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THE PROS AND CONS TO UPPING MINIMUM WAGE
Posted February 7th, 2013

PRO:

Minimum Wage Increase Makes Good Business Sense

BY DARIUS ROSS

When Governor Cuomo called for raising New York’s minimum wage, he expressed not only his own view, but also the convictions of 80 percent of New Yorkers who agree that the state’s lowest-paid workers are in urgent need of a raise. As a business owner, I support the effort to raise the minimum wage because it makes good business sense.

Raising New York’s minimum wage is a critical priority for accelerating the state’s economic recovery. When low-paid workers struggle to purchase necessities on inadequate wages as the cost of living rises, it undermines our economy. As said in a Business for a Fair Minimum Wage statement I signed along with business owners throughout our state, “With far less buying power than it had four decades ago, today’s minimum wage means poverty for working families and weakens the consumer demand at the heart of our economy.”

Raising the minimum wage will put more money in the pockets of workers who most need to spend those dollars. It will boost consumer spending at local businesses across the state. And nothing drives business owners like me to hire additional workers more than increased consumer demand.

Higher wages also benefit businesses by boosting employee productivity, retention and customer satisfaction, and reducing the high costs of employee turnover. Moreover, increasing the minimum wage will reduce the strain on our social safety net caused by inadequate wages.

The Governor proposes raising the state’s minimum wage from its current rate of $7.25 per hour, which is just $15,080 a year for full-time work, to $8.75 per hour. This minimum wage increase would benefit nearly 1.6 million low-paid workers across the state, according to the nonpartisan Economic Policy Institute. The increased wages received by these workers would generate more than $840 million in new economic activity.

Minimum wage workers in retail, restaurants, hospitality, the service industries and other support staff are long overdue for a raise that reflects current living standards. Rent, food, transportation and other keys of life can’t wait for more time to go by.

New York lags behind 19 states – including neighboring Connecticut, Massachusetts and Vermont – that have raised their minimum wages above $7.25. It’s time to act. The minimum wage should be increased to $8.75, and then indexed to inflation so its value does not shrink in the future as the cost of living rises.

As a business owner who was once a low-income wage earner myself, I support raising the minimum wage to give all New Yorkers a jump start to living a more hopeful, productive, prosperous life. Let’s make New York a true shining beacon of opportunity for all workers and businesses.

Raising the minimum wage will be good for New York’s workers, good for New York’s businesses, and good for New York’s economy. Legislative leaders such as Speaker Sheldon Silver and Senator Jeffrey Klein have named it a top priority for the 2013 Session. The time for a minimum wage mandate is now.

Let’s get it done.

Darius Ross is managing partner of D Alexander Ross Real Estate Capital Partners, in New York City. He is a member of Business for a Fair Minimum Wage. www.businessforafairminimumwage.org

CON:

Coming Hikes in Minimum Wage Hurts, Not Helps, Low-Income Workers

BY BETSY MCCAUGHEY

Battles are brewing in New York, California, Minnesota and the nation’s capital over hiking minimum wages, with Democrats having the votes to ram through hikes in all four cases.

These politicians are claiming the moral high ground, saying it will help the poorest in our communities. Don’t be fooled.

Hiking the minimum wage hurts — not helps — the lowest-paid workers, especially young black men. A 10 percent hike in the minimum wage causes a 2.5 percent drop in employment among young white men without a high school diploma and a staggering 6.5 percent drop among young black men without that degree.

Young black males get clobbered three times as hard because they tend to work in the fast-food and restaurant industries, where any increase in labor costs produces layoffs.

The first federal minimum wage was enacted in 1938 and set at 25 cents an hour. It’s gradually increased to $7.25 an hour. What’s also increased steadily is the evidence that raising minimum wages benefits some workers but harms the least employable job seekers.

Sadly, politicians ignore that evidence and bamboozle the public with oversimplified claims that raising the wage minimum is doing good.

In his Jan. 9 State of the State address, New York Gov. Andrew Cuomo climbed atop his moral pedestal to announce that raising the state’s minimum wage was the right thing to do. You can’t take care of a family on $14,600 a year (the yearly income equivalent of minimum wage) in a state where child care costs $10,000 a year, he lectured.

But Cuomo’s pitch was misleading. He left out the fact that the typical minimum-wage employee is young, with few skills and little or no job experience. Half are under age 25, and a quarter haven’t completed high school. Fifty-nine percent are working part-time.

Only 5  percent of American workers earn the federal minimum, according to the latest government data, compared with 13 percent in 1979. Minimum wage workers are largely first-time workers. They are learning what all of us learn on our first job: to be prompt, dress appropriately, do what the boss asks and be reliable.

First-time workers face the biggest risk of being priced out of the job market by a minimum wage hike. They aren’t worth much to an employer when they start working. They don’t have the skills.

When the government increases the minimum wage, it’s more expensive to hire first-timers. According to David Neumark and J.M. Salas, University of California economists, and William Wascher of the Federal Reserve Board, “minimum wages tend to reduce employment among teenagers.”

New York needs that like a hole in the head. Teen unemployment in New York City hit a stunning 35.6 percent last August, compared with 23.7 percent nationwide.

All teens are harmed, but black male teenagers are hit hardest by minimum wage hikes, according to a 2011 study by labor economists David Macpherson and William Evans. Unemployment among young black males is currently 29 percent, double the rate for young white males.

Macpherson and Evans found the reason is that one out of three young black men without a high school diploma works in the restaurant/fast-food industry, where profit margins are thin. Any labor-cost hikes compel these businesses to cut their workforce.

On top of the threatened minimum-wage hikes, businesses now face the certainty of ObamaCare, which will impose the largest government-mandated labor-cost hike in history.

In 2014, employers with 50 or more full-time workers will be required to provide a package of “essential health benefits” or pay a penalty. This government mandated package will add a whopping $1.79 an hour to the cost of hiring an employee. Maybe that’s affordable when you’re hiring lawyers or bankers, but not for hiring unskilled first-time workers.

Pressing for state and federal minimum-wage hikes now, on top of the ObamaCare labor cost hike, is unwise. No, worse than that. It’s cruel to the very people the politicians claim to be helping. But what else is new — politicians saying whatever works to get votes?

McCaughey is a former lieutenant governor of New York state and author of the new book, “Beating Obamacare.”