg and Germantown — are paid $12.25 to $14.

“We’ve kicked this can as far down the road as we can,” Lastoria said. “You just can’t live off the wages that the government mandates you to pay.”

But many other business owners, and multiple chambers of commerce, lobbied against earlier versions of the Montgomery bill and are expected to do so again on Tuesday.

At a public hearing in June 2016, they called a $15 minimum wage a one-size-fits-all solution that would force business owners to reduce their workforces and increase wages at all levels to accommodate a bump at the bottom.

Joe Richardson employs about 260 people as the chief executive of the after-school and camp program Bar-T, which is based in Montgomery. He said he wouldn’t be able to reduce his payroll by much if the council approves a higher minimum wage, given the number of kids Bar-T supervises. Instead, he would have to charge families more for programming, perhaps as much as $15 more per month.

Above all, he said, an increase in the minimum wage to $15 would have ripple effects for staffers at all levels.

“If any entry-level person who you hired with no experience is making [$15 per hour], it doesn’t feel right that people who have been working with you for a while at $16 or $17 not to have a bump up,” Richardson said. “But I couldn’t increase everybody on that same curve.”

Richardson said that if other jurisdictions in Maryland, or the entire state, were considering the increase, “everyone would understand.” But he argued that Montgomery, where the majority of Bar-T programs take place, should not become an outlier.

“This is just Montgomery County being difficult for business,” Richardson said.