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Another Voice: Raising the minimum wage is good economics

By Fred Floss and Sam Magavern

Gov. Andrew M. Cuomo has made a sensible proposal to raise New York State’s minimum wage slowly over time. In New York City, the rate would rise to $15 by 2018; in the rest of the state, it would not hit $15 until 2021. Americans overwhelmingly agree that a job should pay enough to keep you out of poverty, and polls show that New Yorkers favor the governor’s proposal by a margin of 59 percent to 38 percent.

Economists tend to agree; more than 200 of them have endorsed raising the federal minimum wage to $15 by 2020. Unfortunately, however, big business groups and their advocates are trying to protect their profit margins by arguing that jobs will be lost.

The Empire Center has recently released a report using flawed economics to make a version of that argument. Actually, what it argues is not that current workers would lose their jobs, but that jobs will not grow as fast as otherwise predicted. More careful analysis, however, suggests that the Empire Center’s report is wrong. In fact, Nobel Prize-winning economist Paul Krugman has said, “There’s absolutely no reason to think that a $15 minimum wage would be a problem for New York.”

The vast majority of recent studies have shown little or no jobs impact from raising minimum wages. In Seattle, the first city to adopt a $15 minimum wage, unemployment just hit an eight-year low of 3.6 percent.

The governor’s proposal is moderate. To give some perspective, the City of Buffalo defines a living wage as enough to keep a family of three out of poverty; in 2016 the rate will be $13.06 per hour. Inflation in this country over the last century has averaged over 3 percent.

If we assume 3 percent inflation per year, the city’s living wage rate will be $15.14 in 2021. In real terms, a $15 minimum wage in 2021 is just slightly higher than what the minimum wage was worth in 1976. In New York State, business profits per worker grew 61 percent between 2001 and 2013.

Should we really let real wages continue to drop, just so that profits can rise even faster?

There are many ways that society will benefit from a more reasonable minimum wage. Fewer workers will need to take two or three jobs to survive, and this will allow them more time with their children – one key to success at school and in life. Taxpayers will have to pay less to support public assistance programs such as Medicaid and food stamps that currently make up the gap between what workers earn and what they need to live (currently, New York spends $13 billion per year filling that gap). Most fundamentally, full-time workers and their children will no longer live in poverty.

Fred Floss is chairman and a professor in the Department of Economics and Finance at SUNY Buffalo State. Sam Magavern co-directs the Partnership for the Public Good.