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Column: Crunching some numbers on upstate’s minimum wage increase

For upstate New York’s lowest-paid workers, it’s going to feel like 1970 all over again.

As budget negotiators in Albany were nearing a deal that could raise the state’s minimum wage for upstate workers, possibly to $12.50 an hour over the next five years, that works out to a 39 percent pay raise, or better than 7 percent a year.

It’s a compromise that would give Gov. Andrew M. Cuomo the higher minimum wage that he had been pushing for, but would fall short of the one-size-fits-all increase to $15 that he had been seeking.

The compromise would reflect the reality that upstate’s cost of living is far lower than downstate’s, easing – but not erasing – worries that a higher minimum wage would drive the upstate wage scale completely out of whack.

Still, upstate businesses won’t be happy with any increase in the minimum wage, and the compromise would force some into reconsidering just how many low-skilled workers they truly need and how many can be replaced by technology such as self-ordering kiosks in fast-food restaurants.

But sometimes, it’s helpful to look back at where we’ve been. The compromise plan would push the state’s minimum wage to the upper limits of its value over the last 54 years, but it wouldn’t break any precedents that were set in the late 1960s and early ’70s, when the purchasing power of the state’s minimum wage was at its highest. Until 1962, the state had minimum wages that varied by industry. It started off at $1 and went up every two or three years, hitting $1.85 an hour in 1970. If you adjust for inflation, the purchasing power of the 1970 minimum wage equaled $11.31 an hour in today’s dollars.

Since that peak, the minimum wage has been badly eroded by both inflation and reluctance in both Washington and Albany to increase it. By 1990, the purchasing power of the state’s minimum wage was just $6.89. Sporadic increases since then – including Cuomo’s push to raise the state’s minimum beyond the $7.25-an-hour federal mandate – have brought it back up to today’s $9 an hour.

The Governor’s Office, in a bid to build support for the $15-an-hour proposal, likes to argue that if the minimum wage had kept rising with inflation since its 1970 peak, it would be worth $12.18 in today’s dollars.

But that’s a bit of revisionist history, picking the highest possible starting point, rather than the real starting point in 1962.

Regardless, $12.50 an hour still sounds like a lot, especially in Erie County, where the average wage is a little more than $21 an hour.

Yet remember this: Just as inflation steadily cut into the purchasing power of the minimum wage during the ’70s and ’80s, the rising cost of living will ease the blow to businesses of the coming increase.

If we assume that inflation remains mild at 2 percent a year, the purchasing power of that $12.50 an hour minimum wage would be whittled down to $11.30 an hour five years from now. And that’s almost exactly what the minimum wage would have bought back in 1970.

Read David Robinson’s regular updates on the Buffalo Billion and economic development at BuffaloNews.com. Follow David on Twitter @drobby email: drobinson@buffnews.com