New York's gains would be far greater without mandate
New York City's move over the next three years to a $15-an-hour minimum wage—the highest ever, after adjusting for inflation—will take the city into uncharted territory, fraught with risks and trade-offs for workers and businesses. Initially, the downside may be less apparent. If overall economic conditions remain favorable, it's a safe bet employment in the city will continue to rise in 2017. Supporters of the higher minimum will tout this as proof that the policy isn't hurting job creation. But those early numbers will be misleading—because they won't show the added job growth that would have occurred if the minimum wage stayed the same.
Consider the experience in Seattle, which two years ago enacted a plan to raise its minimum to $15 by 2021.
University of Washington researchers looked at the first stage of the Seattle hike, when the minimum went to $10 or $11 an hour, depending on business size, from $9.54. Their key finding: In a much smaller city enjoying a much stronger job boom than New York's, the low-wage employment rate rose about one-third more slowly than it would have without the wage increase.
Extrapolating from that Seattle finding, New York City's 2017 minimum-wage increase to $11 (or $10.50 for small employers) from the current $9 could result in at least 7,000 fewer new low-wage job openings than if no change were made. Count those 7,000 (or more) uncreated jobs as collateral damage from the "Fight for $15."
But that's just the start. With employment already sinking in the city's retail sector—a key source of entry-level, low-wage jobs—the broader impact of the policy will grow as the minimum ratchets up to $11, then $13, and then $15 an hour within the next three years.
Mayor Bill de Blasio's fiscal 2017 budget estimated that total employment in the city will increase by another 147,000 jobs over the next four years. But using methodology developed by the Congressional Budget Office, a study last year by the Empire Center for Public Policy and the American Action Forum estimated a $15-per-hour minimum ultimately will wipe out roughly two-thirds of that projected gain—subtracting about 96,000 new jobs from growth.
The bottom line: The real minimum wage remains zero—the amount earned by someone who can't find a job. Unfortunately, thanks to the rising minimum wage, more New Yorkers are likely to fall into that category.
This piece originally appeared in Crain's New York Business
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E.J. McMahon is a senior fellow at the Manhattan Institute and president of the Empire Center for Public Policy. Follow him on Twitter here.
This piece originally appeared in Crain's New York Business