Opening the gates for higher rates
Keeping realistic about N.Y.’s potential minimum wage increase
Published: Tuesday, January 29, 2013
Updated: Tuesday, January 29, 2013 21:01
Changes are taking place across the country, and the Empire State is in line for a big pay out.
Since Jan. 1, 13 states have weighed wage increases, including New York. Governor Andrew Cuomo proposed a minimum wage bump from the current $7.25 to $8.75, a move expected to benefit over a million workers and create jobs, and according to a new study from the Fiscal Policy Institute and the National Employment Law Project, could create as many as 7,300 full-time jobs.
But are the benefits of raising minimum wage greater than the potential problems? We aren’t quite sure, but yes or no, it is important to point out the ramifications of the decision.
The federal minimum wage began in 1968 at $1.60 and has increased periodically to today’s current set rate. New York’s minimum hasn’t changed since 2007, but as inflation rates and prices increase, it’s necessary to counter the effects by increasing the value of minimum wage.
If executed properly, New York’s wage hike could greatly help the state’s volatile economy. Higher incomes should lead to an increase in consumption, and an increase in consumption should bring an increase in revenue.
But that’s a big if. Small businesses may get hit the strongest, and the increase in labor costs could lead to a cut in company numbers and workers’ hours. The fiscal cliff negotiations of early January didn’t address payroll taxes, but with an increase in minimum wage, people can expect to see more come out of their paycheck to cover the cost. Is a jump as large as $1.50 like Cuomo is proposing too big of a jump for employers to handle?
According to a 2011 summary from the Bureau of Labor Statistics, 1.7 million American workers earn minimum wage (approximately 2.3 percent of the total American workers earning hourly wages). The statistics are first registered for workers at the United State’s legal working age of 16.
Consider this: how many employers are going to want to hire a 16-year-old fresh on the workforce and pay him or her nearly $9 per hour? Companies are not going to find it worth the risk or the time, and those jobs will disappear. This idea is so vital to college students who work summer jobs only to return to school. Would you rather hire someone who can work minimum wage and stay on staff or someone who has to pick up and leave after about four months?
Hearing $8.75 per hour for minimum wage is enough to instill optimism in the biggest of curmudgeons. A major theme of the 2012 election from the Obama camp was to shrink the gap between the rich and the poor, and it’s possible a higher minimum wage rate would eventually help that cause. But only as long as the entire pyramid doesn’t shift with it. If both prices and the minimum wage rate increase, then the only $8.75 will only matter until the two cancel each other out.
Optimism and curiosity is fine, but people also need to keep realistic expectations toward the possible wage bump. While $1.50 more per hour sounds like a blessing to struggling workers, all outcomes need to be weighed, and additional scenarios need to be examined.