Download Minimum Wage Increase

Speaker Sheldon Silver
An Introduction
It’s time to raise New York’s minimum wage. This report details why it needs to be increased and
how such an increase will improve our economy. By reading deeper into this issue, you will see
how increasing the minimum wage is good for working families and good for our local businesses.
This report details the Assembly Majority’s belief that no full-time worker should live in poverty.
At $7.25 an hour, a full-time minimum wage earner makes just over $15,000 a year. Nobody can
raise a family on that. It is so low, most families dependent on minimum wage salaries are eligible
for subsidies and public assistance programs. By providing low-wage workers with a little extra
money, we will immediately boost consumer spending and help local businesses grow. And with
the corporate profits of low-wage employers experiencing record growth, now is the right time
to raise the minimum wage. Please visit the Assembly Majority’s Raise the Wage NY website at
http://assembly.state.ny.us/raisethewageny/.
Minimum Wage Increase: Now Is the Time
IN 1960, the New York State Legislature enacted the Minimum Wage Act to institute a state
statutory minimum wage law1 and established that employment of New Yorkers at insufficient
rates of pay threatens their health and well-being and injures the overall economy. At its inception,
the statutory minimum wage in New York State matched the $1.00 per hour standard provided
for under the Fair Labor Standards Act (FLSA), enacted by Congress in 1938, to ensure that
workers were compensated for their labor with a wage that afforded them a basic standard of living
sufficient to protect their health and safety. In keeping with this basic principle of adequate wages,
it has been widely acknowledged and statistically proven that periodic increases to the minimum
wage have not been sufficient to protect against the erosive nature of inflation. On several
occasions since it was first established, the New York State Assembly has championed proposals
to increase the state’s minimum wage above the federal level resulting in New York having a
higher standard from 1967-682, 1970-743, and 2005-07.4 Once again, in 2013, the New York State
Assembly recognized5 that the well-being of low-wage workers and their families were at risk.
1
2
3
4
5
1960, c.619 (New York had previously adopted minimum wage standards through a wage board procedure. See L.1933, c.584, L.1937, c.276, L.1944, c.705, L.1944, c.792. The
legislation adopted in 1960 set a statutory minimum wage.
See L. 1966, c.649
See L. 1970, c.282
See L. 2004, c.747
New York State Assembly, 2013. A.38-A http://www.assembly.state.ny.us/leg/?bn=A09148&term=2011
1
The most recent increase to the New York statute occurred in 2004
when the law was amended to provide for a graduated increase
from $6.00 to $7.15 per hour over the course of three years. In
2009, one year after the last of the scheduled increases went into
effect, the federal minimum wage increased to $7.25 per hour which
triggered an automatic increase for New York workers, as the higher
of the two values prevails.
Since then, the minimum wage in New York State has remained
stagnant at $7.25 per hour. At this rate, a full-time worker in 2013 is
earning just over $15,000 per year. This salary is so low, that most
full-time workers supporting a family on the minimum wage are
eligible for Medicaid, Supplemental Nutrition Assistance Program
(SNAP), the Home Energy Assistance Program (HEAP), child care
subsidies and other taxpayer-funded public assistance programs.
In 2012, more than 70 percent of New Yorkers polled responded
that they were supportive of efforts to raise the minimum wage.6
The Assembly Majority introduced and passed legislation (A.9148)
that would have raised the statutory minimum wage from $7.25 to
$8.50 per hour and also raised the minimum cash wage for food
service workers who receive tips from $5.00 to $5.86 per hour. The
measure required both wages to be indexed for inflation to prevent
further erosion of New York minimum wage earners’ purchasing
power. For the 2013 session, with over 80 percent of New Yorkers
supporting an increase,7 the Assembly Majority reintroduced the
minimum wage proposal and amended it to call for a wage floor
of $9.00 an hour and raise the minimum cash wage to $6.21 an
hour, while maintaining the indexing provisions. This amended
proposal would directly benefit the more than 925,000 workers who
are currently earning below $9.00 an hour and also have profound
benefits for local and state economies. The reality of the economic
climate in this state is that the current minimum wage is insufficient
to provide food and shelter let alone access to health care or
retirement security.
