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Minimum wage hike could hit resort restaurants hardest

(Feb. 1, 2013) For resort-area businesses – and the tourism industry throughout the state – the upcoming legislative session in Annapolis may be less about getting what you want, and more about not getting what you don’t want.

A proposal currently circulating through the Maryland General Assembly seeks to raise the state’s minimum wage from the current $7.25 per hour to $10 per hour by 2015. According to the bill’s backers, the increase will be gradually phased in, but the end result will be to raise the standard of living for the roughly 320,000 people in the state who live off an hourly minimum wage.

Such an infusion of disposable income would presume to be healthy for tourism and the recreation industry as a whole. But another element of the proposal could as well be extremely onerous, in particular, to the resort restaurant industry.

The bill would also seek to raise the percentage of pay for tipped workers from 50 to 70 percent. Under Maryland law, which is similar to that in most other U.S. states, workers who receive tips do not have to be paid a full share of the minimum wage. Currently, they must receive at least half, or $3.63 per hour.

For many seasonal employees in the Ocean City area, however, this is an almost negligible income given the volume of tips received at bars and eateries during the summer months.

But if the minimum wage is raised to $10, and the minimum portion for tipped workers to 70 percent, this almost doubles the rate to $7 per hour.

“It could certainly have a devastating effect on small businesses,” said Ocean City Hotel, Motel, and Restaurant Association Executive Director Susan Jones. “There have been so many extra regulations and fees in past years.”

According to many business owners, the wage hike could actually have the opposite of its intended effect, at least for seasonal restaurants. Additional pay would be given to those who do not rely on it, such as seasonal wait staff, most of whom are students who do not live off their summer earnings per se. Conversely, this burden would force employers to either cut staff or cut pay to non-tipped employees, such as kitchen or management staff, more of whom are long-term employees who may rely on that income for their families.

“It could cause restaurants to limit staff or to cut jobs,” Jones said. “A lot of our places already do pay more than minimum wage [to non-tipped staff].”

Next week, the Maryland Tourism Council and the Maryland Association of Destination Marketing Organizations will hold their annual “Tourism Day” of lobbying Annapolis. With a significant contingent from Ocean City in attendance, Jones said the minimum wage issue is likely to come up.

“Traditionally, our focus for Tourism Day has been state funding for tourism initiatives,” said MTC President David Reel. “I don’t know yet if that issue [the wage increase] will be on our agenda specifically when we go down … but it’s certainly on our radar screen.”

Similar legislation was filed in 2011, Reel noted, but the bill did not make it out of committee hearings, due to its divisiveness and relatively low political priority.

“We try to focus on legislation that is moving or about to move,” Reel said. “If a bill has been introduced and considered in committee, then we probably need to jump in.”

Progress on other hot-topic legislation, such as gun control and the elimination of the death penalty, is likely to take precedence over lower-profile issues.

“I think the sponsors of the bill will have to evaluate, based on the reaction from various constituencies, whether or not to actually press forward in committee,” Reel said.


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