Last week, Cuomo threw his weight behind raising the state’s minimum wage to $15 by 2018 in New York City and by 2021 upstate. That hike would, in the near future, put the statewide wage floor at fully 76% of the 2014 statewide median wage. Even liberal economists balk at a minimum wage above 50% of the median, a target currently equal to $9.82 per hour in New York State across all occupations.
This is the paradox: A low minimum affects few workers, doing little harm but also little good. A high minimum affects more workers, but at the terrible cost of locking unskilled workers out of even the first rung of the labor market.
As a way of balancing these effects, liberal labor economists like UMass Amherst Prof. Arindrajit Dube have settled on a target minimum wage equal to 50% of the median wage. Yet in 2013, regarding a $15 federal minimum, even Dube admitted to The Washington Post: “We don’t know what happens to employment of low skilled workers when the minimum wage is doubled.”
Prof. David Card of UC Berkeley co-authored a landmark empirical paper in 1993 — one of the first to find no measurable effects on employment from small minimum wage increases. Yet in 2013, he similarly told Cal Alumni Magazine that his findings cannot extrapolate to a $15 per hour federal minimum wage, saying of one: “I suspect that employers in many low-wage areas of the country would simply refuse to comply.”
In other words, even if one were to rely only on the findings of pro-minimum wage researchers, a $15-per-hour floor across diverse areas with different levels of labor productivity would be dangerous. A $15 federal minimum wage could be devastating to marginal workers in many states — or force workers into the off-the-books gray market.
Puerto Rico is the most extreme American example of the ravages of setting a too-high minimum. Nobel Prize-winning economist Paul Krugman, an outspoken liberal, himself has admitted as much about our unfairly neglected commonwealth — where the current federal minimum, $7.25, equals 77% of the median wage, far above the 50% target. According to the New York Federal Reserve, 40% of 16- to 24-year-old Puerto Ricans are unemployed, while only 36% are employed or actively seeking work.
Unfortunately, Cuomo wants to bring Puerto Rico’s labor problems to upstate and western New York. In Buffalo, the governor’s minimum would be 90% of the metropolitan median wage; in Rochester, 86%; Albany, 79%; in New York City, 71%. All of these ratios would be higher than Dube’s 50% benchmark, and all but New York City’s would be worse than Puerto Rico’s.
Recall that even this “50% of median wage” target neglects other anti-minimum-wage evidence. The Congressional Budget Office found that a $10.10 federal minimum wage would cost 500,000 jobs, while a follow-up by the Manhattan Institute with former CBO director Douglas Holtz-Eakin found a $15 federal minimum would cost 6.6 million jobs.
But even setting aside the case being made by minimum-wage opponents, it’s clear based on the preponderance of pro-minimum-wage evidence that the governor’s plan will put workers at risk throughout New York. Indeed, New York City is the only labor market that could come close to surviving this attack without suffering a decimation in the demand for low-skilled workers.
Yet again, a regulation clearly targeted at New York City’s economy will do huge harm on the rest of our state, even as it seals out high school dropouts and ex-cons from the labor force in our Goliath on the Hudson.
Is Cuomo really sure he wants to do this?
This article orginally appeared in New York Daily News