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Legislative Memo

Tom Minnick
Director, Center for Human Resources
T 518.465.7517 x210
www.bcnys.org

BILL:

A.38-A (Wright)

  Support

SUBJECT:

Increase State Minimum Wage

 

A.38-A (Wright)

DATE:

February 14, 2013

 

This bill would increase the state minimum wage to $9.00/hr. on January 1, 2014 and automatically increase it each year by indexing it to the consumer price index. The Business Council opposes its enactment.

Significant increases in payroll, benefit and insurance costs

Category
/Additional Cost

Current Annual Costs at $7.25/hr.

1/1/14 @      $9.00/hr.
24.1% increase

New Annual Cost on 1/1/14

New Cost 1/1/15  w/ 3% indexing

New Cost  1/1/16  w/ 3% indexing

Direct payroll cost

$15,080 yr.

$3634

$18,714

$19,275

$19,853

Social security

$934

$226

$1,160

$1,195

$1,230

Medicare

$218

$53

$271

$279

$287

Workers’Comp.

$622

$150

$772

$796

$819

Total

$16,854

$4,063

$20,917

$21,545

$22,189

Together, these generate an additional cost of $4063 or 24.1% per employee the very first year. The chart also shows that indexing will push costs up continually every year thereafter.

Employers paying the current minimum wage to full time employees will face additional costs of over $4,000 per employee the first year if this minimum wage bill becomes law, without any increases in productivity to offset it.

For employers who currently pay the current minimum wage of $7.25/hr., this bill involves a direct increase in wage costs of $4,063 or 24.1% on January 1, 2014. In addition, Social Security taxes (6.2% of wages) will rise a corresponding 24.1% or $226, as will Medicare taxes (1.45% of wages) of $53 because both are directly applied to the wages of the employee.

Likewise, Workers' Compensation premiums will directly reflect the 24.1% wage increase required by this bill. For example, a retail department store employee classification carries a premium of $4.13 per $100 of payroll per year. At the current minimum wage of $7.25/hr., the annual workers' compensation premium is $622 while at a minimum wage of $9.00/hr., the annual premium would rise to $772, an increase of $150.

Reduction in entry level training opportunities

A predictable response to these increased costs generated by the mandated minimum wage increase 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.

The bottom line

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 7,031 poor 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.

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