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Minimum wage reality check

Perhaps you saw the piece that ran in the Buffalo News over the weekend called “Raising the minimum wage is good economics” co-authored by an economics professor at SUNY Buffalo. Well, hopefully you don’t know anyone who is taking that professor’s class, because his reasoning is way off base.

Our Vice-President Ken Pokalsky decided to give a few of the more outlandish claims in the piece the Minimum Wage Reality Check treatment:

“In Seattle, the first city to adopt a $15 minimum wage, unemployment just hit an eight-year low of 3.6 percent.”

Reality Check: Seattle is not at a $15 an hour wage today, the city’s phased-in wage is currently at $11 an hour. Moreover, Seattle wages could be depressing jobs in low wage sectors, while others continue to grow. We need to wait and see. But job counts and unemployment rates with an $11 an hour wage isn’t evidence of what job counts and unemployment rates will be under a $15 an hour wage.

“In fact, Nobel Prize-winning economist Paul Krugman has said,”

Reality Check: The rest of the sentence doesn’t matter. Paul Krugman is a left of center political commentator now, regardless of his prior work. What he says is hardly evidence of anything, other than his blatant bias.

“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.”

Reality Check: So what, this applies only to vendors who VOLUNTARILY choose to do business with the city, and only applies to contracts > $50,000.

“Inflation in this country over the last century has averaged over 3 percent.”

Reality Check: Again, what is the point? Over the last 10 years inflation has averaged a smidge over 2 percent. The last 5 years it’s been under 2 percent. So why use a figure 50% higher than recent trends? Unless of course you’re simply trying to deliberately mislead.

Facts not on union’s side

You know you’ve hit a nerve when the opposition resorts to misleading arguments.

Today’s Newsday features an article where the Long Island Labor Federation dismisses a new report by the Long Island Association projecting significant job losses resulting from a $15 an hour minimum wage. The Newsday story is here. (it is behind a paywall, sorry)

According to the Federation, the LIA’s report projecting job losses of up to 23,000 is “disproved” by “numerous” studies, and cites a letter from “600 economists” to President Obama arguing that a minimum wage increase won’t hurt jobs. The Long Island Federation of Labor is being completely disingenuous. Five seconds of searching on the web finds the letter being referred to here. While the federation is right, “600 economists” do support an increase in the federal minimum wage, the proposed increase is from $7.25 to $10.10 an hour. That’s nowhere near $15 an hour, the target wage that was the focus of the LIA’s analysis and a recent Empire Center report. In fact, New York’s minimum wage is already set to go to $9 at the end of the year, a level close to the 600 economists’ target level. At $9, New York’s minimum wage will be one of the highest in the U.S.

We are unaware of “numerous” other studies that “disprove” the projections from the Empire Center and the Long Island Association on a $15/hour minimum wage. Most studies we have seen look at far lower target levels. For example, a CBO study issued in 2014 suggested that a $10.10/hr. minimum wage would reduce national employment by 500,000. That same study conceded that the actual job impact could be “very slight” or climb as high as 1 million. New York is talking about going well beyond $10.10 an hour and the only credible studies to date indicate significant job loss.

A numbers game

Syracuse Mayor Stephanie Miner made news, and received plaudits from liberal activists like The Working Families Party, earlier this week when she announced she was increasing the minimum wage for all city employees to $15 an hour.

Miner estimates the move will affect 61 of the city’s 1700 employees and cost roughly $220,000 per year. It’s not an eye-popping number, and probably speaks more to the overall high wages of city of Syracuse employees than anything else, but it’s also not chump change. The increase is sure to have an impact, and becomes increasingly questionable when put into context with Miner’s own comments when she submitted her budget last April. From the Syracuse Post Standard (emphasis added):

“Her 2015-16 budget anticipates a $9.2 million deficit, which will have to be paid for out of cash reserves unless city officials can cut costs during the year. That’s the smallest deficit since Miner took office in 2010, but a sign that Syracuse continues to face a fiscal crisis, Miner said Tuesday.”

So, in April Mayor Miner was proposing a budget with a $9.2 million deficit that would be paid either out of a so-called “rainy day fund”, or by cutting costs. Now, just six months later, not only is Mayor Miner not cutting costs, she’s increasing them.

Rainy day funds are supposed to be used, like the name suggests, during dire financial times. Dipping into them to give artificially-inflated wage increases to dozens of city workers seems at best, misguided.

We can’t help but wonder how the people of Syracuse will feel when Miner’s next budget calls for tax increases in order to cover these increased costs.

