Cara Sullivan is the director of the American Legislative Exchange Council Task Force on Commerce, Insurance and Economic Development and the author of the report, Raising the Minimum Wage: The Effects on Employment, Businesses and Consumers. To learn more about ALEC, visit www.alec.org.
New York’s Minimum Wage Increase: The Wrong Way to Ring in the New Year
Last night, as shivering tourists gathered in Times Square to watch the New Year’s Eve Ball drop, something much more impactful rose across the entire state of New York. Rising from $8.00 per hour to $8.75 per hour on December 31, New York’s minimum wage became the fourth-highest state minimum wage in the nation. Yet advocates continue to call for a higher minimum wage, some even as high as $15 per hour.
While many applaud the move as a positive step for New York residents, the minimum wage increase will adversely affect those it is intended to help by eliminating job opportunities for lower-skilled and undereducated individuals and inefficiently targeting any increase in pay to the poor. At a time when six percent of the state’s labor force cannot find work, New Yorkers cannot afford policy decisions made under political pressures rather than rational consideration of a policy’s economic implications.
Don’t blame the businesses. By increasing the minimum wage, government raises a company’s cost of doing business. If companies are to stay in business at all, they have to find a way to cut expenses or raise revenue elsewhere, whether that is in the form of reduced employee hours, benefits, or training, slower hiring and expansion, or increased prices to consumers.
Furthermore, those fortunate enough to have jobs who are walking off to strike for higher wages are making it more attractive for their employers to explore investments in labor-reducing technologies such as self-checkout lanes at grocery stores, self-serve gas pumps, or even robotic bellhops. Just ask families from generational-union households how technology has impacted the need for human labor in the manufacturing sector. If necessity is the mother of invention, marching for mandatory $15 per hour wages dramatically increases the speed at which people will invent mechanical replacements for human employees.
If companies can’t trim other production costs to keep the lights on, they may be forced to cut employment, and first on the chopping block are the same low-skilled, undereducated individuals championed by minimum wage activists.
Minimum wage jobs provide the first rungs of the career-advancement ladder by giving inexperienced individuals an opportunity to gain on-the-job skills and traits such as responsibility, work ethic and punctuality. Although some of the hard skills learned at a minimum wage job may not follow an employee throughout their career, the ability to show that one can act in a professional manner is essential to securing the future job placements that will build a career. Fifty five percent of all Americans start their careers within $1 of the minimum wage, and New York’s recent increase may rob many young residents of the opportunity to build the skill set necessary for a successful career.
Despite arguments that the minimum wage must be raised to help America’s least fortunate, increases to the minimum wage do not efficiently target the underserved. A recent study by the nonpartisan Congressional Budget Office examined the proposal to increase the federal minimum wage to $10.10 per hour and found that just 19 percent of the increased earnings would go to families below the poverty line. This is because among adults 25 and older earning the minimum wage, 75 percent live well above the poverty line and have an average household income of $42,500. Minimum wage earners 24 and younger have an average household income of $65,900.
New Yorkers need ways to support their families and prosper, but increasing the minimum wage is not the policy solution that will deliver these results. Policymakers should resist calls to increase the minimum wage and instead look to expand employment and entrepreneurial opportunities in New York.