Minimum wage

NEW YORK STATE MINIMUM WAGE

By Alexis Lake, Cole Rosen & Joshua Smith

Agenda ¨

Federal vs. state minimum wage

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Demographics

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Economic principles

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Pros and cons

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Perspectives from business owners and economists

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Conclusion

Federal Minimum Wage ¨

Lowest hourly wage, also known as the “pay floor”

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Current rate is $7.25 per hour, set in July 2009

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States, counties, regions, or cities can set their own minimum wage rates: ¤

29 states and Washington, D.C., have a minimum wage higher than the federal minimum wage

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40 localities have minimum wages above their state minimum

State Legislation 2018 Highlights “Eighteen states began the new year with higher minimum wages.

Eight states (Alaska, Florida, Minnesota, Missouri, Montana, New Jersey, Ohio, and South Dakota) automatically increased their rates based on the cost of living, while ten states (Arizona, California, Colorado, Hawaii, Maine, Michigan, New York, Rhode Island, Vermont and Washington) increased their rates due to previously approved legislation or ballot initiatives.�

- National Conference of State Legislatures

New York State Minimum Wage ¨

Patchworked system of varying rates ($10.40 to $13.00)

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Considered the most complex system in the United States

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There are 14 different rates depending on: ¤

Type employee (tipped)

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Size of the business (10 or more, 11 or more)

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Industry (fast food, food service, hospitality, farming, etc.)

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Geographic location (New York City, counties, region, etc.)

NYS General Minimum Wage Date Effective

NYC Small Business (10 or less)

NYC Large Business (11 or more)

Nassau, Suffolk, Westchester Counties

Rest of New York State

12/31/2016

$10.50

$11.00

$10.00

$9.70

12/31/2017

$12.00

$13.00

$11.00

$10.40

12/31/2018

$13.50

$15.00

$12.00

$11.10

12/31/2019

$15.00

TBA

$13.00

$11.80

Demographics ¨

50.4% are aged between 16-24, 24% are teenagers (ages 16 to 19)

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According to the Bureau of Labor Statistics, 23.3% are ages 25 to 34

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Restaurant/food industry biggest employer of minimum-wage employees

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77% are white, while nearly 50% are white women

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Minimum-wage workers comprised 4.3% of the nation’s 75.9 million hourly-paid workers All data from 2013 Pew Research

Economic Principles ¨

Trickle-up/trickle-down economics ¤

Does not necessarily go to the less affluent citizens

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Can cost lower-wage employees their jobs

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Reduction in fringe benefits and trainings

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Related to higher high school drop-out rate

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Cost of living

Inflation ¨

The average rate at which prices rise ¤

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Good economies see a 1-2% raise each year

Minimum wage should be raised based on inflation In 1968, when minimum wage matched inflation, unemployment was lower than today (3.6-to-5)

Inflation

PROS 1 2 3 4 5 6 7

Increase in the quality of life for those who meet the minimum wage rate Greater job satisfaction among employees who receive minimum wage The potential for disposable income, which could boost the local and state economy New York State will generate more income in taxes received Possibility that a higher minimum wage will create a relief from programs designed to help poverty stricken individuals Helps employees counteract inflation Reduction in crime

CONS 1 2 3 4 5 6 7

Potential for employers to layoff employees Potential for a ‘hiring freeze’ among employers Increase in the price of goods and services Increases the risk of technological advancements harming human jobs Negative economic impact among businesses Increase in competition for jobs which could hurt young workers and workers who require entry level jobs to gain working experience More expensive costs for employers leads to an outsourcing of jobs and/ or production

Local Business Perspectives ¨

There are a wide range of perspectives regarding the minimum wage hike in New York State.

“I absolutely support a minimum wage increase and have always paid my staff at least 20% more than minimum wage. If I can do it for under $100k in sales per year, the big corporations can do it way easier than I can. I support the wage increase because I am a human before I am a business owner, and the minimum wages are way too low. It means I take a little less home and I struggle more, but I am doing the right thing so I feel better about paying it. Paying people fairly also reduces turnover and improves staff attitudes,” - Sara Caldwell, Global Taco

Perspectives Continued...

“We can raise prices and wages, but what good will that do if customers -- many on fixed incomes -- are priced out of their ability to dine out with any frequency?” - Bill Tague ‘Jerlando’s “The unintended consequences of rising minimum wages will result in the loss of tens of thousands of restaurant wait staff and support jobs. Good operators will survive, poor operators will go out of business, but the labor force will find themselves without employment opportunities.” - Mark Simiele, Owner: Wine & Glass Tour, Inc., DBA Captain Bill's Seneca Lake Cruises/Seneca Harbor Station

Perspectives Continued...

“Our wages are well above New York State minimum wage today. What will impact our business is how unions respond to the wage increases. As union and highly skilled workers see their wages rise to keep them above the new minimum, it makes it challenging for our business to lure these employees away. At that point we have to increase wages to remain competitive.”

