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Can New York Raise the Wage?

Worries about increasing the minimum wage are often overhyped. It can be done in NYC.

Published onApr 30, 2024
Can New York Raise the Wage?
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Can New York Raise the Wage?

After years of increased minimum wage proposals, New York Governor Kathy Hochul signed into law a new minimum wage of $16/hour for New York City, Westchester, and Long Island. Although the increase is a step in the right direction for minimum wage workers, the “Raise Up New York” campaign has been pushing for a gradual increase to $21.25 by 2026 for downstate New York and $20 for upstate.1 Employers have raised concerns about the impact that a further increase would have on the economy and unemployment, citing a possibility of future job loss and increased labor costs.2 However, more than 300 New York business owners have formed a coalition in favor of the Raise the Wage Act, which was introduced in the New York State Senate during the 2021-2022 legislative session.3 Raise Up New York and the Raise the Wage Act are crucial initiatives for minimum-wage-earning New Yorkers attempting to combat the increasingly high cost of living as well as growing poverty rates. Governor Hochul attempts to address concerns regarding potential increased unemployment by including an “off-ramp” provision in the new minimum wage law, meaning that a slight increase in unemployment could freeze any wage increases.4 Is an increase to $16/hour adequate for minimum wage New Yorkers, particularly those at the bottom of wage distribution? Can New York’s economy afford a further increase to $21.25? 

One of the most prominent arguments in favor of increasing the minimum wage is that the cost of living in New York, particularly the New York metropolitan area, is becoming increasingly high. According to the Economic Policy Institute’s Family Budget Calculator, “a family of two adults and two children in the New York metro area need[ed] $134,938 a year in 2022 to achieve a modest but adequate standard of living.”5 Since 2022, this estimated amount has increased to $147,041 a year, which includes housing, childcare, food, transportation, healthcare, taxes, and other necessities.6 In the Nassau/Suffolk metropolitan area, $162,785 a year would be needed to achieve an adequate standard of living for this type of family.7 Costs for everyday needs are also increasing much faster than median household earnings are increasing. United Way of New York City, a nonprofit organization for low-income New Yorkers, reports that since 2000 “costs have increased 131% across [New York City’s] boroughs” for a family of two adults, one preschooler, and one school-aged child, while “median earnings have only increased 71%.”8 

Growing rates of poverty in New York City also raise major concerns regarding the ability to adequately afford such a high cost of living. According to the Poverty Tracker by Robin Hood and Columbia University, the poverty rate increased from 18% in 2021 to 23% in 2022, which was the largest reported increase within a year since 2012.9 Raise Up New York’s minimum wage increase would have a vital impact on those affected by poverty; the Economic Policy Institute (EPI) estimates that “looking at workers below 200% of the poverty line, more than 1.1 million workers would benefit.”10 

Business owners against any further increases to the minimum wage argue that it would have damaging effects on New York’s economy. An economic analysis report by Regional Economic Models states that increases would “raise labor costs for many businesses, negatively impacting the state’s economic competitiveness and increasing consumer prices.”11 The report also explains that by 2033, 128,000 jobs would be lost, and economic output would decrease by more than $19 million; these effects would also take a large toll on small businesses.12 Governor Hochul’s current minimum wage law addresses some of these concerns with an “off-ramp” provision which could freeze any increase to the minimum wage beginning in 2027. The provision is “triggered if the New York seasonally adjusted three-month average unemployment rate from May to July is at least half a percentage point higher than the lowest unemployment rate of the previous 12 months.”13 The implications of a potential freeze in the minimum wage may have a disproportionate effect on New Yorkers at the bottom of the wage distribution. The National Employment Law Project predicts that the triggering of the off-ramp in 2027 could cost 1.45 million low-wage NY workers $609 million in earnings.14 This is a concerning estimate given that it could be caused by only a slight increase in the unemployment rate. 

The Raise the Wage Act would not only increase the minimum wage to $21.25 through 2026 but also allow for annual increases in the wage in relation to nominal labor productivity, or real productivity plus inflation. The Economic Policy Institute reports that since 1979, the gap between worker’s compensation and productivity––otherwise known as the productivity-pay gap––has drastically increased.15 For New York specifically, if it had increased alongside productivity since 1968, the minimum wage would “likely exceed $28 per hour in 2026.”16 Increasing wages with labor productivity is a seemingly logical way to address the high cost of living in New York. Achieving a better standard of living is possible when productivity increases, but it also requires wages to increase as well, especially in an expensive economy like New York’s. In 2022 alone, New York’s labor productivity was tremendously high, with workers generating $120.67 on average per hour, or a total of $1.725 trillion in value-added economic output.17 Although there are concerns regarding unemployment, increases in labor productivity illustrate that the economy can afford further increases in the minimum wage. 

Evidently, New York workers will need a further increase in minimum wage in the years to come if there are no other solutions to addressing the tremendously high cost of living and growing poverty rates. New York’s increase in labor productivity alone could be enough to push the minimum wage to $21.25 by 2026, including further increases in the future. However, this would require Governor Hochul to remove the off-ramp provision in the new minimum wage legislation, thereby allowing wage increases after 2026, even if unemployment slightly increases. An increase in workers’ wages does not always have to be correlated with a decline in the economy. The more than 300 New York business owners in favor of the Raise the Wage Act remind us that higher wages can lead to a higher quality workforce. New York certainly has the ability to raise the minimum wage and allow its residents to maintain a proper standard of living.

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