Mayor Michael Bloomberg has joined Assembly Speaker Sheldon Silver in advocating an increase in the state minimum wage.  Unlike Silver, Bloomberg in his State of the City message was at least willing to acknowledge that the minimum wage discourages hiring–specifically, that it “can reduce youth employment.”  His solution?  More government-subsidized summer job programs.  Because, after all, “the genius of the free market is not always perfect.”  (But it comes pretty close!)

So, other than allowing a bunch of politicians to feel good about themselves, what is the purpose of raising the minimum wage?  Silver advocates it as a measure to help the working poor.  But as I wrote in my Newsday column yesterday,”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).

Bloomberg’s rationale for raising the minimum wage above the federal $7.25 an hour, in a city with an 8.9 percent unemployment rate?  Well, he didn’t really offer one, other than pointing out that Massachusetts and Connecticut have done it.  He noted, in passing, that the EITC exists (augmented on the city level, by the way) to “incentivize work.”  Then he called the minimum wage “another way to help those who can only find jobs with entry-level wages by incentiviz[ing] and reward[ing] work.”

Huh?  If you “can only find jobs with entry-level wages,” chances are you only don’t have the skills to command a higher wage.  So now Bloomberg and Silver, in order to “help” you, want to force employers to raise the cost of hiring you.  Which means there will be fewer of those jobs to go around.

So just how high will the wage go?  Bloomberg, like Silver, didn’t say.  He said it needed to be“high enough so people can get by on it without having a negative economic impact.”  But that’s the point of the EITC, along with Food Stamps and Medicaid.  If Bloomberg wants to do more to help people “get by on” low-wage employment, he ought to expand the EITC again and be done with it.

When you hear this kind of exceptionally muddled logic coming from the mayor, it’s a sure sign that his real aim is political.  In this case, it seems obvious that one of Bloomberg’s aims to deflect criticism of his threat to veto a bill that would set a $10 minimum “living wage” for recipients of city economic development subsidies. In the process, however, he adopted the same flawed logic as proponents of that increase.  Instead of negotiating a compromise that would affect the city alone — e.g., “how about we say $9 and call it a deal?” — he’s going to help Silver saddle the entire New York economy with a higher minimum, reducing entry-level job opportunities and increasing employer costs across the Empire State.

About the Author

E.J. McMahon

Edmund J. McMahon is a senior fellow at the Empire Center.

Read more by E.J. McMahon

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