Still struggling to recover from spring pandemic shutdowns, now facing the threat of renewed restrictions due to a second wave of COVID infections, the last thing New York’s economy needs is a state-mandated disincentive to put people back to work.

Nonetheless, at the worst possible time, a big potential obstacle to renewed hiring looms just ahead, in the form of scheduled end-of-year increases in the minimum wage for most of the state. Having already risen to $15 in New York City, the hourly minimum is scheduled by law to rise from $13 to $14 (an increase of 7.7 percent) in Long Island and Westchester, and from $11.80 to $12.50 (an increase of 5.9 percent) in the rest of the state. Only six states currently have higher statewide minimums than $11.80, and only two (California and Washington) exceed $13 statewide. The federal minimum wage is $7.25.

The next round of New York increases, which take effect Dec. 31, are not (yet) cast in stone, however. Under the 2016 law aiming ultimately for a $15 statewide minimum, Cuomo’s Division of the Budget (DOB) had the power starting in 2019 to recommend a “temporary suspension or delay” in any scheduled wage hikes, based on its “analysis of the state of the economy in each region, and the effect of the minimum wage increases” already imposed by the law.

Last year’s DOB minimum wage report relied mainly on unemployment data as supposed proof that the minimum wage wasn’t harming employment trends. As noted in this space, that analysis by the normally more credible DOB staff was “remarkably flimsy, misleading and superficial,” ignoring a drop in the labor force that contributed to labor shortages in some sectors. The analysis also ignored establishment payroll data reflecting a slowdown in job growth across much of the state last year.

This year, the data are terrible enough to undercut any happy-face labor market outlook. Consider:

  • As of October, New York’s seasonally adjusted statewide unemployment rate of 9.6 percent was statistically unchanged from a month earlier, and nearly two-and-a-half times the rate in October 2019.
  • On an unadjusted basis, the October unemployment rate was the highest since 1976, the labor force was the smallest since 1998, the number of employed residents was the lowest since 1996 and the number of unemployed was the highest on record across the entire 44-year period covered by the current data series.
  • New York’s private payrolls are still down nearly 12 percent from the level of a year earlier, pointing to a slower recovery rate than any state except Hawaii.
  • Unemployment filings have been greatest from sectors with large concentrations of minimum-wage workers—leisure and hospitality (including restaurants) and retail trade.
  • DOB’s latest financial plan update predicts that employment in the state won’t return to pre-pandemic levels for “several years.”
  • As of November 16, the number of small businesses open in New York was almost 28 percent below the January level, and small business receipts in the state were down more than 39 percent, according to economic tracking data compiled by Harvard University’s Opportunity Insights project.

At a time of negligible inflation and limited pricing power for businesses, a further 5.9 percent to 7.7 percent increase in hourly labor costs could deal a fatal blow to those small employers that have somehow managed to survive the pandemic so far.

In this continuing economic crisis, New Yorkers need jobs, and New York’s surviving small businesses need breathing room. The new data provides all the excuses DOB (read: Cuomo) needs to postpone the next scheduled minimum wage increase.

 

 

About the Author

E.J. McMahon

Edmund J. McMahon is Empire Center's founder and a senior fellow.

Read more by E.J. McMahon

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