Cuomo’s minimum-wage hikes are already killing jobs
Author: Michael Saltsman
Publication Date: January 2017
Newspaper: New York Post
Topics: Minimum Wage
New York’s small businesses headed into the new year on a sour note.
As of Dec. 31, the Empire State shares with California the dubious distinction of having the country’s most onerous minimum-wage requirements. Employers now face at least 14 different minimum-wage levels, depending on the size, type and location of a business, as well as the type of employee. (The state restaurant association has compiled all of the wage requirements in a chart at.)
Confusion is the least of employers’ concerns. The minimum in New York City is now as high as $12 an hour, covering large fast-food businesses as well as small franchisees who pay a fee to share a recognizable brand. By the end of 2018, the required starter wage for their employees will rise to $15 an hour — an increase of more than 70 percent since 2014.
To put these numbers in context, consider: The average inflation-adjusted federal minimum wage, since its creation in 1938, is $7.40 an hour. New York has hiked it to more than twice that. Owners of small businesses with single-digit profit margins don’t have the cash to afford it, and they stand to lose business by passing the cost onto customers — who may find eating out as much no longer fits the budget.
This isn’t merely theoretical. A summary of the best academic studies, published at the end of 2015 by the Federal Reserve Bank of San Francisco, reported a 1 to 2 percent drop in employment for less-experienced workers after each 10 percent minimum-wage increase. The increases in New York are much larger than this — and the initial evidence suggests that the consequences are, too.
Take, for example, the minimum wage-related shutdown this summer of the Del’Rio Diner in Bensonhurst (covered by The Post), or this month’s closure of the China Fun restaurant on Second Avenue. Elsewhere in the state, well-loved eateries like Bob and Ron’s Fish Fry in Latham, Medici House in East Aurora and Longway’s Diner in Watertown have either closed or cut staff to adapt to the wage hike.
Restaurants have always seen some level of churn, but this time appears to be different. Census Bureau data show annual food-service employment growth has fallen each year since New York began its wage-raising experiment, even as overall private-sector growth has been steady. In the first half of 2016, the state had its weakest six months of food-industry employment growth since the Great Recession.
In extreme cases, businesses are looking for the exit. Last month, I was contacted by the owner of a small call-center business that was until recently located in an impoverished town in New York’s Southern Tier. The owner offered opportunity to a town that desperately needed it, but the looming minimum-wage hike — which raised his cost per order by as much as 77 percent — made it impossible to continue to operate there.
When his lease was up near the end of last year, he moved a short distance across the Pennsylvania border, where he still has employees and customers and can afford to cover his costs.
It’s a damning indictment of Gov. Cuomo’s wage-raising agenda, which is working at cross purposes with his “New York Open for Business” campaign. In a 2015 New York Times article about the continued economic difficulties in this part of the state, Cuomo shrugged that “the state can only do so much” and “it’s up to the localities to also come up with a business plan.” They’d love to — if Cuomo would stop shackling them with unmanageable costs.
Don’t look for labor unions and the advocacy groups they fund to be chastened by these consequences. They’re already pushing new legislation in New York City to restrict the scheduling and hiring practices of employers. In 2017, the state needs principled political leaders who are willing to put a stop to the triumph of self-interested politics over sound economics.