Uber release highlights economic impact

Officials from the car-sharing service Uber were joined by Business Council President Heather Briccetti, elected officials, and local stakeholders at a news conference in the New York State Capitol yesterday.

Business Council President Heather Briccetti joined by Uber, elected officials, local stakeholders.

The news conference was called to highlight a newly released economic impact study that, among other findings, states Uber would create as many as thirteen thousand jobs in its first year of operation in upstate New York.

The full study, which can be read here, goes on to say that 350 thousand New Yorkers in areas not currently serviced by Uber have downloaded the app. Uber NY General Manager Josh Mohrer says this shows people throughout upstate New York are clamoring for the service.

In addition to yesterday’s news conference and study release, Uber has also launched an online petition giving everyday New Yorkers the chance to voice their approval of bringing Uber to all of New York State. You can sign the petition by clicking here.

Behind the Q-Poll

Most pollsters will tell you, how you ask the question can impact the answer. What they don’t always mention is the result can often significantly alter the public narrative on an issue.

Last week’s Quinnipiac University poll is a perfect example. Their press release claimed “New York poll found voters back $15 minimum wage,” and in their first poll question, “Would you support or oppose raising the state’s minimum wage to $15.00 an hour over the next several years?” participants agreed, 62 to 35%. The headline in a number of media outlets was, Q poll shows support for Governor’s $15 minimum wage proposal.

But that poll had a second minimum wage question, and the response has been largely ignored by the media.

It asked: Which of four options “…comes closest to your point of view regarding raising the state’s minimum wage,”?

  • No increase
  • an increase but less than $15
  • an increase to $15
  • or an increase above $15

For this question, 49% preferred something less than $15, slightly more than the 48% who preferred $15 or higher. Interestingly, for upstate respondents, 61% supported an increase under $15, including 13% who chose no increase. When given a range of choices, the Q-poll found that New Yorkers in fact are split on the $15 per hour proposal.

Then there is this opinion piece in yesterday’s NY Post. Michael Saltsman, from the Employment Policy Institute, used Google’s Consumer Survey tool to survey 504 New Yorkers. He first asked about a $15 per hour minimum wage, and – similar to Quinnipiac – found a support rate of 57%. But when they asked whether New Yorker’s would support that policy if it would cause some less-skilled employees to lose their jobs, the results flipped to 57% in opposition. When asked how they’d feel about a $15 minimum wage if it would cause some small businesses to close, 67% opposed it.

No doubt, there will be numerous studies on the economic impact of a $15 minimum wage. Three west coast cities– Seattle, San Francisco and Los Angeles – have adopted laws moving toward that figure, and some data are already showing job loss. Stay tuned.

New York slips in Legal Climate Ranking

The U.S. Chamber of Commerce’s Institute for Legal Reform is out with their latest rankings of state legal climates and New York State has slipped to number 21. While not a precipitous decline, we had been ranked the 18th best climate when the survey was last conducted in 2012, we are clearly going in the wrong direction. The Business Council strongly believes that more work needs to be done to ensure we do not slip further back in the pack.

Despite the setback, New York did receive high marks in two key areas, ranking in the top five in: “Having and enforcing meaningful venue requirements” and “Scientific and technical evidence”.

Here is more on the survey itself: “The 2015 Lawsuit Climate Survey constitutes the tenth fielding of the survey and builds upon previous studies, the first of which was initiated in 2002.1 Prior to these rankings, information regarding the attitudes of the business community toward the legal systems in each of the states had been largely anecdotal. The 2015 Lawsuit Climate Survey aims to quantify how corporate attorneys, as significant participants in state courts, view the state systems by measuring and synthesizing their perceptions of key elements of each state’s liability system into a 1-50 ranking. Participants in the survey were comprised of a national sample of 1,203 in-house general counsel, senior litigators or attorneys, and other senior executives at companies with at least $100 million in annual revenues2 who indicated they: (1) are knowledgeable about litigation matters; and (2) have recent litigation experience in each state they evaluate.”

You can read this year’s results, and check on the stats from prior years, by clicking here.

P-TECH Praise

During an interview that aired Monday night on NY1, Errol Louis asked new state education commissioner MaryEllen Elia why it seemed so difficult to replicate school programs and systems that work well. In her response, Elia touted the P-TECH program as a great example of effective replication.

The P-TECH school in Brooklyn — which is a collaboration between IBM, New York City Department of Education, City University of New York and City Tech—serves as the model for the New York State Pathways in Technology Early College High School (NYS P-TECH) program, which includes 26 schools (grade 9-14) across the state.

