In a misguided effort to reduce unemployment, cities around the country are legislating local hiring mandates. Baltimore's city council recently passed a law mandating that companies awarded city contracts of $300,000 or more, or any project that receives at least $5 million in city funding, must ensure that at least 51% of the new hires required to fulfill the contract are Baltimore city residents. This law creates a costly hurdle for businesses to leap and will likely have no effect on the city's 10% unemployment rate.
Since the bill specifically targets the new hiring necessary to fulfill a contract, it discourages companies from taking on new workers. Contractors will be incentivized to get the work done with their existing workforce rather than jump through the local hiring hoops created by the bill. This will have the opposite effect of what the council intended and will harm residents. Consider the case of hiring two workers for a project: under the new law both would have to be local since 1 out of 2 does not meet the 51% threshold. Marginal increases in a contractor's workforce such as this will be especially difficult since there is no flexibility. A contractor may decide it is better to simply pay overtime to their existing employees rather than engage in a costly search of local workers capable of doing the job.
And let's not forget about non-city workers. Baltimore's superficial attempt to lower the city unemployment rate directly deprives non-Baltimore residents of jobs. Discriminating against workers based on their address is neither a fair nor an efficient hiring practice.
Even worse for Baltimore taxpayers, complying with the bill will be costly for contractors and much of this cost will likely be passed on to taxpayers in the form of higher bids. Searching for the skilled workers needed for many of the construction jobs in a shrunken labor pool decreases the chance of finding the best worker for the job. This means lower quality work for the residents of Baltimore at a higher cost, since the workers hired may need costly training or be error prone if required to learn on the job.
Passed in June, the bill will not take effect until November in order to give the mayor's office time to prepare for enforcement. This gives the business community time to challenge the bill in court, where other similar bills have been struck down. The Baltimore city council approves approximately 10 contracts every week that total $300,000 or more. That is a lot of contracts that will be impacted if the local hiring bill goes into effect.
Forcing contractors to hire six local workers for every 10 new employees is a costly regulation that will not ease Baltimore's employment problem. The arbitrary cutoff of 51% puts contractors in a difficult situation, especially when hiring at the margin. This bill will lead to less hiring of local workers and higher costs for taxpayers while unfairly discriminating against non-city workers. If the city council cares about their constituents they will scrap this bill, which is nothing but window dressing, and instead take steps to create a better overall business environment in Baltimore.