New York's two-tier system offers testing
ground in minimum wage debate
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[June 30, 2016]
By Edward Krudy
NEW YORK(Reuters) - When New York and
California became the first states to lift the minimum hourly wage
towards $15 earlier this year, New York state adopted a two-speed system
that makes it a perfect testing ground for both advocates and opponents
of government mandated pay hikes.
While California set a state-wide schedule of reaching the $15
level by 2022, New York lawmakers struck an 11th hour compromise
that created different timetables for New York City and neighboring
counties and the "upstate" regions where incomes are lower and labor
markets less robust.
Under the plan minimum wages in the northern and eastern parts of
the state would be initially lifted from present $9 to $12.50 by
2021 rather than $15 as in New York City and adjacent areas and only
later upstate might gradually catch up, although there is no fixed
It will be almost six years before $15 and $12.50 minimum wage
levels will be reached throughout the state, but other states and
advocates of a higher national minimum wage standard will be closely
watching how New York state's regions will respond to its two-speed
To be sure, some big cities have adopted their own targets - notably
San Francisco, Los Angeles and Seattle - but New York is the first
big state to experiment with a state-wide two-tier setup.
Governor Andrew Cuomo's administration has estimated that a $15
minimum wage across the state would bring its economy $15.7 billion
per year in additional spending by minimum wage earners.
Based on such calculations, a $12.5 minimum wage in upstate New York
would bring about $2.6 billion rather than $6 billion to the region,
according to Reuters estimates, confirmed by an analysis by
economists from the Fiscal Policy Institute and the Rockefeller
Institute. (Graphic: http://tmsnrt.rs/1WGO59y)
The governor's office did not respond to a request for comment for
this article. When the deal was announced in early April Cuomo said
a "calibrated" minimum wage path that was "responsible and a
positive for the overall economy" could be an example for the rest
of the country.
The FPI's James Parrott, who together with Donald Boyd, director of
fiscal studies at the Rockefeller Institute, prepared the analysis
for Reuters, said two-speed minimum wage hikes could mean less
growth for the upstate economy.
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"I'm not sure the proponents of a slower phase in upstate realize
the magnitude of the impact," said James Parrott, FPI economist who
helped with the analysis.
Republican lawmakers and business lobbies have questioned the
Democratic administration's calculations, which did not account for
any possible impact on jobs, business investment or public sector
Groups that lobbied against a state-wide $15 minimum wage have
argued that economic growth and demand in the northern parts of the
state were not strong enough to cope with higher labor costs and
moving at the same pace as New York city could lead to losses of
hundreds of thousands of jobs.
"The upstate economy is very, very different from the down-state
economy," said Greg Biryla, Executive Director of Unshackle Upstate,
a lobby group for upstate businesses.
Not surprisingly, some upstate workers feel short-changed by the
compromise struck in the state capital.
Lorie Compton, 43, who works as a care worker in a nursing home for
a non-profit in Ithaca, New York, and raises two teenage daughters,
says on $11.40 an hour she cannot afford her employer's health
insurance program or even a visit to the movies.
"I'm poverty level, let me put it that way," she said. "It should be
$12.50 now and then they can bump it up."
But some economists say for big states with substantial regional
disparities, a two-tier system may have its merits.
"It is smart to adjust minimum wage levels with some sensitivity to
local prices," said Jared Bernstein, an economist at the Center on
Budget and Policy Priorities and former director of the President
Obama's Task Force on the Middle Class. "There is a reason why $15
makes more sense in San Francisco than in Mississippi."
(Reporting by Edward Krudy; Additional reporting by James Odato in
Albany; Editing by Daniel Bases and Tomasz Janowski)
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