All Over Albany

Getting some sense of New York's upcoming minimum wage increases

As you know, New York State's minimum wage -- or, really, its minimum wages -- are set for large increases over the next handful of years. Areas downstate will eventually hit $15 an hour, and upstate will rise to $12.50, with continued increases planned after that.

Last year during the debate about whether the state should take this path, we tried to get some sense of the proposed increase by comparing the minimum wage to the wages of everyone else in the state. And we did this by region, because making $15 an hour in New York City isn't necessarily the same as making $15 an hour in Utica.

So now that the increases are set, we thought we'd run that comparison again. And we added a new one -- using the cost of housing as a yard stick.

What are the scheduled minimum wage increases?

The current minimum wage is $9 as of the end of last year. (Fast food workers are on their own schedule after the wage board decision last year.) Under the scheduled increases:

+ New York City's minimum wage will increase $2 at the end of each year until reaching $15 on the last day of 2018. (Businesses with 10 or fewer employees will have until the end of 2019.)

+ In Nassau, Suffolk and Westchester counties, the minimum wage will increase by $1 at the end of each year until reaching $15 by the last day of 2021.

+ For the rest of the state the minimum wage will increase by 70 cents at the end of each year until reaching $12.50 an hour on the last day of 2020. After that the minimum wage will continue to increase toward $15 according to a schedule set by state budget director based on economic conditions

Some quick background on the comparisons

As we mentioned last year, some of our thinking about this topic has been framed by a proposal floated in 2014 by an economist at UMass-Amherst, Arindrajit Dube: That the minimum wage should be roughly half the median hourly wage, and that it should be adjusted for differences in prices across the country. Why half the median wage? A clip:

This target has important historical precedence in the United States: in the 1960s, this ratio was 51 percent, reaching a high of 55 percent in 1968. Averaged over the 1960-1979 period, the ratio stood at 48 percent. Approximately half the median full-time wage is also the norm among all OECD countries with a statutory minimum wage. For OECD countries, on average, the minimum wage in 2012 (using the latest data available) was equal to 49 percent of the median wage; averaged over the entire sample between 1960 and 2012, the minimum stood at 48 percent of the median (OECD 2013). In contrast, the U.S. minimum wage now stands at 38 percent of the median wage, the third-lowest among OECD countries after Estonia and the Czech Republic.

Boiled down a lot, Dube is arguing that half the median wage is a good target, based both on history here in the US and what other countries that are economically similar to the US do. (Here's a discussion of Dube's proposal in the NYT's Upshot in 2014.)

That proposal seems like a reasonable idea, and we figure the concept helps provide some context for the $15-an-hour proposal.

New York State minimum wage(s) compared to what other people are making now -- and in the future

OK, so here's a quick look at how the current $9 minimum wage stacks up against the median hourly wages in regions around the state, and how the scheduled future minimum wages will compare. (NYC and Long Island are marked differently because they're on different minimum wage tracks.)

(This projection assumes the minimum wage outside of NYC and Long Island/Westchester will continue increasing 70 cents a year after 2020.)

There's a table above in large format that tracks the year-by-year increase.

About these numbers
This is a very crude look at the topic. Among its deficiencies is the fact it doesn't take into account differences in the cost of living across different areas of the state (which can be big). This is, at best, a way to get a vague sense of the numbers involved.

The wage numbers here are from the May 2015 State Occupational Employment and Wage Estimates for New York, which were were recently published by the federal Bureau of Labor Statistics. Start with different sets of wage numbers and you'll end up in a different place.

Also: How do we know what the median wage will be for 2016 or 2022 (or the years in between)? We don't. So we guessed. The projected wage numbers above are based on the median hourly wage for each region increasing by 2 percent each year between 2015 and 2022. (That annual increase is probably a bit optimistic. The average annual increase for the median hourly wage across all of New York State, as measured in this specific BLS stat, has been 1.36 percent over the last five years. But there's a not-bad chance that the minimum wage increases will push wages up overall. But, again, use a different guess and you'll get a different outcome.)

Also also: Some of the regions above don't match-up exactly with how New York State is breaking out regions for different minimum wages. And the NYC region includes areas outside NYC, so that probably results in a lower median wage figure than NYC would have by itself.

Another comparison, this time to housing

Another way to get some context on the minimum wage is to use the cost of housing as a comparison. And as it happens, the federal government publishes estimates of "fair market rents" for apartments for regions around the country.

One of the ways these numbers are used is to figure a "housing wage" -- basically, how much you'd have to make to afford an apartment, if you devote 30 percent of your income to housing.

So here's a comparison of the scheduled minimum wages around the state compared to the housing wage for a two-bedroom apartment.

There's a table above in large format that tracks the year-by-year increase.

About these numbers
Again, we had to make some guesses about how rents would change in the future. In this case, we guessed they would increase by 1.5 percent by year because that was the average annual increase across New York State between FY2011 and FY2015. That probably understates the increase for some areas of the state, including the the Capital Region. The Albany metro area's annual average increase was a bit more than 2 percent over that same time period.

Some quick discussion

+ The idea that the minimum wage would increase dramatically in all parts of the state on the same schedule always seemed a bit unlikely. And these numbers provide some sort of outline for why that was going to be a tough sell. A $15-per-hour minimum in NYC means something very different than in, say, Glens Falls.

+ Looking back to Dube's research about historical min wage-to-median wage ratios, it looks like the minimum wage in pretty much every part of the state could be historically high by the time we reach 2022. What will that mean? Good question. A lot of experts -- even those generally in favor of a significant minimum wage increase -- have said they really don't know what to expect about the way the higher rate will affect the economy and jobs. (Though some analysts have made predictions -- some optimistic, others very skeptical.) [Vox] [UC-Berkeley] [Empire Center]

This is uncharted economic territory. And even when we arrive at the destination, there will probably be debate about how much the minimum wage increase did -- or did not -- affect things.

+ Another thing about predicting what's going to happen is that the wage increase may not have uniform effects. Some industries and workers might not end up seeing much difference because of labor costs aren't a big part of the industry's costs -- while others see a large effect. One of the interesting things about that UC-Berkeley report linked above is that even though it's generally optimistic about the effects of the higher minimum wage, it also predicts that the increase will be a significant issue for the food service industry because labor makes up a big portion of the costs.

+ That part about trying to figure out what's happening (and why) could make for an interesting challenge in 2020 when the state budget director (whoever that is then, working for whoever the governor is then) has to start making decisions about how to proceed on the upstate increases. There almost certainly will be another large round of debate and lobbying.