6
7
“a full-time worker in
2013 is earning just over
$15,000 per year. This
salary is so low, that
most full-time workers
supporting a family on
the minimum wage are
eligible for Medicaid,
Supplemental Nutrition
Assistance Program
(SNAP), the Home
Energy Assistance
Program (HEAP), child
care subsidies and other
taxpayer-funded public
assistance programs.”
Siena College Research Institute, August 21, 2012
Quinnipac University Polling Institute. January 31, 2013.
Minimum Wage Increase: Now Is the Time
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It is often said by those who oppose increases to the minimum
wage that most low-wage earners are teenagers or unskilled
workers who do not have the work experience that would enable
them to bargain for a higher wage. The abundance of data that has
been collected on the minimum wage and its affected population
show that these assertions are false.
Currently, in New York State, there are approximately 925,700
workers earning less than $9.00 per hour, which accounts for just
over ten percent of the state’s employed population.8 The most
significant evidence against the assumption that most low wage
earners are either teenagers or unskilled is the fact that according to
recently published data, 84 percent of those that would be directly
affected by an increase in the state’s minimum wage are adults; and
further still, 87 percent of those affected work more than 20 hours
per week.9 Nationally, women, African-Americans and Hispanics
are disproportionately represented among low-wage earners, with
women representing about two-thirds of the minimum wage earning
population and sixty-one percent of the full-time minimum wage
earners.10
Opponents of increasing the minimum wage have also argued that
this proposal would have crippling effects on the business climate
and lead to higher rates of unemployment in New York State.
Traditionally, the basis for this position has been the theory that
increased wage costs will reduce demand for labor and therefore,
result in disemployment. This argument represents an oversimplified
view of a complex economic relationship and also fails to take
into account the myriad of factors involved in the determination of
unemployment rates. It assumes that all businesses and employers,
regardless of size or sector, experience the same reaction to
economic conditions. Over the years, labor market research and
academic studies have consistently concluded that there is no
discernible correlation between minimum wage increases and
job loss or business failures.11 In fact, Chart 1 shows that after the
largest increase in the minimum wage in the past decade – 0.85
cents in January 2005 – the unemployment rate went down; and
it went down again after the next increase. It is widely accepted
that other trends, among them: limited sector job availability which
targets specialized skills; changes to the labor force caused
by worker choices relating to educational pursuits, retirement,
“according to recently
published data, 84
percent of those that
would be directly
affected by an increase
in the state’s minimum
wage are adults; and
further still, 87 percent
of those affected
work more than 20
hours per week.9
Nationally, women,
African-Americans
and Hispanics are
disproportionately
represented among
low-wage earners, with
women representing
about two-thirds of
the minimum wage
earning population and
sixty-one percent of the
full-time minimum wage
earners.10”
“after the largest increase
in the minimum wage in
the past decade – 0.85
cents in January 2005 –
the unemployment rate
went down”
Fiscal Policy Institute. “Which workers will benefit, if the New York minimum wage is raised to $8.50 an hour?” February 2012, available at http://fiscalpolicy.org/wp-content/
uploads/2012/04/FPI_NumbersThatCount_BenefitsOfIncreasingTheMinimumWage.pdf
Fiscal Policy Institute and National Employment Law Project. “Raising New York’s Minimum Wage: The Economic Benefits and Demographic Impact of Increasing New York’s
Minimum Wage to $8.75 per Hour.” January 2013, available at http://fiscalpolicy.org/wp-content/uploads/2013/01/Raising-New_york-Min-Wage-FPI-NELP.pdf
10
Bureau of Labor Statistics, Characteristics of Minimum Wage Workers, 2011, available at http://www.bls.gov/cps/minwage2011tbls.htm#1
11
Jared Berstein, Economic Policy Institute, “Minimum Wage and its Effect on Small Business” 2004, available at http://www.epi.org/publication/webfeatures_viewpoints_raising_
minimum_wage_2004/ (citing Jerold Waltman, Allan McBridge, and Nicole Camhout, “Minimum Wage Increases and the Business Failure Rate,” Journal of Economic Issues,
Vol. XXXII, No. 1, March 1998)
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Minimum Wage Increase: Now Is the Time
3
etc.; structural economic changes such as outsourcing and other
production-based business dynamics could lead to changes in the
unemployment rate in some regions or industries. Furthermore, it
is characteristic in a recession for employers to cut back on hiring
and lay off workers in response to overall signs of slow economic
growth. Chart 1 highlights the unpredictable relationship between an
increase in the minimum wage and the rate of unemployment in New
York. The chart also makes clear that there are other forces, such as
recessions, that could dramatically impact unemployment rates.