– Gary Lake, President of CemeCon Coating Services “We are certainly feeling a strain, but that’s because we have been changing our business. For example, we serve fewer seated dinners and more take-out lunches. Last year, we invested in an online ordering and pick-up system similar to Panera. We have had more technology costs, but decreased part-time staff.”

– Amy Boon, Part Owner of Bennie’s Thai Café, NYC

Perspectives Continued...

“We have cut the number of employees we employee by approximately 15% because of reduced business hours and fewer employees desired during certain shifts…

3 employees quit because they are now making ‘too much money’ and they will lose their government benefits by making more money. They have decided it is in their best interest to be unemployed rather than work now...at least 5 employees ask that we reduce the number of hours they work each week so that the do not exceed a certain income level now. Making more money is also hurting their government benefit package…

We have had to eliminate any of the many financial incentives and have found that there has been no discernible difference in our employees lifestyle with an increase in their wages. We are asked for loans and advances as often as we were before the increase,” – Matthew Hufnagel, SUBWAY

Economist Perspectives ¨

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“Researchers at Harvard Business School and Mathematica Policy Research looked at San Francisco’s $15 minimum wage and found restaurant closures associated with the increase in labor costs.” - Harvard University Business School, April 2017 “A team of economists at the University of Washington found a reduction in employees’ work hours associated with Seattle’s rising minimum wage. The costs to lowwage workers in Seattle outweighed the benefits by a ratio of three to one, according to the study...” - The Seattle Times, June 2017 “Using a variety of empirical models, the economists conclude that each 10 percent increase in the state’s minimum wage causes a nearly five-percent reduction in California industries with a larger percentage of lower-paid employees. Based on California’s historical experience, they project 400,000 jobs will be lost in the state by the time the $15 minimum wage is fully phased in by 2022.” - Economic Policies Institute, December 2017

Conclusion ¨

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This is a very complicated situation, but agree with the humanitarian approach Federal minimum wage should be increased, but that anything higher than $11 should be decided on a city-by-city basis based on cost of living Higher federal minimum wage will help create consistency among the states

THANK YOU Questions?

References Basten, K. (2017, October 31). New York State $15 Minimum Wage and Paid Family Leave. Retrieved March 11, 2018, from

https://www.govdocs.com/new-york-state-15-minimum-wage-paid-family-leave/#cities Brainerd, J. (2018, January 2). State Minimum Wages. Retrieved March 18, 2018, from http://www.ncsl.org/research/labor-and-employment/state-minimum-wage-chart.aspx DeSilver, D. (2014, September 08). Who makes minimum wage? Retrieved March 17, 2018, from http://www.pewresearch.org/fact-tank/2014/09/08/who-makes-minimum-wage/ Doyle, A. (2018, January 8). List of Federal and State Minimum Wage Rates for 2018. Retrieved March 11, 2018, from https://www.thebalance.com/2017-federal-state-minimum-wage-rates-2061043 Duran, A. (2018, February 02). New York State Minimum Wage Laws Across The State. Retrieved March 11, 2018, from https://www3.swipeclock.com/blog/new-york-state-minimum-wage-laws-across-state/ Employment Policies Institute. "New Study Finds $15 Wage Will Cost 400k California Jobs By 2022." Employment Policies Institute. December 2017. Accessed March 11, 2018. https://www.epionline.org/release/new-study-finds-15-wage-will-cost-400k-california-jobs-by-2022/.

Haefner, Charles (2018, March 13) “Legislature backs the wage tip credit system� Retrieved March 17th 2018 from www.odessafile.com.

References Harding, R. (2017, December 29). NY minimum wage to increase Dec. 31. Retrieved March 11, 2018, from http://auburnpub.com/blogs/eye_on_ny/ny-minimum-wage-to-increase-dec/article_ce5f51c0-ebfe-11e7-9630-db7f7b6d2e39.html Luca, D. (2017, April 11). Survival of the Fittest: The Impact of the Minimum Wage on Firm Exit. Retrieved March 11, 2018, from https://www.mathematica-mpr.com/our-publications-and-findings/publications/survival-of-the-fittest-the-impact-of-the-minimum-wage-on-firm-exit Ncsl.org (2018, January 2) “STATE MINIMUM WAGES | 2018 MINIMUM WAGE BY STATE” Retrieved march 17th 2018 from: http://www.ncsl.org/research/labor-and-employment/state-minimum-wage-chart.aspx ProCon.org “Should the Federal Minimum Wage be Increased”. Procon.org. Retrieved March 15th, 2018 from: https://minimum-wage.procon.org Scheiber, N. (2017, January 10). Higher Minimum Wage May Have Losers. Retrieved March 11, 2018, from https://www.nytimes.com/2017/01/10/business/economy/national-minimum-wage-.html Tu, J. I. (2017, June 27). UW study finds Seattle's minimum wage is costing jobs. Retrieved March 11, 2018, from https://www.seattletimes.com/business/uw-study-finds-seattles-minimum-wage-is-costing-jobs/