Home

Legislative Memo

BILL:

S.7825 (Velella) / A.11805 (Nolan)

Support

SUBJECT:

Minimum Wage

 

DATE:

June 28, 2002

 

The Business Council of New York State, whose membership includes almost 4,000 member firms as well as hundreds of chambers of commerce and professional trade associations, has reviewed the above mentioned legislation and opposes its enactment.

This bill would increase the state minimum wage to $6.00/hr. on January 1, 2003 and $6.75/hr. on January 1, 2004, and compel the Commissioner of Labor to conduct an investigation of the adequacy of wages no later than March 31, 2004.

For employers who currently pay a wage between the current minimum wage of $5.15/hr. and the proposed levels of $6.00 and $6.75/hr., this bill involves significantly more than just an 85¢ followed by a 75¢/hr. increase. Additional costs will be generated through our payroll tax system and insurance coverage.

Social Security taxes- A 16.5% increase followed by a 12.5% increase in the minimum wage brings a corresponding 16.5% and 12.5% increase in both employer and employee social security taxes paid. Specifically, an additional 5.3¢/hr. for the first increase followed by an additional 4.6¢/hr. for the second increase for a 9.9¢/hr. total increase in the social security taxes paid over the two years specified in this bill.

Medicare taxes- A 16.5% increase followed by a 12.5% increase in the minimum wage brings a corresponding 16.5% and 12.5% increase in both employer and employee Medicare taxes paid. Specifically, an additional 1.2¢/hr. for the first increase followed by an additional 1.1¢/hr. for the second increase for a 2.3¢/hr. total increase in the Medicare taxes paid over the two years specified in this bill.

Workers' Compensation costs- A 31% increase in the minimum wage over two years brings a corresponding 31% increase in workers' compensation costs over the same period for a minimum wage worker. For example, a "clerk" classification carries a premium of $2.42 per $100 of payroll per year. At the current minimum wage of $5.15/hr., the annual workers' compensation premium is $258.94 while at a minimum wage of $6.75/hr., the annual premium would be $338.80.

Unemployment Insurance taxes- Employers pay UI taxes on the first $8500 of earnings. For employers with significant numbers of minimum wage part time workers who only earn a few thousand dollars per year, the UI tax increases required by this bill will mirror the bill's increases of 31% over two years.

Commercial Insurance costs-Certain commercial insurance coverages such as General Liability are based on an organization's revenue. For firms affected by this minimum wage increase, one of the few responses available is to pass along the minimum wage increase to its customers through higher prices. This, in turn, increases the firm's revenue which in turn increases the General Liability insurance rates that it pays.

The other response to increased costs generated by mandated minimum wage increases is to reduce the number of current and future minimum wage jobs that the business supports. This, in turn, reduces the current and future number of entry level and training opportunities for those with the least skill and experience, whom the proponents of a higher minimum wage purport to help.

This bill is not just about an 85¢/hr. followed by a 75¢/hr. increase in direct wage payments. It involves a 31% increase over two years in Social Security & Medicare taxes and Workers' Compensation costs plus Unemployment Insurance tax and Commercial Insurance hikes. We urge the Legislature to take this into consideration when reviewing this bill... and reject it.

For these reasons, The Business Council strongly opposes this legislation and respectfully urges that it not be enacted.