Minimum Wage: Rhetoric and Reality

Gov. Andrew Cuomo is pushing hard for a $15-per-hour minimum wage in 2016. While it is possible that the minimum wage could be increased through stand-alone legislation, it is likely that this issue will be resolved within the context of the state budget. By the end of this month, New Yorkers will likely find out whether the Governor will get the minimum wage he seeks.

On the minimum wage issue and on many others, Gov. Cuomo is pursuing an agenda that has more to do with his own political goals and ambitions than it does with the needs of his constituents. The minimum wage in New York has increased three times in the past three years, and is currently set at $9 per hour. The Governor’s proposed increase would raise the wage by an astronomical 66.67%. A huge minimum wage increase would likely lead to unintended consequences, including widespread layoffs of low-wage employees; reductions in work hours; less hiring in low-wage categories, disproportionately affecting young workers; a higher unemployment rate; increased education costs, which could cause New York’s sky-high property taxes to become even more unmanageable; greater use of automation by businesses in an effort to reduce staffing levels; a decrease in entrepreneurship; outmigration of New York businesses to other states with lower minimum wages; creation of a new economic disincentive for employers in other states to set up shop in New York; greater use of gray-market approaches where workers are paid under the table; and a higher cost of goods and services for everyone, including low-income New Yorkers. Ironically, the $15-per-hour proposal would likely harm the very population it seeks to help.

Instead of pushing for a $15-per-hour minimum wage, elected officials should consider effective anti-poverty measures such as an increase in the earned income tax credit, wage subsidies as an alternative to welfare, incentives for businesses that employ recent welfare recipients and/or provide on-the-job training, and removal of the marriage disincentives in our entitlement system.

The bottom line is this: Attempts to artificially inflate workers’ wages tend to lead employers to seek alternatives to hiring and retaining low-wage employees. As economist Thomas Sowell once said, “‘The real minimum wage is always zero.’”