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Legislative Memo

518.465.7511

BILL:

A.9710 (John)

Support

SUBJECT:

Minimum Wage

 

DATE:

February 27, 2004

 

This bill would increase the state minimum wage to $6.00/hr. on October 1, 2004, $6.75/hr. on July 1, 2005 and $7.10/hr. on January 1, 2006. It would also give unions new authority to interfere in the internal relationship between employers and their non-union employees plus increase the minimum wage for tip food service workers.

The Business Council opposes its enactment.

Let it follow the federal minimum wage

In 2000, the state minimum wage became linked to the federal minimum wage. Let the state minimum wage now follow the federal minimum wage as the Legislature intended in 2000.

Significant costs beyond wages

For employers who currently pay a wage between the current minimum wage of $5.15/hr. and $7.10/hr., this bill involves significantly more than just up to a 38% increase of up to $1.95¢/hr. Additional costs will be generated through payroll tax systems and insurance coverages.

Social Security taxes - A 38% increase in the minimum wage brings a corresponding 38% increase in both employer and employee social security taxes paid. Specifically, a total additional 12.1¢/hr. increase in the social security taxes paid by both the employer and employee as a result of this bill.

Medicare taxes - A 38% increase in the minimum wage brings a corresponding 38% increase in both employer and employee medicare taxes paid. Specifically, a total additional 2.7¢/hr. in the medicare taxes paid by both the employer and employee as a result of this bill.

Workers' Compensation costs - A 38% increase in the minimum wage brings a corresponding 38% increase in workers' compensation costs 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 $259.23 while at a minimum wage of $7.10/hr., the annual premium would be $357.38.

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 increase of 38% in UI taxes.

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 mandated 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.

Reduction in entry level training opportunities
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.

As you raise the cost of creating and maintaining entry level and low skill jobs, you are reducing the incentive to create and maintain them.

Interference in Employer/Employee Relations

Employees and certified collective bargaining agents already have the right to file complaints with the commissioner under section 196-a of the labor law. This bill gives unions legislative authority to interfere in the internal relationships of an employer and its non-union employees under the label of an “employee advocate”. If unions wish to represent non-union employees in wage matters such as these, let them take the time and make the effort to mount an organizing campaign as currently permitted under federal law. When and if they become the certified collective bargaining agent of these employees, they may then use the current provisions of the law.

This bill is not just about a $1.95/hr. increase in direct wage payments. It involves a 38% increase in Social Security & Medicare taxes and Workers' Compensation costs plus Unemployment Insurance tax and Commercial Insurance hikes. It also puts the Legislature in the position of giving unions a free representation role in non-union workplaces, a role the union did not earn. We urge the Legislature to take these 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 by the Assembly.