New York’s minimum wage is increasing with the new year.
The minimum wage is set to increase to $15 per hour and $16 in New York City, on Long Island, and in Westchester County. The hikes were agreed to as part of the state budget passed in 2016.
While workers may walk away with larger paychecks, not everyone is in favor of the change.
“We don't think minimum wage increases result in the benefits that advocates think. I mean, we all do self-checkout now, right, and then use self-service kiosks. And that's ultimately the cost of mandatory minimum wages on businesses if they have to find ways to automate and reduce labor costs,” said Frank Kerbein, Director of the Center for Human Resources with the Business Council of New York State.
Kerbein says the change is another policy that makes New York less competitive.
“I'm in Horseheads, New York right now, I'm about seven miles from the Pennsylvania border. It's awful easy for business to just move that seven miles,” Kerbein said.
Kerbein says more costs are being passed on to consumers.
“The tipped wage goes up, allowances for meals, and housing and uniform maintenance all go up, the minimum salary for exempt employees goes up, you're going to hear a lot of talk over the summer about the new federal overtime rule. Means almost nothing to New York employers, because New York already has the highest minimum salary to be qualified as exempt in the country,” Kerbein said.
Aaron Pacitti, a professor of economics at Siena College in Loudonville, has a different view.
“Most people view the minimum wage very narrowly. So they hear that, well, the minimum wage is going to go up. Therefore, firms are going to lay off minimum wage workers, right, supply and demand. And if the price of minimum wage workers goes up, then firms are going to hire less of them. But that's not necessarily true, because firms hire as many workers as they need to staff their operations,” Pacitti said.
Pacitti says businesses have three choices as worker costs increase.
“They can either lay off some workers and replace them with machines, or make their existing workforce work harder. Firms can raise prices, that's the second option to compensate for the higher labor costs, or firms can accept lower profits,” Pacitti said.
He says automation and job growth can coexist in a growing economy, and adds it’s in a business’ interest to keep wages low.
“Business interests frequently use the minimum wage as a scapegoat to say, well, ‘you know, the government policy that tries to lift workers out of poverty is only going to make them worse off, so what you need to do is, you know, lower business taxes so businesses can hire more workers.’ Those are myths that we tell ourselves as a country. The statistics do not bear any of this out,” Pacitti said.
Despite being on opposing sides of the issue, Kerbein and Pacitti do agree small businesses will be most impacted.
“The mom and pop store that might have one or two minimum wage employees, they might find it difficult to absorb a higher minimum wage cost,” Pacitti said.
But, Pacitti says most employers in the state are large corporations that can afford to eat that cost, and suggests using taxes from larger companies to subsidize small businesses.
According to the AFL-CIO, had inflation kept pace with productivity, the minimum wage would be over $25 per hour, but the current federal minimum wage is $7.25.
