An issue that is sure to be in the forefront during the upcoming legislative session is increasing the state’s mandated minimum wage.
At the beginning of the year, New York state’s minimum wage will increase to $9 an hour. Many, particularly left-leaning organizations from NYC, argue that $9 isn’t enough and New York should raise its minimum wage to $15 an hour — a position with which Governor Cuomo agrees. Their basic argument is that we need higher wages to lift low-wage earners out of poverty.
In addition, there appears to be public support for additional increases, and why not? For almost a decade, our country’s economy has been sputtering along and many families feel that they are falling behind. A simple fix is to mandate that employers pay their workers more.
The problem, of course, is that the increased labor costs are then the responsibility of businesses. To pay for these increased costs, businesses can either raise the prices of their products or reduce employment. Due to the competitive nature of our global economy, too often raising prices isn’t an option so, instead, companies look to automate which, in turn, leads to layoffs.
In the past, large increases in the minimum wage have had negative impacts on low-income individuals and their families because many lose their jobs as a result of the higher mandated wage or have their hours cut.
It has also resulted in the reduction of entry-level employment. Studies done by Cornell University, the Congressional Budget Office, and others economists have shown a direct link between increasing the minimum wage and job loss. One study done by the Empire Center concludes that an increase in the minimum wage to $15 will cost New York state 200,000 jobs with the larger employment decreases in Upstate New York.
Interestingly, there is scant evidence to show that large increases in the minimum wage benefit the majority of those workers who are below the poverty threshold. Because a minimum wage increase is a broad mandate and not specifically targeted, the actual benefits go to all who receive the wage increase no matter whether they are living in poverty or not.
In its 2014 study, the Congressional Budget Office examined the effects of raising the federal minimum wage to $10.10. While it found that earnings for low-wage workers would increase by $31 billion, only 19 percent of those additional earnings would go to families below the poverty threshold. Why? Because the population that makes up low-wage workers include those who aren’t living in poverty like young workers and family members who have other sources of income.
If the governor and others who are pushing for the $15 minimum wage really want to help the working poor, they should support the expansion of the state’s earned income tax credit. The earned income tax credit (“EITC”) is a federal and state tax credit for low- and moderate-income working families and individuals. The EITC is refundable so that if the credit exceeds a low-wage worker’s income tax liability, both the state and federal government will refund the balance to the taxpayer. In order to receive the EITC, the taxpayer must have earnings from employment. The EITC increases as a low-wage worker’s earnings increase but then it is capped once those earnings reach a certain level. New York’s EITC supplements the federal EITC and is equal to 30 percent of the federal EITC.
In contrast to a minimum wage increase, an increase in the EITC on the state level directly targets low- and moderate-waged workers. Further, it encourages people to work because in order to receive the EITC you must have a job. To help low-wage income earners lift themselves out of poverty, we should raise the state EITC to 45 percent of the federal EITC. This would provide additional incentive for people to find work and provide them with the earnings necessary to support themselves and their families.
In addition, we should have the state EITC paid out monthly as opposed to paying it out as a lump sum like a tax refund — which has encouraged binge spending on nonessential amenities. A monthly payout would encourage responsible monthly budgeting and also encourage the use of the funds for necessary living expenses.
In these challenging economic times, we want to help those who are having trouble making ends meet. When considering state policies that will be most beneficial to those in need, shouldn’t we choose a policy like increasing the EITC, which is directly targeted to assist the working poor rather than a policy like substantially raising the minimum wage which will ultimately mean fewer job opportunities for those same people.
This session, I look forward to impressing upon the governor and my colleagues in the legislature that we should increase the state’s EITC and reform how it is paid-out rather than implement a broad-based wage mandate that decreases job opportunities, particularly in Upstate New York.
If you have any questions or comments regarding this or any other state issue, please contact me. My office can be reached by mail at 200 N. Second St., Fulton, NY 13069, by e-mail at [email protected] or by calling 598-5185. You can also friend me, Assemblyman Barclay, on Facebook.
