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A Silver Bullet -- Aimed At Jobs

January 12, 2012

By E. J. McMahon

Reducing job opportunities for unskilled and part-time workers will be the No. 1 goal of the New York State Assembly this year, Speaker Sheldon Silver declared last week.

Silver didn’t put it that way, of course. But what he did say was tantamount to the same thing: “I will ask the Assembly majority to establish as a top priority -- and to pass -- legislation to raise the minimum wage, which has increased just 10 cents in the last six years.”

So, with jobs at a premium, Silver hopes to make it more expensive for businesses to hire New Yorkers most vulnerable to unemployment -- inexperienced workers with marginal skills.

A little background: New York’s minimum wage rose to $7.15 an hour in 2006, and was superseded three years later when the federal government raised the nationwide minimum to its current level of $7.25. Most economists have long believed that higher minimum wages discourage hiring by raising the price of labor. Although this view was challenged by some studies in the 1990s, the academic debate over the marginal impact of higher minimum wages on hiring unfolded largely during a boom. Common sense would suggest it’s particularly unwise to boost the cost of hiring during a sluggish recovery from a big bust.

Unemployment in New York City, for example, stands at 8.9 percent, nearly a half point higher than the national average. The average jobless rate is lower in the suburbs and upstate, but this isn’t necessarily a sign of economic strength. Recent declines in the rate don’t reflect a strengthening job market so much as a drop in the number of people seeking work.

Employment and economic growth are not Silver’s main concerns, though. He is pushing a higher minimum wage as a way to help the working poor, saying, “It is absurd to expect anyone -- let alone a working family -- to afford the cost of living today and be able to invest in their future on a salary of $7.25 an hour, or $15,000 a year.”

The case for a higher minimum as an antipoverty measure is especially weak.

Few people earning the minimum are actually trying to live or raise a family on the income it provides. Two academic economists, Joseph J. Sabia and Richard V. Burkhauser, have found that workers living in poor households would make up less than 12 percent of the total of those benefiting from a proposed further increase in the federal minimum. Their data suggest that most minimum wage beneficiaries are “second or third earners,” including part-timers and teens, in households earning two to three times the poverty level.

The notion that anyone subsists solely on $7.25 an hour also ignores an array of government benefits available to the working poor in New York, including Food Stamps, Medicaid and tax rebates provided through an exceptionally generous Earned Income Tax Credit (EITC).

In addition to raising the minimum wage, Silver said the Assembly wants to cut income taxes for families earning less than $30,000 a year and to eliminate taxes for families with incomes below $25,000 -- when, in fact, most families at those income levels already pay no tax and get a net EITC rebate to supplement their incomes. The speaker apparently wants a higher wage subsidy for such workers, even while making it more costly to employ them.

The timing of Silver’s proposal -- outlined in brief remarks before Gov. Andrew M. Cuomo’s State of the State address last week -- seemed designed to put the governor on the spot.

Cuomo shouldn’t take the bait. His goal of creating “jobs, jobs, jobs, jobs” will not be well served by a policy that is more likely to destroy them.

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