Home

Legislative Memo

Frank Kerbein
Director, Center for Human Resources
T 518.465.7517 x210
www.bcnys.org

BILL:

S.6335-A (Espaillat)

Support

SUBJECT:

Increase State Minimum Wage

 

DATE:

April 20, 2012

 

This bill would increase the state minimum wage to $8.50/hr. on January 1, 2013, to $9.25/hr. on January 1, 2014 and automatically increase it each year thereafter by indexing it to the consumer price index. The Business Council opposes its enactment.

Considering payroll costs and increased costs for social security, medicare and workers’ compensation, the initial jump would generate a 17.2% increase while the second would result in an 8.8% increase. Thereafter, the indexing component would then push costs up continually every year thereafter.

Reduction in entry level training opportunities

A predictable response to these increased costs generated by the mandated minimum wage increases is to reduce the number of current and future minimum wage jobs that a 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, those whom the proponents of a higher minimum wage purport to help.

The bottom line – lost jobs

From the October 2008 Cornell/American University minimum wage study authored by Richard Burkhauser from Cornell and Joseph Sabia from American University, “The Effects of Minimum Wage Increases in New York State: Evidence from a Natural Experiment,” came conclusions that by raising the minimum wage from $5.15 to $6.75 (this occurred from 1/1/05 to 12/31/06), employment of less educated 16 to 29 year olds fell by 12.2%. In addition, the report projected that raising the minimum wage from $7.15 to $8.25 would result in the loss of 28,990 jobs including those of 7,031 low income workers.

Businesses in New York State cannot create new jobs and maintain existing jobs, particularly entry level and lesser skilled positions, if the cost of creating and maintaining them continues to rise due to state and federal mandates such as increases in minimum wage.

The Business Council believes that the way to improve our state's economy and the lives of all New Yorkers is to create more private-sector jobs. Raising the minimum wage would only hurt New York's tourism industry, small businesses, farms and not-for-profits that are struggling to make their current payrolls, and reduce job opportunities, in this difficult economy.

Another way

There‘s another and better way to target wage benefits to low-income families. 

With the combined federal and state earned income tax credit (EITC), the “effective” minimum wage in New York is already more than $9 per hour, and somewhat higher in New York City, which has its own city-level EITC as well. As the EITC benefits low-income families — not minimum wage workers in higher-income families — it is a more efficient tool to provide wage support. In 2009, the EITC returned nearly $1 billion to low-income families in New York. The state should consider enhancing the EITC by increasing the rate and/or folding the current state “household credit” into the EITC, providing both an enhanced benefit and simplified application and administration process. 

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