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June 8, 2000

Council urges members to voice opposition to minimum-wage bill

The Business Council is urging the state Legislature to reject proposals for a huge increase in the state's minimum wage.

The Council is also urging its members to contact lawmakers and convey the same message. Members of The Council's Small Business Committee and its Labor and Human Resource Committee have already been asked to call or write state lawmakers to voice opposition to the proposals.

The Business Council has long maintained that the minimum wage should be established in Washington, said Business Council President Daniel B. Walsh.

"A state minimum wage that is higher than the federal minimum wage will put New York State employers at a competitive disadvantage, especially smaller businesses," Walsh said.

"There's no question that higher wages would be reflected in the costs of goods and services produced here, and if employers in other states don't have to pay those wages, they would have a potentially significant advantage."

The current state minimum wage is $5.15 per hour. Early this week, the Senate and the Assembly were considering separate bills that would increase the minimum wage by 31 percent to $6.75 per hour.

These bills also include a provision to automatically increase the minimum wage by an amount identical to any increase in the state's average weekly wage.

In a memorandum of opposition to the bill, The Council noted that most minimum-wage workers move beyond that wage within the first year of employment.

Moreover, a 31 percent increase would subject employers to "wage compression"—i.e., pressure on employers to increase wages for other workers at other wages "with no corresponding increase in productivity or business income."

The memo noted that the state's earned income tax credit (EITC) is "a better means of assisting low and moderate income employees who are head of households." This tax credit, which is targeted at the working poor, was increased recently by New York—with strong support from The Business Council.

Despite New York's current strong economy, a higher minimum wage would reduce the number of low-skill, entry-level jobs and provide a disincentive for future creation of such jobs, "further removing opportunities for unskilled teens and low skilled entry level employees to get their first chances at meaningful employment," the memo noted.

The memo also argued that a law requiring employers to pick up an additional $3,000 in per-employee wage costs will force many employers to reduce optional benefits such as health insurance. "Such a tradeoff will leave an employee worse off since these benefits are not taxable," the memo noted.

Most minimum-wage employees are part-time workers who are not seeking full-time jobs, and thus are not "stuck" at that wage, the memo noted.

It cited data from the Employment Policies Institute showing that nearly two-thirds (62.5 percent) of minimum-wage workers move above the minimum wage within one year of working at the starting wage.

"The typical wage increase after one year was 8.06 percent for employees with less than a high school education, 11.76 percent for high school grads and 14.47 percent for those with some college," the memo said. It noted that the median annual wage growth for minimum wage workers is three to four times higher (10.1 percent) than the average wage growth for all employees.