The expanding NYS P-TECH program also includes seven yet-to-be-announced partnerships whose schools will open their doors in September 2016.

The Business Council strongly supports the early college high school model, and has been instrumental in recruiting employers from around the state to partner with community colleges and school districts to collaborate on P-TECH’s innovative, STEM-focused career schools.

Watch Commissioner MaryEllen Elia’s interview here, NY1 Online: State Education Commissioner Talks School Reform, Common Core & More. (Time Warner Cable login may be required).

New York Times faults opt-out movement

A New York Times editorial board piece published on Friday, (“Opting Out of Standardized Tests Isn’t the Answer”, Aug. 14) raised concerns over New York’s 20 percent assessment opt-out rate for students in grades 3 through 8. The Times referred to the opt-out movement as an “ill-conceived boycott” that could seriously harm education reform.

The main culprit behind the damaging, heavily publicized opt-out movement has been a massive media attack by the teachers unions, whose anger over the student-growth component of evaluations has driven a campaign filled with misinformation aimed to induce anxiety among parents and students.

The Business Council has been at the forefront of support for both higher education standards and quality assessments, pointing to employers’ difficulty in finding qualified workers with skills such as critical-thinking and problem-solving. The annual assessments in grades 3 through 8 are a necessary “check-up” tool to ensure that students are being prepared for college and the work world.

While student gains in English Language Arts and math tests this year were incremental overall, it is critical that New York stick to the implementation of higher education standards and aligned assessments.

The Business Council agrees with the Times editorial board that political leaders must be vocal in their support for the tests. We also believe that additional steps should be taken to ensure that teachers and parents are able to adjust to the new, more rigorous assessments.

How are high energy costs affecting job growth?

The U.S Chamber of Commerce is out with a terrific piece highlighting the negative effect high energy costs are having on job growth throughout New England. The story is familiar to anyone who has tried to own and operate a business in New York.

One of our own member companies, Kinder Morgan, which is in the process of securing approvals for a natural gas pipeline which would run through portions of New York State, receives a mention in the post.

“Pipeline companies are itching to extend their lines to bring plentiful gas into Massachusetts; Kinder Morgan KMI +0.87% has already signed up long-term buyers for the gas it would haul in via its stalled $3.3 billion Northeast Direct line.

But that’s not going to happen, at least not anytime soon. Despite the fact that Western Massachusetts’ GDP plunged 3.6% from 2007-13 (while the U.S. overall expanded 5.6% over the same time), opposition by small, well-organized groups to any new pipeline remains as ferocious as it is irrational. “We want to prevent the overbuilding of gas infrastructure and overreliance on gas, for economic reasons and climate reasons,” says Kathryn Eiseman, head of Massachusetts PipeLine Awareness Network advocacy group. Yet thanks to her group and others like it, in January 2014 New England’s power companies, lacking gas to make electricity, resorted to burning 2.7 million barrels of emergency fuel oil–more expensive and far more toxic, pumping out twice as much carbon dioxide as natural gas. So much for “economic and climate reasons.””

New Yorkers know all too well the negative impact NIMBY-activism can have on economic growth. We encourage you to take the time to read the entire piece and let us know what you think.

Brief highlights impact of $15 minimum wage

The Manhattan Institute, a highly-regarded, nonpartisan, independent research and educational organization is out with a new issue brief examining the economic impact of raising the federal minimum wage to $15 an hour.

This is an issue close to the mind of many New Yorkers after the recent decision by the state Labor Department to recommend raising wages for fast-food workers to $15 an hour by 2018 in New York City and 2021 in the rest of the state.

According to the executive summary, The Manhattan Institute concludes:

“We find that increasing the federal minimum wage to $15 per hour by 2020 would affect 55.1 million workers and cost 6.6 million jobs. Aggregate income among low-wage workers would rise by $105.4 billion, after accounting for income declines from job losses. However, only 6.7 percent of the increase in income would go to workers who are actually in poverty.

Because the exact effect of the minimum wage on employment remains unsettled, we check the robustness of our results by employing a range of estimates from the literature that imply modest, moderate, and severe employment consequences. In each case, we analyze how the change in earnings resulting from a minimum-wage increase would be distributed across income levels.”

We find it particularly interesting that the brief finds less than 7 percent of the projected increase in worker income would go to people living in poverty. Especially since advocates often cite lifting workers out of poverty as the primary reason drastic wage hikes are necessary.

We encourage you to read the Manhattan Institute’s full report and let us know what you think.