Raising New York’s Minimum Wage: A Poor Way to Help the Working Poor

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State lawmakers in Albany are poised to vote on a staggering 38 percent increase in the state’s minimum wage. The increase to $7.10 an hour will not grant the majority of its benefits to poor New Yorkers, but it will deprive these individuals of necessary employment opportunities. This study, conducted by Drs. Richard Burkhauser and Joseph Sabia of Cornell University, finds the claims of lawmakers—that the minimum wage will mainly help individuals in poverty—are deeply flawed.

The majority of beneficiaries from the proposed increase are not living in poverty. According to U.S. government data, New York employees affected by the proposed hike are more likely living in families earning three times above the poverty line than in poor families. Only 14 percent of the benefits from this increase will go to families in poverty. In contrast, 59 percent of the benefits will go to families earning more than two times the federal poverty line. More than one-third of the benefits from this wage hike will go to families earning three times the federal poverty line.

The majority of beneficiaries are not only from non-poor families, but also are not the primary breadwinner for their family. Contrary to the popular belief that minimum wage earners are primarily single parents supporting a family, this study reveals that 60 percent of the beneficiaries are not even the highest earner in their family. They are second and often third earners. Fewer than 20 percent of the employees affected by the proposed hike are actually single parents with children. The remaining 80 percent are either not the primary earner in their family, a single adult, or they have no children.

Not only do the majority of benefits go to families who earn more than twice the poverty line, but the blunt nature of the increase means that most employees in poverty will not benefit. This study found that over 60 percent of employees living in poverty will receive no benefit from the wage increase because they earn more than $7.10 an hour.

The proposed wage hike will cost New York employers and consumers $880 million a year. Of this, only $122 million would go to poor families, while $528 million would go to families earning more than twice the poverty line. The especially poor targeting of this social program makes it a highly inefficient and often ineffective means of combating poverty. This inefficiency becomes even worse when you consider the decades of research proving the negative employment effects resulting from a wage increase. Research cited in this study shows that the job loss is concentrated on the least-skilled and most vulnerable employees. For example, increasing the minimum wage causes four times more employment loss for employees without a high school diploma and African-American young adults than it does for their more educated and non-black counterparts.