Chart 1
Note: Data is monthly through November 2012 and is seasonally adjusted.
Shaded areas indicate recessions.
Source: U.S. Department of Labor, Bureau of Labor Statistics; New York State
Department of Labor.
The Case for Indexing
Already, 10 states index their minimum wage to inflation. The
Assembly Majority agrees with this approach because hardworking
families are consistently dealing with a steady rise in the cost of
living. Chart 2 demonstrates that the ever-increasing costs for health
care, higher education, housing, gas, groceries, utility bills or child
care are squeezing the working poor. There is a misconception
among those who object to the inclusion of this critical provision
that indexing will drive the minimum wage so far above the rates of
our neighboring states, that New York will lose its ability to compete
for business. Chart 3 illustrates the changes in the U.S. Consumer
Price Index (CPI), which measures fluctuations in the price level of
consumer goods and services purchased by households, over the
Minimum Wage Increase: Now Is the Time
4
last 22 years. The data shows that positive percent change in the
CPI over the last 10 years has ranged between 1.6 percent and 3.8
percent. Families should be able to rely on a basic increase in their
pay each year to keep pace with rising expenses. For the 10 states
that index, Chart 4 illustrates their statutory minimum wages which,
relative to the federal minimum wage, are comparable to each
other, proving that indexing does not artificially inflate the minimum
wage. Every year without a minimum wage adjustment is a year that
minimum wage workers are robbed of the value of their labor.
Chart 2
U.S. Consumer Price Index by Category Percent Change 2002-2012
169%
Gasoline:
72%
Education:
Household Energy:
49%
Medical Care:
45%
32%
Food at Home:
24%
Housing:
Clothing Apparel :
2%
25%
50%
75%
100%
125%
150%
175%
Source: U.S. Bureau of Labor Statistics.
Minimum Wage Increase: Now Is the Time
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Chart 3
Note: Data for 2012 is estimated.
Source: U.S. Bureau of Labor Statistics; NYS Assembly Ways and Means
Committee
Chart 4
“there have been several
instances where
states whose statutory
minimum wages are not
set above the federal
level experienced high
rates of unemployment.
In fact, some of these
states have even
reported unemployment
rates well above the
national average.”
Source: U.S. Bureau of Labor Statistics; NYS Assembly Ways and Means
Committee
If the claim that enacting a higher minimum wage is bad for
business were true, there would be some evidence of this in the
local and state economic trends of the nineteen other states that
have raised their statutory minimum wages above the FLSA.
However, according to data presented by the Economic Policy
Institute, there have been several instances where states whose
statutory minimum wages are not set above the federal level
experienced high rates of unemployment. In fact, some of these
states have even reported unemployment rates well above the
national average. It is also a fact that states with minimum wages
equal to the federal level are not immune to the business and
economic trends that have an adverse impact on unemployment
rates.12
12
Jeff Chapman, “Employment and the Minimum Wage – Evidence from Recent State Labor Market Trends,” Economic Policy Institute, 2004, available at www. Epi.org/
publication/briefingpapers_bp150/
Minimum Wage Increase: Now Is the Time
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Nineteen States and D.C. with Minimum Wages Above
Federal Level
Alaska
$7.75
Missouri $7.35
Arizona
$7.80
Michigan
$7.40
California
$8.00
Montana
$7.80
Colorado
$7.78
Nevada
$8.25
Connecticut
$8.25
New Mexico
$7.50
D.C.
$8.25
Ohio
$7.85
Florida
$7.79
Oregon
$8.95
Illinois
$8.25
Rhode Island
$7.75
Massachusetts
$8.00
Vermont
$8.60
Maine
$7.50
Washington
$9.19
Consider that the federal government has increased the minimum
wage under the Fair Labor Standards Act 22 times since its
inception in 1938. In 2007, the last time Congress voted to increase
the minimum wage, the proposal called for a $2.10 increase over
three years to bring the federal minimum wage to $7.25 per hour.
