New York Minimum Wage Law: Lessons For the Rest Of the Nation

Mario Cuomo, the New York governor, has reached a deal with Republicans in the state legislature that will augment the minimum wage to $9 an hour in 2015. This increase will be a boost to many workers in New York who are still struggling to provide for their families although they are working full time.

During the State of the Union Speech, Barack Obama proposed an increase in the minimum wage similar to the plan that has been tentatively approved by lawmakers in New York. Unlike Republicans in the state legislature of New York, John Boehner, the Republican Speaker of the House of Representatives, came out against the proposal. The public strongly supports a minimum wage hike. If Republicans in Congress, once again, try to thwart the wish of a large majority of Americans by preventing such an increase, they will continue to badly damage the image of their party.

Before 2007, the minimum wage was $5.15. After gaining control of Congress, Democratic lawmakers successfully pushed for an increase. The law, which increased the minimum wage to $7.25, was signed into law by George W. Bush. 

It has been, therefore, almost six years since there was a minimum wage hike. Meanwhile, the “real value” of the minimum wage has declined as a result of inflation. In fact, according to the Economic Policy Institute, the minimum wage was worth much more in 1968 than it is today. For instance, the I indicated that when adjusted for inflation, the 1968 minimum wage would be equal to a yearly salary of $17,080, whereas the current minimum wage amounts to an annual salary of $14,500. In other words, the purchasing power of millions of workers is much weaker today than it was more than four decades ago.

In making their argument against an increase in the minimum wage, conservatives never fail to point out that such a wage hike would have a deleterious effect on job growth. In voicing his opposition to Obama’s wage increase proposal, Speaker Boehner emphasized this very point. But many academic studies have shown that a raise in the minimum wage would not have an adverse impact on jobs. Equally important, a number of prominent economists have endorsed a minimum wage increase.

The utility of a minimum wage increase has been recognized by many in the business community. Wal-Mart supported the previous push that augmented the minimum wage from $5.15 to $7.25; Wal-Mart could well support the new proposal to increase it to $9. Two other important business leaders already came out in support of the new effort to hike the minimum wage to $9. For instance, Howard Schultz, the CEO of Starbucks, said that he would be in favor of an increase. Craig Jelinek, the head of Costco, went even further, saying that he would support an increase to more than $10.

Like all business leaders, these CEOs want to run profitable businesses, which begs the question: Why would they support the new effort to raise the minimum wage?

Academic studies show that when low-wage workers receive better compensation they are less likely to quit their jobs and they are more likely to spend what they earn. In other words, when workers are better compensated, they become “better consumers” as the founder of Costco once put it. That is also why Wal-Mart supported the previous effort to increase the minimum wage. Those who run Wal-Mart know that many customers who frequent their stores are low-wage workers. Hence, the more discretionary income these workers have, the more likely that they would spend that money at Wal-Mart.

After the election, the chairman of the Republican National Committee, Reince Priebus commissioned a report in order to assess the reason why the party has become so unpopular in order to help the GOP rebrand itself. The report, which was dubbed the autopsy, revealed that many voters saw the party as “scary,” and “out of touch.” The rejection of its congressional leaders of the highly popular proposal to increase the minimum wage would make it even more difficult for the party to shed its out-of-touch image.

But if the national leaders of the GOP are really serious about changing the voters’ perception of the party, it would be a good first step if they were to follow the example of Republicans in the New York state legislature.