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Raising the Minimum Wage for New York State

Ilana Novick

New York State Governor Andrew Cuomo has proposed to raise the New York State minimum wage from $7.25 to $8.75 per hour, drawing cheers from progressive groups who have lobbied for such a hike for years. But many business advocacy groups worry that this move would raise the cost of hiring entry level employees, and hinder New York's already slow economic recovery. 

Cuomo said of the hike: "It's the right thing to do. It's the fair thing to do. It is long overdue. We should have done it last year. Let's do it this year.” New York State lawmakers have been debating the increase for over a year, but Cuomo decline to push for it in 2012, saying the issue needed further study.

This mimimum wage increase would also give New York one of the highest minimum wage rates in the country. Current Federal minimum wage is also $7.25; most states hover around that level, with the exception of twelve, including Massachusetts, Washington, and Illinois that have rates above the federal requirements. 

That New York would join the ranks of the highest minimum wages is not saying much, however, considering those working full-time minimum wage jobs at the current level are only making about $15,000 per year hardly enough to cover basic expenses for most single people, let alone families. 

Some also question whether these higher rates will make a noticeable difference in paychecks over the long term if they are not indexed to inflation, which progressive groups and advocates for the working poor are still pushing for. The State Assembly's version of the plan included a provision for indexing to inflation, but would first raise the wage to $8.50, then to $8.75 gradually. If passed, Cuomo's plan would have the $8.75 rate start in July. 

Opponents of both plans, including New York State's small business lobby and the New York State Business Council, remain concerned about harmful effects on job creation and economic growth. According to a recent report by the National Federation of Independent Businesses, Cuomo's proposal would kill 22,000 jobs over the next decade and cut economic output by $2.5 billion.

This estimate is almost certainly wrong. Considerable research shows that minimum wage hikes don't kill jobs -- in part, because most minimum wage workers are employed by highly profitable corporations, not mom-and-pop businesses struggling to survive. What's more, raising the minimum wage would actually spur growth by channeling less profit to the executives and shareholders of those companies, and more into the pockets of low-wage workers, who would immediately turn around and spend the extra cash. 

For instance, a recent Demos study on the retail sector -- where low-wage jobs are the norm -- found that "A wage standard at large retailers equivalent to $25,000 per year for full-time, year-round workers would increase GDP between $11.8 and $15.2 billion over the next year. As a result of the economic growth from a wage increase, employers would create 100,000 to 132,000 additional jobs."

New York States needs that kind of stimulus. And low-wage New Yorkers need a raise. The National Employment Law Project estimates that 747,000 New Yorkers would benefit from the higher $8.75 an hour rate.  

The Senate will ultimately decide the fate of the proposed increase, which already has strong support in the Assembly.