Speaker Sheldon Silver An Introduction

Its time to raise New Yorks 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 Majoritys 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 Majoritys 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 states 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.

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

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.

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.

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Siena College Research Institute, August 21, 2012 Quinnipac University Polling Institute. January 31, 2013.

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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 states 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 states 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,
8

according to recently published data, 84 percent of those that would be directly affected by an increase in the states 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

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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 Yorks Minimum Wage: The Economic Benefits and Demographic Impact of Increasing New Yorks 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 Bureau of Labor Statistics, Characteristics of Minimum Wage Workers, 2011, available at http://www.bls.gov/cps/minwage2011tbls.htm#1 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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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

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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

Gasoline:

169% 72% 49% 45% 32% 24% 2%

25% 50% 75% 100% 125% 150% 175%

Education:

Household Energy:

Medical Care:

Food at Home:

Housing:

Clothing Apparel :

source: u.s. Bureau of Labor statistics.

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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/

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Nineteen states and D.c. with Minimum Wages Above Federal Level
Alaska Arizona California Colorado Connecticut D.C. Florida Illinois Massachusetts Maine $7.75 $7.80 $8.00 $7.78 $8.25 $8.25 $7.79 $8.25 $8.00 $7.50 Missouri Michigan Montana Nevada New Mexico Ohio Oregon Rhode Island Vermont Washington $7.35 $7.40 $7.80 $8.25 $7.50 $7.85 $8.95 $7.75 $8.60 $9.19
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

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 nations unemployment rates were rightfully attributed to the general reduction in economic activity that is characteristic of a recession. 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/

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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 Number of establishments Number of employees Annual Payroll Average Payroll Per Worker 3.1% 4.8% 18.5% 13.0% states with Federal Minimum Wage ($5.15)) 1.6% 3.3% 15.4% 11.7%
one cannot live, let alone raise a family in the state of New York on $7.25 per hour, $15,000 a year.

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 Assemblys 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

14

15

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/

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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 familys well being. Every year that goes by where there is a rise in the cost of living and no adjustment to the minimum wage

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 States 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 wages 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 Yorks. Raising the minimum wage is good for workers, good for business and good for New York State. 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 days work should live in poverty. Now is the time to raise and index the minimum wage.

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.

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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 States 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 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

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