Over the 3 day Martin Luther King holiday, on Sunday Jan 18, 2015, Gov. Andrew Cuomo announced the next step in his plan to make New York State the “progressive capital” of the nation. While the news was muted, both by the timing and the release of the topics for President Obama’s State of the Union Address, it nonetheless caught the attention of many New Yorkers. The proposed action is an increase of the minimum wage to $10.50 for those in Upstate NY, and $11.50 for New York City.
The hot button issue of minimum wage has been actively on the tongues of Democrat and Liberal politicians since Sen. Elizabeth Warren first made the rally cry for a national minimum wage of $22. Since that time it has been a popular issue to refer to whenever the economy is addressed, or social justice is cited. Not as well celebrated across the nation was the news that the Democrat controlled NY Assembly proposed an increase in the minimum wage in 2012.
Part of the reason that Gov. Cuomo has taken action is the political turmoil created by New York City Mayor DeBlasio. The Mayor suggested in 2014 that the minimum wage in the city be increased even more than that of the State. At the time Gov. Cuomo rejected the idea. But in a new year, Gov. Cuomo now has reversed his position, somewhat, stating that the State should set the price while conceding that New York City has a cost of living in excess of the rest of the State.
Still there is great debate, in New York and across the nation, as to the impact of increases of the minimum wage. Beyond the feel good sound of the increase, the real world effect of such an increase is still not clearly understood. What is known is that some 2%-5% of workers are paid minimum wage. Over 88% of those on minimum wage are over the age of 20. Minorities and women are key figures affected by the minimum wage.
What is not known is affect on these individuals, and is the subject of intense research. According to a CBO study on the impact of a raise of minimum wage to $10.10 across the nation, a range of between almost no impact to a loss of 1 million jobs. Research by Politifact on the subject determined that there is no clear answer as results from national minimum wage increases since 1978 show equally employment growth and reduction. Yet, in a study of the impact to job growth (as opposed to employment levels in other studies) from raising the wage, Johnathan Meer and Jeremy West of Texas A&M found,
” Our findings are consistent across all three data sets, indicating that job growth declines significantly in response to increases in the minimum wage. However, we do not find a corresponding reduction in the level of employment, particularly in specifications that include state-specific time trends.”
And then there is the impact of the minimum wage on poverty. It is ultimately the driving argument to increase the wage. According to David Neumark, of University of California,
“Most studies of the effects of the minimum wage on the income distribution in the United States suggest that a higher minimum wage does little to reduce poverty… some low-skilled workers lose their jobs and others fail to find work because of the higher wage floor.”
Perhaps most pertinent to New York and the proposal by Gov. Cuomo were the thoughts of James Schrager of the University of Chicago Booth School of Business,
“It depends on your definition of ‘small business.’ If it is a neighborhood restaurant or hardware store, then yes, it could have quite an impact. But if your small business is a technology startup, then probably less so as you are not likely to employ as many entry-level employees.”
In much the same way that researchers and industry leaders are without definitive agreement, the consensus of politicians across the Southern Tier of NY are similarly mixed. We sought out the responses from several elected officials. We reached out to Assemblywoman Donna Lupardo, Assemblywoman Claudia Tenney, State Senator Tom Libous, and Binghamton Mayor Rich David (who did not respond), asking each of them the same 2 questions:
- We are seeking an official response about Gov. Cuomo’s proposal to increase the minimum wage in NY State and NYC
- We would ask what is your expectation of the impact on the Southern Tier
From the office of Senator Libous, a more cautious tone was called for. The response mirrors in some ways the research from Politifact. It also highlights the concern noted by Gov. Cuomo in 2014 about the potential for competing minimum wages from city to city within the State.
“In the past, I’ve supported raising New York’s minimum wage in stages – but we must be sensitive to the impact drastic minimum wage increases can have on small business owners,” said Senator Tom Libous. “Overall, minimum wage should be handled at the federal level, to prevent states from competing against each other.”
From the office of Assemblywoman Lupardo, a more enthusiastic response. Assemblywoman Lupardo is more aligned with Senator Warren in a hopeful outlook that constituents will be better enabled by the change.
“I support the Governor’s proposal to increase the minimum wage,” said Assemblywoman Donna Lupardo (D-Endwell) “Studies show that low-wage workers are more likely than any other income group to spend extra earnings immediately on basic needs and services that they could previously not afford. This type of increased activity would certainly be beneficial to the Southern Tier.”
From the office of Assemblywoman Tenney, a more small business focused response was provided. Assemblywoman Tenney sees an outcome that matches the data found in the Meer-West research on overall job growth, and like State Senator Libous is concerned about small business owners.
“Why is the Government intervening in what should be a competitive free market. It causes inflation and hurts small business. As an example there is the small independent coffee shop trying to compete with Dunkin Donuts. Smaller independent companies cannot absorb the change like giant chains.”
Ultimately, the result of an increase in the minimum wage within a year, if Gov. Cuomo is able to get his proposal passed, is unclear. A small portion of New Yorkers will be paid more. Some people will be without work as companies try to comply or leave the State. Costs for goods may increase effectively eliminating any gains made by those receiving the minimum wage and negatively impacting others, keeping New York at the 2nd worst real minimum wage in the nation . Most companies will endure, and the majority of New Yorkers will see no difference in their paychecks. A real fear will be how many companies will exit the least business friendly State once minimum wage increases, and as a result how many New Yorkers will leave to get jobs – at whatever pay scale – that are no longer available here.