During each of the three years of the phase-in the cause of the
fluctuations that were observed in the nation’s unemployment rates
were rightfully attributed to the general reduction in economic
activity that is characteristic of a recession.
“According to data
presented by the
Economic Policy
Institute before the U.S.
House Subcommittee
on Workforce
Empowerment and
Government Programs,
states that had enacted
minimum wages above
the FLSA experienced
higher rates of growth in
companies, job creation
and payroll.12”
There is, however, data to support the theory that raising the
minimum wage is good for business when comparing rates of job
and payroll growth for states that have enacted minimum wages
higher than the federal standard against those which have not.
According to data presented by the Economic Policy Institute before
the U.S. House Subcommittee on Workforce Empowerment and
Government Programs, states that had enacted minimum wages
above the FLSA experienced higher rates of growth in companies,
job creation and payroll.13
In recent years, the Fiscal Policy Institute (FPI) has studied and
issued reports on the impact of a higher minimum wage on the
small business sector and found the same to be true for businesses
13
Jared Berstein, “Minimum Wage and its Effects on Small Business,” Economic Policy Institute, 2004, available at http://www.epi.org/publication/webfeatures_viewpoints_
raising_minimum_wage_2004/
Minimum Wage Increase: Now Is the Time
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with less than 50 employees.14 The following table illustrates growth
trends in establishments, number of employees, and annual payroll
for states with minimum wages at or above the federal standard.15
Growth In Selected Variables
States with
Minimum
Wage above
Federal Rate
States with Federal
Minimum Wage
($5.15))
Number of
Establishments
3.1%
1.6%
Number of
Employees
4.8%
3.3%
Annual Payroll
18.5%
15.4%
Average Payroll
Per Worker
13.0%
11.7%
Source: Jared Berstein, Economic Policy Institute, “Minimum Wage and its
Effects on Small Business” 2004, available at http://www.epi.org/publication/
webfeatures_viewpoints_raising_minimum_wage_2004/.
In consideration of the 2012 minimum wage proposal, the New
York State Assembly’s Standing Committee on Labor conducted a
series of public hearings across the state in order to hear testimony
from affected individuals and groups on how an increase in the
minimum wage would impact them. Workers, representatives of the
not-for-profit sector, clergy, and even some small business owners
all echoed the same sentiment: one cannot live, let alone raise a
family in the State of New York on $7.25 per hour, $15,000 a year.
Witnesses presenting testimony in Harlem, Syracuse and Buffalo
relayed their own personal experiences of the sacrifices that a fulltime minimum wage earner is forced to make, just to afford food,
shelter and transportation. Reverend Jennifer Kottler, from the Park
Avenue Christian Church, was in attendance and said, “A job should
keep you out of poverty, not keep you in it.” Members representing
a national coalition of businesses testified in New York City that
what is actually proven to be bad for business is an inadequate
minimum wage due to the fact that consumers cannot spend what
they do not have. If a worker cannot afford to spend money at their
“one cannot live, let
alone raise a family in
the State of New York on
$7.25 per hour, $15,000
a year.”
Fiscal Policy Institute. “States with Minimum Wages above the Federal Level have had Faster Small Business and Retail Job Growth”, 2006, available at http://www.fiscalpolicy.
org/FPISmallBusinessMinWage.pdf
Jared Berstein, “Minimum Wage and its Effects on Small Business” 2004, available at http://www.epi.org/publication/webfeatures_viewpoints_raising_minimum_wage_2004/
14
15
Minimum Wage Increase: Now Is the Time
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local businesses and shops, naturally, their local economies will
suffer. It is commonly believed among economists that low-wage
workers are more likely than any other income group to spend extra
earnings immediately on basic needs or services that they could
previously not afford.16 As the nation continues to recover from
the recent recession, putting more income in the hands of those
who will spend it is one of the most useful tools available. Lowwage workers support their families by spending their income at
businesses located closest to home, in their communities. Retail
establishments, the largest small business sector in New York
State,17 would benefit from this additional consumer spending
power the most. Furthermore, businesses will benefit because an
adequate wage would reduce the high rates of worker turnover,
training and recruiting costs, and would increase productivity while
building a more stable workforce in low-wage sectors.18
According to a July 2012 Data Brief prepared by the National
Employment Law Project (NELP), seven out of the top ten growth
occupations over the next decade are in low-wage industries. The
Brief further reveals that the 50 largest employers of low-wage
workers have largely recovered from the recession and most are in
strong financial positions. In fact, ninety-two percent were profitable
last year; seventy-eight percent have been profitable for the last
three years; seventy-five percent have higher revenues now than
before the recession, seventy-three percent have higher cash
holdings; and sixty-three percent have higher operating margins.19
The Data Brief reported that top executive compensation averaged
$9.4 million last year at these firms, and they have returned $174.8
billion to shareholders in dividends or share buybacks over the past
five years. In light of this research, businesses will not be negatively
impacted by an increase to the minimum wage of the workers at the
lowest rung of the economic ladder.
