$15 Minimum Wage: Disaster for New York

As one of the most unathletic and uncoordinated teenagers that God ever created, I avoided all extracurricular sports and spent most of my high school years working multiple minimum wage jobs. Low wage employment allows millions of young and less-educated workers to acquire the skills needed to advance in the job market. Another hike in the minimum wage could eviscerate employment opportunities for thousands of workers across New York.

The minimum wage in New York rose to $9 an hour at the beginning of this year. Governor Cuomo then proposed another drastic hike in the wage, which the state legislature recently approved. It will increase the current wage in New York City by 67 percent to $15 an hour by 2018. The upstate minimum wage will increase to $12.50 in 2022, with the timeframe for the $15 target dependent on economic conditions.

According to data released by the Empire Center for Public Policy, the $15 minimum wage is the highest in New York state’s history (adjusting for inflation). Previously, the highest minimum wage in New York’s history was in 1970, at a rate of $11.35 in 2015 dollars.

New York is the first state in the U.S. to adopt a $15 minimum wage. Although well intentioned, such a drastic increase will result in substantial loss in employment. According to economists Douglas Holtz-Eakin, a former Congressional Budget Office director, and Ben Gitis of the American Action Forum, a $15 minimum wage could result in job losses ranging from 200,000 to 588,800 by 2021. 

Imposing this drastic hike in the minimum wage in an economically diverse state such as New York is irresponsible public policy. Affluent regions downstate can better endure a $15 minimum wage. Other areas, by contrast, may struggle to weather this wage hike.

According to the report by Holtz-Eakin and Gitis, Long Island could lose 22,000 jobs or 1.6 percent of employment while the Mohawk Valley could lose nearly 5,000, or 2.5% percent of employment.

The minimum wage hike will exacerbate the deteriorating economic conditions upstate. The Empire Center argues that between 2010 and 2015, 41 of the 50 upstate counties experienced population decreases. Republican State Senator John DeFrancisco from Syracuse said, “The reality is that upstate New York simply can’t afford a $15 minimum wage. The small businesses and farms that power our economy will be devastated, jobs will be lost, consumer costs will skyrocket and taxes will rise.”

Last fall, Governor Cuomo bypassed the state legislature and created an unelected Wage Board to enact a $15 hourly wage only for fast-food workers at chain restaurants. The “Fight for $15” campaign argues that fast-food corporations earn substantial profits but do not pay works sufficient wages for food, healthcare, and rent. 

Advocating economic justice for fast-food workers sounds like a good idea. Unfortunately, these policies’ results will contradict their advocates’ good intentions. Higher labor costs force corporations to raise prices or lay off workers to combat declining profit margins.

In 2013, Oxford Professors Carl Benedikt Frey and Michael Osborn released a report titled The Future of Employment: How Susceptible are Jobs to Computerisation? The report analyzed the probability that specific professions could be replaced by technology on a scale of 0 (profession irreplaceable) to 1 (completely replaceable by computers). It revealed that the probability fast-food workers could be replaced with automation and technology was .92. Fight for $15? More like fight for $0.

Democrats argue that increasing the minimum wage stimulates the economy and creates jobs. Assuming low-income people are more inclined to save, a higher minimum wage, in theory, would create more spending and increase aggregate demand. More people become employed at higher wages and we all live happily ever after.

That’s not the case in Seattle. In June 2014, the Seattle city government approved a $15 minimum wage to gradually take effect by 2019. A report by the American Enterprise Institute shows that Seattle experienced the largest nine-month employment drop since the recession between April and December of 2015. Additionally, Seattle lost 10,000 jobs in September, October, and November of last year. This was the largest three-month job loss in Seattle since 1990.

No one wants to see working people struggle to pay for basic necessities in the United States. Pragmatic, bipartisan measures exist to address issues of poverty. For example, the earned income tax credit (EITC) acts as a sort of negative income tax. Expanding the EITC helps low-income families without putting jobs in danger. The EITC encourages employment and helps combat our disastrous entitlement system.

Economist Thomas Sowell famously said, “Unfortunately, the real minimum wage is always zero, regardless of the laws, and that is the wage many workers receive in the wake of the creation or escalation of a government-mandated minimum wage.… Making it illegal to pay less than a given amount does not make a worker’s productivity worth that amount.”