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The Business Council opposes this legislation that, by 2019, would increase the minimum wage to $15 per hour in New York City and Westchester and Nassau counties and to $12.60 per hour elsewhere in New York State. It would also increase the minimum cash wage payment for tip-earning food service workers to $12.50 downstate and $10.50 elsewhere.
This is well-intentioned legislation with unintended, adverse impacts.
Compared to the state’s current minimum wage of $8.75 per hour (by existing statute, it will increase to $9 per hour on 12/31/15), these proposed wage mandates will increase total payroll costs by $14,531 in New York City and Westchester and Nassau Counties, and $8,951 per year elsewhere, for a full time position. These cost figures include direct wage costs as well as automatic increases wage-based payroll expenses including social security, Medicare and workers’ compensation.
At a time when most areas of New York State continue struggle to recover jobs lost in the 2009 recession, the last thing the state’s economy needs is a significant increase in mandatory labor costs. But that is what a minimum wage hike is – an employer cost mandate, that will result in increased prices, reduced profitability, or reduced spending on labor or other business needs.
The aggregate cost impact is significant. The Governor’s Executive Budget proposal of $11.50 in New York City and $10.50 in upstate was projected to add $3.4 billion in aggregate labor costs; the current Assembly proposal would be considerably more costly.
When the state’s minimum wage increases to $9 per hour at the end of 2015, it will be 25 percent above the federal minimum wage, and higher than all but four other states. The highest state-level minimum wage is in Washington, at $9.47
For a small business with a handful of employees, these costs add up fast, especially with the economy producing little in the way of new sales. To accommodate these increased costs, business have limited choices: increased prices, divert resources from other purposes, attempt to become even more “efficient,” or purchase less labor, meaning either a reduction in hours or elimination of jobs for some workers.
As for low-wage employees, a recent study by Cornell and American University shows this bill would hurt the very people who the proposal is intended to protect. It found that the after the state’s 2005 minimum wage hike (from $5.15 to $6.75), in-state employment of low-skilled workers between 16 and 29 years of age fell by 12.2 percent. At the time, it also estimated that a minimum wage increase of $7.15 to $8.25 an hour would result in the loss of nearly 29,000 jobs in New York. A recent report by the U.S. Chamber of Commerce also indicates a negative relationship between minimum wages and employment, showing secondary impacts, such as a reduction in the amount of training provided to low-income employees, which would result from increasing the minimum pay rate.
Finally, the minimum wage is also an inefficient anti-poverty tool. In February 2014, the Congressional Budget office issued a report showing that less than 20 percent of the benefits of a federal minimum wage increase goes to households with income below the federal poverty threshold, while 30 percent goes to households with income three times the poverty level and higher, with the largest share going to middle and upper middle class families.
The Business Council believes that the state’s long-term future requires improvements in the state’s overall economic competitiveness. Any new costs on employers, including new or increased wage mandates is contrary to that objective.
For these reasons, The Business Council opposes the proposed minimum wage increase.