Raising the state’s minimum wage would put more money into low-income workers’ pockets, but would the cost to businesses be too great?
That’s among the questions being debated as a push to raise the minimum wage in New York gains steam.
Michael Durant, director of the state chapter of the National Federation of Independent Business, said increasing the minimum wage would force employers to cut jobs and increase prices.
“Some of our members will be unable to continue hiring high school kids and seasonal workers,” Durant said. “Entry-level workers will be shut out of jobs. This is a job-killing measure.”
But James Parrott, an economist with the Fiscal Policy Institute in Latham, disagreed. He said raising the minimum wage would be beneficial to the economy because it would boost spending and create jobs and “will help improve the living standards of workers below or near the poverty line.”
He said 18 other states have raised the minimum wage beyond the federal level and New York should do so, too.
A proposal from Assembly Speaker Sheldon Silver and Assemblyman Keith Wright would raise the state minimum wage to $8.50 an hour, a 17 percent increase, and index it to inflation beginning in 2014. The legislation would also set wages for food service workers who receive tips at $5.86 an hour.
New York’s minimum wage was last increased in 2009, when the federal minimum wage was raised to $7.25 an hour. Prior to that, the state’s minimum wage was $7.15 an hour.
States can set their minimum wages higher than the federal minimum. The state with the highest minimum wage is Washington, which requires employers to pay at least $9.04 an hour.
Lucy Dadayan, a senior policy analyst at the Rockefeller Institute of Government at the University at Albany, said experts have conflicting views on the impact on small businesses, from expecting no impact to fearing job cuts.
“In general, raising minimum wage means more money in people’s pockets, which leads to more spending and more economic activity,” Dadayan said.
Overall, workers' wages have not kept up with inflation, Dadayan said. Between 2001 and 2010, the average annual pay in real value increased by 7 percent in the U.S., while inflation for the same period was 22 percent, she said.
“Those in opposition to raising minimum wages might have a valid argument,” she said. “But on the other side of the spectrum is the harsh reality that today people in general have less money in their pockets compared to 10 years ago and have to deal with the rising costs of living.
“Raising minimum wages can be a double-edged sword: It might have favorable consequences for some individuals and unfavorable consequences for some small businesses.”
The Fiscal Policy Institute estimates raising the state’s minimum wage to $8.50 an hour would benefit about 1 million workers — slightly more than 11 percent of all New York workers.
“This number is much greater than the number of workers now paid right at the state and federal minimum wage of $7.25,” an FPI report notes.
“It includes a total of 880,000 workers who earned below $8.50 an hour as of 2011, and an estimated 120,000 workers who earn slightly above $8.50 an hour who likely would see a wage increase as employers seek to maintain relative wage patterns among their employees.”
The report adds, “Women, blacks and Hispanics would be among the main beneficiaries of a higher minimum wage, since they are disproportionately represented in low-wage jobs.”
Parrott said it wouldn’t make any sense for employers to cut workers as a result of raising the minimum wage because it would make them less capable of supplying the market with goods and services.
“It would put them at competitive peril and reduce the scale of their business,” he said.
However, a recent paper, slated for publication in the forthcoming edition of the Industrial and Labor Relations Review, examined the impact of minimum wage increases, using data from New York, specifically looking at the increase in the minimum wage that occurred from 2004 to 2006.
According to the paper, this increase, from $5.15 to $6.75 an hour, resulted in a 20.2 to 21.8 percent reduction in employment of younger, less-educated people, particularly those between the ages of 16 and 24.
Business groups have pointed to this study, which was authored by professors at San Diego State University, Cornell University and the University of Oregon, to bolster their arguments against raising the minimum wage.
Matt Nelligan, a spokesman for the New York Farm Bureau, said that for the state’s farmers, raising the minimum wage amounts to “a stealth tax” that will be passed along to consumers in the form of higher prices on food and milk. Another consequence will be a decline in farm jobs, which he described as counterproductive, given the high unemployment rate and fragile economy.
“The best way to help working people is to keep them working,” Nelligan said.
Business groups said they supported helping workers by enhancing the state’s earned income tax credit, a refundable tax credit that primarily benefits low-income earners with children.
But Parrott said the earned income tax credit was never intended to be a substitute for raising the minimum wage.
“It was always envisioned as a complementary policy,” he said. “They go hand in hand. I would never argue against an EITC increase, but you also need to raise the minimum wage.”
Mike Saccocio, executive director of the City Mission of Schenectady, said many of the mission’s clients find themselves in entry-level jobs that pay minimum wage.
“I work with folks who are in poverty,” Saccocio said. “I always want them to be making more money.”
Even more importantly, though, he said, is that jobs provide opportunities to move up out of minimum-wage positions.
“Some minimum-wage jobs have upward mobility,” he said. “But if someone is going to be working minimum wage forever, that’s not a livable wage. I’ve sat with folks who are working and trying and the numbers don’t add up.”
For these people, he concluded, “life is a constant choice between what you pay for and what you don’t.”
Saccocio said local businesses often tell him workers who are reliable and hard-working are likely to receive raises.
The City Mission has a few minimum-wage workers, mainly in the thrift store. But most positions, such as those in management or food service, pay a bit more, Saccocio said.
“If it’s a leadership position, it is going to be higher,” he said. “We decide on a case-by-case basis, depending on what work is being done. When someone is starting out, minimum wage can be a legitimate starting point.”