Following the lead of California, New York has passed a statewide minimum wage increase to $15 by 2018.
In both states, such large increases will be unprecedented.
The increase was signed into law as part of the 2016-17 New York state budget, and will take effect depending on the size and location of the business between 2018 and 2021.
“By moving to a $15 statewide minimum wage and enacting the strongest paid family leave policy in the nation, New York is showing the way forward on economic justice,” Governor Andrew Cuomo said in a press release.
That “economic justice” comes through gambling on the wages and employment of many low-paid workers across the state. Like most politicians, passing a law is treated as a success, rather than waiting to judge the effects of the law.
It’s also a cause taken up by both Democratic presidential hopefuls, now that Hillary Clinton flipped to support it after previously opposing it.
In fairness, the debate over the minimum wage isn’t as one-sided as conservatives like to argue. It’s difficult to isolate the effects of minimum wage increases, especially as most of them tend to be marginal and slow changes. It’s also possible that higher wages can motivate workers to be more productive, and reduced turnover costs could cancel out the cost of higher wages.
However, preliminary data on seasonal teenage employment in Seattle make minimum wage increases look like the culprit for reduced employment. And, as the minimum wage gets closer to the median wage, low-skilled workers will bear the brunt of the costs. Raising prices to avoid firing workers is one way to deal with higher personnel costs, but that gets difficult to do in rural areas compared to larger, economically robust cities.
“Big states like California and New York combine a large and politically powerful urban population with a much poorer rural population that cannot afford the kinds of government interventions that the urban voters want,” Megan McArdle noted. In the name of helping low-income workers, policymakers could make their lives worse.
The way the New York increase is structured recognizes that fact. Large businesses in New York City will see their minimum wages rise first, and small businesses in rural areas aren’t affected until three or four years later.
The inherent assumption is that the economy will drive up wages enough to dull the negative effects of the increase. However, as wages have been stagnant for decades, that assumption is concerning. Especially for young workers, pushing the mandated wage higher could threaten future employment opportunities by delaying their entry into the labor force.
As politicians play social scientist in law and economics, the youngest and least-skilled stand to bear the consequences of their tinkering.