by Ray Keating
The bad economic apple does not fall far from the tree –
especially in New York.
That’s clear with Governor Andrew Cuomo’s effort called the
Mario Cuomo Campaign for Economic Justice, named for his late father who also
was a governor of New York. What’s the point of this campaign? To jack up New
York’s minimum wage to $15 per hour – that is, more than double the federal
mandate of $7.25 per hour.
Like his father, Andrew Cuomo has a tough time understanding
economics, including the economics of the minimum wage.
New York already imposes a high minimum wage at $9.00. For
good measure, Cuomo had his labor commissioner impanel a wage board, which in
July of last year recommended a $15 minimum wage applied to employees of
fast-food chains. This will be phased in by the end of 2018 in New York City
and throughout the rest of the state by mid-2021.
The current Cuomo campaign wants to expand the $15 wage
mandate to all industries. On the effort’s website, it says, “A campaign is underway to make New York the
first state in the nation to adopt a $15 an hour minimum wage.” Why? According
to the Cuomo campaign, “A reasonable minimum wage is a necessity to improve the
standard of living for workers, encourage fair and more efficient business
practices, and ensure that the most vulnerable members of the workforce can
contribute to the economy.”
Of course, all of this amounts to nothing more than
political wishful thinking and pandering.
The politics and the economics of raising the minimum wage
are unmistakable – but they also happen to be diametrically opposed.
Consider, for example, that according to a Siena
College poll released on February 1, 65 percent of New York voters support
raising the state’s minimum wage to $15. The problem is that government cannot
simply dictate to businesses what they must pay individuals, without there
being serious, negative consequences. After all, if it could, then why stop at
$15 an hour. Why not $50, or $100?
Contrary to what many politicians and voters apparently
think, a higher minimum wage only raises costs for businesses, while hurting
young, low-skilled, low-income workers by reducing job opportunities.
The economics of the minimum wage are clear, and not really
in any serious dispute. For example, in a 2007 study, economists David Neumark
(University of California-Irvine) and William Wascher (Board of Governors of
the Federal Reserve System) reviewed the economic literature since the early
1990s on the employment effects of the minimum wages. They concluded: “[T]he
oft-stated assertion that the new minimum wage research fails to support the
conclusion that the minimum wage reduces the employment of low-skilled workers
is clearly incorrect. Indeed, in our view, the preponderance of the evidence
points to disemployment effects.”
As for the impact on business, consider an Employment
Policies Institute (EPI) study released in May 2006 written by economist Joseph
Sabia from University of Georgia. It looked at the effects of a higher minimum
wage, including on the small business and retail sectors. EPI noted that the “results
confirm the consensus economic opinion that increases in the minimum wage
decrease employment, particularly for low-skilled and entry-level employees.”
And as for small businesses and the retail sector: “A 10 percent increase in the minimum wage is
associated with a 2.7 to 4.3 percent decline in teen employment in the retail
sector, a 5 percent decline in average retail hours worked by all teenagers,
and a 2.8 percent decline in retail hours worked by teenagers who remain
employed in retail jobs. These results increase in magnitude when focusing on
the effect on small businesses. A 10 percent increase in the minimum wage is
associated with a 4.6 to 9.0 percent decline in teenage employment in small
businesses and a 4.8 to 8.8 percent reduction in hours worked by teens in the
retail sector.”
For good measure, studies overwhelmingly show that raising
the minimum wage is ineffective in reducing poverty rates, particularly given
the reduction in job opportunities.
Rather than political ignorance and pandering winning out on
economic policy matters, including the minimum wage, in New York, wouldn’t it
be refreshing if Governor Andrew Cuomo managed to align policymaking with
actual economics? But alas, it’s probably too much to have the apple indeed
fall far from the tree.
______________
Mr. Keating is an
economist and novelist who writes on a wide range of topics. His Pastor Stephen
Grant novels have received considerable acclaim, including The River: A Pastor
Stephen Grant Novel being a finalist for KFUO radio’s Book of the Year 2014,
and Murderer’s Row: A Pastor Stephen Grant Novel winning for Book of the Year
2015.
The Pastor Stephen
Grant Novels are available at Amazon…
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