At a time when most areas of New York State 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 Executive Budget’s proposal to raise the minimum wage to $10.50 per hour, and $11.50 per hour for New York City employers, is well-intentioned legislation with unintended, adverse impacts. The Business Council opposes this proposal.
As shown in the chart below, this proposal would result in a nearly $4,100 per year labor cost increase, on a full time equivalent (FTE) basis, and nearly a $6,400 per year cost increase in New York City. These figures include the direct payroll costs resulting from a 20 and 31 percent, respectively, increase in the hourly minimum wage, plus the resultant, automatic increases in federal social security (6.2%) and Medicare (1.45%) taxes, and increased costs of mandated state-level and workers’ compensation coverage.
(federal minimum wage)
(current NYS minimum wage)
(NYS minimum wage as of 12/31/15)
proposed NYS minimum wage
proposed NYC minimum wage
|Increase (versus current NYS Law)||$582||$4,069||$6,396|
The state’s minimum wage is currently 21 percent above the federal minimum wage, and under current law is schedule to go to $9 per hour at the end of 2015 for a total increase of almost 25 percent. This will leave New York with a state-level minimum wage that is higher than that in all but four other states. The Executive Budget proposes another 20 percent increase (over current law) by the end of 2016, and a more than 30 percent increase for New York City employers over the same time frame. This statutory change would also trigger another $1 per hour increase in the cash wage component of the minimum wage for tipped workers as well.
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.
The Business Council believes that the state’s long-term future requires improvements in the state’s overall economic competitiveness. An new costs on employers, including new or increased wage mandates is contrary to that objective.
For these reasons, The Business Council opposes the Executive Budget’s proposed minimum wage increase.