Report: Minimum Wage Should Rise

| The Post-Journal

JOHN WHITTAKER

The next step of New York’s phased minimum wage increases will take effect at the end of December.

Previous increases in 2016, 2017 and 2018 took effect automatically, but the 2019 increase required a report by the state Division of the Budget to judge the state of the economy in the state’s regions. The Budget Division could determine a region’s economy is struggling and that an increase in the minimum wage would harm the economy. The report is one of the concessions Democrats made to Republicans who formerly held control of the state Senate when the minimum wage increase was passed as part of the 2016-17 state budget.

The report contains several interesting tidbits of information. It notes that in 2009, minimum wage workers made up about 3.1% of the state’s workforce compared to 16.4% of the workforce in 2020. Women represent 57% of the minimum wage workforce in both 2009 and in 2020 while making up 48% of the total workforce while the minimum wage workforce has aged over time.

In 2009, 41.4% of minimum wage workers were between the ages of 16 and 24, a number that has decreased to 31.3% in 2020. Fewer minimum wage employees work in leisure and hospitality jobs in 2020 than they did in 2009 (40% in 2020 compared to 60% in 2009).

“In conclusion, there is no definitive evidence to date that the positive impact the state’s rising minimum wage has had on the incomes of low-wage workers has been associated with any significant loss of jobs,” wrote Robert Mujica, state budget director, in a report required before the minimum wage can increase further. “Although the economic forecast is not without risks, the current outlook for continued growth in employment and wages at a moderate pace should allow the state labor market to absorb the minimum wage increases scheduled for 2020.”

HAS THE ECONOMY ABSORBED THE MINIMUM WAGE?

One reason to approve the increasing minimum wage, according to the state Division of Budget, is that the state’s evidence shows previous minimum wage increases have been absorbed without hurting labor demand. Mujica cites as evidence the state’s 4% unemployment rate in September 2019 and the fact that 2019 could have the lowest yearly unemployment since 1976.

“Among respondents to both the November 2019 Federal Reserve Bank of New York Empire State Manufacturing Survey and Business Leaders Survey, the factor most frequently cited as the most important for restraining their hiring plans was ‘cannot find workers with required skills,’” Mujica’s report states. “Consequently, it is likely that at least some portion of the increase in wages resulting from statutory minimum wage hikes would have occurred in any case due to increased competition for workers.”

A Federal Reserve analysis released earlier this fall argued that hiring in the leisure and hospitality industry was not hurt in New York state compared to lower-wage Pennsylvania. An analysis of Chautauqua County compared to neighboring Warren County, however, showed that Chautauqua County struggled over the five-year sample period, losing 6.7% of its jobs in the private sector leisure and hospitality industries while Warren County lost 0.5% and Erie County gained 3%. Cattaraugus County gained 6% in the same sectors while Bradford County grew 0.5%.

An analysis from the Empire Center for New York State Policy noted that the Federal Reserve did issue a cautionary note on its analysis.

“The Fed economists’ blog ends with an appropriate cautionary note,” the Empire Center wrote. “For one thing, even using their method, it’s possible that minimum wage increase reduced the numbers of hours worked, they acknowledge. (Hard hours-worked data at the county and sectoral level are not published by the state Labor Department.) Finally, as the Fed economists point out, ‘longer-term effects, if any, remain to be seen.’ It is certainly conceivable that minimum-wage differentials may affect decisions on firm location, business investment, lease renewal, and the like over a longer time horizon.’”

WHAT WILL THE ECONOMY DO?

Mujica’s analysis points to an expected “moderation” in national economic growth in 2020, though Mujica wrote there is no evidence that the economic expansion will end anytime in the near term despite slowing global growth and economic and geopolitical uncertainties that have restrained business investment and employment growth.

“These dynamics are expected to continue to adversely affect growth as we enter 2020,” Mujica wrote. “However, with monetary stimulus working its way through both the national and global economies, and the trade war not expected to escalate any further, the national economy is expected to grow 1.9% in 2020. Consistent with the national economic outlook, the New York state economy’s pace of growth is also expected to modestly decelerate in 2020, but private sector jobs are expected to grow at a still healthy pace of 1.2%, following 1.4% growth in 2019.”

An August report by the Associated Press paints a different picture. Financial markets are flashing a key warning sign of a recession, and the global economy is weakening as the U.S.-China trade war intensifies, Christopher Rugaber wrote in a story about the August realignment in interest rates on 10-year U.S. Treasury note briefly fell below the yield on the 2-year Treasury for the first time since 2007.

Rugaber wrote that many economists worry that recession odds are rising. Julia Coronado, chief economist at MacroPolicy Perspectives, sees a 40% probability of a downturn within the next 12 months, up from 30% last month. Rugaber did note that if there is a recession, many economists think it might be relatively mild because American households are in stronger financial shape than before the Great Recession. Mortgages and household debts, as a percentage of overall incomes, are lower. And ultra-low interest rates make it easier for consumers to stay current on their debts.

© 2019 The Post-Journal