HIGHER MINIMUM WAGE WON'T HURT ECONOMY
By: Mark Poloncarz
Date: January 21, 2005
The following appeared in the Jan. 21, 2005 edition of Business First Buffalo
Chris Koetzle concludes in his viewpoint published in the Jan. 7, 2005 edition of Buffalo Business First that the recent increase in New York State's minimum wage to $7.15 an hour by 2007 will "cause significant harm to small businesses and local economies, particularly in Upstate New York." Without quoting any factual sources, he goes on to note that the increase "is an anti-worker, anti-business policy that only leads to fewer jobs." However, when you examine the facts surrounding the issue nothing could be further from the truth.
According to a report issued in July of 2004 by the non-partisan Fiscal Policy Institute there is no evidence that a higher minimum wage would be harmful to New York's economy. It noted that the 2004 minimum wage was 71 percent lower than it was at its peak in 1970 when adjusted for inflation ($8.83 compared to $5.15). It determined that when fully phased in by 2007 the increase will directly benefit 740,000 New Yorkers, with most (58 percent) of the benefit going to workers in low wage families.
Moreover, the Institute concluded that an increase would actually benefit New York's economy. It found that in the 12 states that had a higher minimum wage than the federal base, from 1998 to 2004 job growth was greater than the level seen in states with the federal minimum (6.1 percent to 4.8 percent). Even when you take into account the ancillary business costs potentially resulting from the legislation, the Institute determined that for small businesses the number of businesses and rate of employment grew faster in the 12 higher wage states than in those where the federal minimum prevailed. It should be noted that the twelve higher wage states were not in the burgeoning economies of the south or southwest, but in the allegedly faltering economies of the northeast and west.
This analysis would seem to be confirmed by the 1999 annual report of the President's Council of Economic Advisers that concluded that the 1996 and 1997 federal minimum wage increase resulted in no adverse employment effects.
Furthermore, an increase in the minimum wage may provide additional positive impacts on other less quantifiable, yet important social and economic issues. For example, the non-partisan Center on Budget and Policy Priorities issued a report which found that a 1997 increase in Oregon's minimum wage above the federal minimum corresponded with a drop in participants in the state's welfare program, i.e., more welfare recipients went back to work because of the greater earning potential. Thus, the minimum wage increase could positively impact New York's economy by promoting the return to work of some welfare recipients, which in turn cuts welfare costs and increases the tax base.
While we will truly not know the economic impact of the minimum wage increase for some time, if recent history is any indicator, New York's legislature, including the Republican controlled Senate, was correct to override the governor's veto because the increase will produce benefits for all sectors of the economy, including upstate.
Mark Poloncarz, an attorney with Kavinoky Cook LLP, is co-founder of the WNY Coalition for Progress.
© Mark C. Poloncarz, 2005.
The opinions expressed herein are solely those of the author and do not represent those of the WNY Coalition for Progress
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