Firm admits mistakes in minimum wage study Featured

MoCo LogoThe County-hired consulting firm that conducted a study on raising the minimum wage in Montgomery County said it made a mistake when calculating the results.

“Obviously we take full responsibility for the error in our study,” said Dean Kaplan, managing director of PFM Consulting, the Philadelphia-based firm that conducted the study.

Back when PFM Consulting originally published its study, for which the County paid $149, 600, Leggett said the numbers were sobering. He said the projected job loss results were significant for the County, adding that even half the projected number would be a lot.

“The numbers are so staggering that if you were to still cut it in half, you still have a pretty substantial number,” Leggett said after the study was first released.

Now according to Kaplan the newly projected job loss numbers will be approximately half of the original 47,000 jobs projected to be lost by 2020, if the County raised minimum wage to $15 an hour.

Kaplan said the firm is conducting a “comprehensive review” after a “human error” was discovered in the calculation of the study. The firm will publish an updated version of the study between the end of this week and next week. The firm is scheduled to appear before the County Council Sept. 12.

Kaplan said after PFM finishes its comprehensive review he expects the 47, 000 job loss number should be less, possibly cut in half. Kaplan said the mistake came when the firm chose the wrong number -- a number from an elasticity measurement-- instead of correctly choosing from expectation of loss in employment when calculating its employment projections.

“We merely picked the wrong number… that number is higher than it should have been,” Kaplan said.

The news of the comprehensive review became public after Leggett wrote a letter to Randall Bauer, the director of PFM, saying he received “word” from the firm that there might be a problem with the calculation of the fiscal impact and the projected impact on jobs that would result.

“You have indicated that the job losses might be less than what is expressed in the report,” Leggett wrote in the letter dated Aug. 15.

He then requested a review of the study.

When he found out about the error, Leggett called the study flawed, saying there is no way to do an empirical study that could predict the impact increasing the minimum wage.

“Any study, even if flawed, is better than no study,” Leggett said.

Council member Marc Elrich (D-at large) was among the council members who criticized the way the firm conducted the study, even before news of the error surfaced.

“This study is dishonest...there is nothing they can explain,” said Council member Marc Elrich (D-at large), who sponsored both bills to increase the County’s minimum wage to $15 per hour by 2020.

The study’s methodology involved collected surveys from businesses and non-profits in the County asking them how increasing the minimum wage would affect their business or organization.

Erich said the surveys that PFM passed around to businesses and non-profits were biased, because businesses owners generally do not support increasing the minimum wage.

“It would be like me going to ask all the poor people if they like minimum wage to be increased,” Elrich said.

The County Council originally approved the study after Leggett vetoed a bill that would have increased the County’s minimum wage to $15 per hour by 2020. Leggett and the four council members who voted against increasing the minimum wage asked for an economic impact study for the County. They said they could be convinced to increase the minimum wage only after seeing an economic impact study.

After the County released the study, many of the Council members who supported the minimum wage were critical of the firm’s methodology in the study.

After the error, Kaplan defended the study and its methodologically saying the interviews and survey that PFM used to calculate it results were reliable data and there was no perfect data the firm could use to do the study.



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