The Minimum Wage
In recent weeks Sheldon Silver has taken time out from advancing the interests of older generations and politically connected interests (at the expense of the common future and the less well off), and proposed an increase in the minimum wage for New York State to a higher level than the federal minimum wage. Mayor Bloomberg has concurred. In response, the predictable battle has emerged between those who claim that a higher minimum wage would wipe out jobs that businesses could not afford to fund at those levels, and those who claim that the higher wages would lead to more consumer spending and thus create jobs. In reality, however, both sides are right, about different places. As I’ve noted previously, a higher than the U.S. mandated minimum wage makes perfect sense in Manhattan, where Silver and fellow supporter Mike Bloomberg are from, and no sense in Upstate New York. The higher minimum should not be imposed on Upstate; neither should Downstate be precluded from a higher minimum because of Upstate objections.
The main argument for a higher minimum wage is that New York is a high wage, high cost of living state where only powerless and exploited workers are paid so little. That is a fair argument for Downstate, where the average payroll per private sector worker, excluding the overpaid financial sectors, has been about one-third higher than the U.S. average year-after year. The federal minimum wage is $7.25, but Sheldon Silver has proposed a minimum wage of $8.50 for the entire state. To be proportional to the average private sector wage in Downstate New York, the minimum wage would in fact have to be $9.65, not $8.50.
In Upstate New York, on the other hand, the average private sector worker earns less than the average private sector worker in the U.S. Outside the Capital District, with its concentration of high-paid government workers, Monroe County was the only county north of I-84 with a per capita income above the U.S. average. And that was a couple of years ago, before Kodak went Chapter 11. Private wage levels are even lower; the best off people Upstate are the retired, and government workers funded by taxes collected in part in Downstate New York.
In the U.S. every generation has been poorer than the last, as a result of the self dealing of those now 55 and over, for 30 years. In New York City, however, this trend has been somewhat obscured by the fact that many of the most advantaged young people have been flocking here and fleeing the shrinking opportunities in the places they come from. And by the fact that the city was relatively disadvantaged, and in decline, 30 years ago. The young adults in Manhattan and Brownstone Brooklyn seem more prosperous than in the past, but they are not representative of their generations.
Upstate is more like most of the U.S., where high-wage factory jobs have been replaced by low-wage service jobs, or low wage factory jobs for new hires under multi-tier contracts intended to ensure the pensions of older and retired workers. There, the typical starting wage for the best jobs is falling toward $9.00 per hour, generally with no health or retirement benefits, as in places such as Ohio or Georgia or Texas. The peak salary young workers can expect is probably around $16.00 per hour. Fortunately, the cost of living is lower Upstate than Downstate. Unfortunately, it is higher than in Ohio, Georgia or Texas due to the taxes required support much richer public employees. A higher minimum wage would not only raise the cost of living Upstate, but might displace some jobs serving national markets, rather than local consumers, to other states with just the federal minimum. The minimum wage should remain at the federal level Upstate.
In Downstate New York, on the other hand, those sectors serving national and international markets tend to pay high wages. They are overwhelmingly concentrated in Manhattan, the county with the highest average wage level, and in the affluent Downstate Suburbs. (Non-high wage sectors have in fact fled the New York area for other, cheaper places, unless they are tied to local consumers). Minimum wage workers Downstate are overwhelmingly concentrated in businesses serving local consumers. In this situation, low wages at the bottom don’t create any additional jobs, and higher wages would not lose jobs But a higher minimum wage would increase the cost of living of those with advantages as it was passed on to consumers in higher prices. Including the political/union class and the one percent – the very people most connected to Silver and Bloomberg.
The housing in Manhattan and exclusive Downstate suburbs is too expensive for most low-wage workers to occupy, due to the operation of the free market in the city and due to exclusionary zoning intended to keep the less well off out in the suburbs. Most of the low-wage and moderate workers who hold jobs in these areas are forced to commute in from the outer boroughs of Brooklyn, the Bronx and Queens, a few poor older cities in Hudson County, New Jersey, and a few poor suburban towns such as Yonkers and Hempstead. High commuting costs, therefore, are combined with low wages for these workers.
The low wage workers of Manhattan are forced to use a subway system that is being de-funded by debts run up by older generations, and public employees are retirees who have become much better off compared with the lower 2/3 of private sector workers. The transit ride to those Manhattan jobs is increasingly expensive, crowded, and soon to become unreliable. In addition, even higher fares will be needed to prevent the collapse of the system, higher than low-wage workers can afford.
Those low wage workers holding jobs in exclusive suburbs have it even worse. They are forced to revenues commute on services such as Long Island Bus, which are far worse than the subway, or expensive commuter railroads. Often they are forced to pack into the limited number of low cost housing options available, generally illegal subdivisions of one family homes that violate zoning rules, and travel to work on foot by bicycle on suburban roads while at risk of being run over by SUVs.
I would suggest that the minimum wage in Manhattan, Staten Island, Nassau, Suffolk, Westchester, Rockland and Putnam should be $9.65 per hour, and should remain one-third higher than the federal minimum as it increases.
The boroughs of the Bronx, Brooklyn, and Queens are a middle case. Most of those who work there and are not public employees earn as little as private sector workers Upstate, but the cost of living is higher. Perhaps a minimum wage somewhere between $7.25 and $9.65 is appropriate there.
One thing is for certain, a higher minimum wage will increase the cost of living for other, more privileged workers downstate. As I noted when I ran against the state legislature, as much against Sheldon Silver as against his local minion:
“There is an exchange of value between private-sector workers and public-sector workers, with each working to provide goods and services for the other, but there is a critical difference in the way each is paid. In the private market all transactions are voluntary, and if the seller does not provide "fair value" in goods or services, the customer may go elsewhere for a better deal. Whenever there is a monopoly, it assumed that consumers are vulnerable to abuse. In the public sector, on the other hand, money is collected from the ‘customers’ up front in taxes, and is paid to public employees and contractors regardless of whether the customers are satisfied. The question is, given that the government almost always is a monopoly, do the customers receive ‘fair value’ in exchange? The answer is often ‘no.’”
Many of the customers of New York’s public services earn just somewhat more than the minimum wage, and some earn less – as even the existing minimum wage is seldom enforced. Many low wage workers are forced to work off the books, or as “freelancers,” earning less so their employers can satisfy the demands of the retired, the unionized, and the one percent for more for less, a trend noted by liberal economist Robert Reich in the Financial Times. “At a deeper level the crisis marks the triumph of consumers and investors over workers and citizens. And since most of us occupy all four roles, the real crisis centres on the increasing efficiency by which we as consumers and investors can get great deals, and our declining capacity to be heard as workers and citizens.”
Not all workers. Not by public sector monopolists who can force people to pay. For them, the consumers don't matter. The state legislature has acted over and over again to enrich the political/union class, with retirement enhancements that raise costs without even attracting more motivated workers. The federal government bailed out the richest white collar workers in the country, on Wall Street, and the riches blue collar workers in the country, in the auto industry. In a deal that included lower wages and benefits for younger workers. It wouldn’t surprise me if the public employee unions secretly opposed higher wages for the serfs, or would demand to be compensated for higher living costs. We’ll see how it plays out.
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