As corporate profits of low-wage employers continue to grow, the
wages of hard-working families are constantly being eroded by
sky-rocketing costs for rent, groceries, child care and insurance. An
adequate minimum wage ensures that workers will not be forced
to sell their labor for less than that which is necessary to provide
for their family’s well being. Every year that goes by where there is
a rise in the cost of living and no adjustment to the minimum wage
Minimum Wage Increase: Now Is the Time
“It is commonly believed
among economists that
low-wage workers are
more likely than any
other income group to
spend extra earnings
immediately on basic
needs or services that
they could previously
not afford.15 As the
nation continues to
recover from the Great
Recession, putting more
income in the hands of
those who will spend
it is one of the most
useful tools available.
Low-wage workers
support their families by
spending their income
at businesses located
closest to home, in their
communities.”
“the fifty largest
employers of low-wage
workers have largely
recovered from the
recession and most
are in strong financial
positions. In fact,
ninety-two percent were
profitable last year;
seventy-eight percent
have been profitable
for the last three years;
seventy-five percent
have higher revenues
now than before the
recession”
“top executive
compensation averaged
$9.4 million last year at
these firms, and they
have returned $174.8
billion to shareholders
in dividends or share
buybacks over the past
five years”
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means that workers are selling their labor for less and less. This
means an hour worked in 2012 and 2013 will afford less than an
hour worked in 2011 and so the cycle will continue. As the income
gap continues to widen, the men and women at the lowest rungs
of the economic ladder will eventually be relegated into perpetual
poverty when their wages are no longer able to afford them food
and shelter. Those who advocate for cut backs in State spending
will be surprised to learn that failure to act on this one issue will
result in more and more demand for state spending to subsidize the
day-to-day living expenses of the working poor.
With decades of history behind the minimum wage and all of
the research that has been conducted on its impact on workers,
employers and the overall economy, there is no reason to believe
that an increase in the wages for the lowest paid workers in the
labor force will be to the detriment of the State’s businesses. To
date, nineteen other states (including the District of Columbia) have
enacted minimum wages above the federal standard and ten of
them currently have laws in place that adjust the wage’s value for
inflation. The state of Washington leads the nation with a statutory
minimum wage of $9.19 per hour. More importantly, neighboring
states of Vermont, Connecticut and Massachusetts have all enacted
a statutory minimum wage that is higher than New York’s. Raising
the minimum wage is good for workers, good for business and good
for New York State.
“As the income gap
continues to widen, the
men and women at the
lowest rungs of the
economic ladder will
eventually be relegated
into perpetual poverty
when their wages are
no longer able to afford
them food and shelter.”
The Assembly Majority has been a longstanding champion of
workers’ rights and atop that list is the right of a worker to earn a
dignified wage. No full-time worker who puts in an honest day’s
work should live in poverty.
Now is the time to raise and index the minimum wage.
Mary Gable and Douglas Hall, “The Benefits of Raising Illinois’ Minimum Wage,” Economic Policy Institute, Issue Brief #321, January 30, 2012
Office of the New York State Comptroller, “The Role of Small Businesses in New York State’s Economy,” September 2010
Kai Fillion, Economic Policy Institute, Minimum Wage Issue Guide, 2009, available at http://www.epi.org/page/-/mwig/epi_minimum_wage_issue_guide.pdf
19
National Employment Law Project, “Big Business, Corporate Profits, and the Minimum Wage,” July 2012, available at http://www.nelp.org/page/-/rtmw/NELP-Big-BusinessCorporate-Profits-Minimum-Wage.pdf?nocdn=1
16
17
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Minimum Wage Increase: Now Is the Time
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