My cell phone rang shortly after state Assembly Speaker Sheldon Silver announced his proposal to increase New York’s minimum wage from $7.25 to $8.50 an hour.
“Jay, we’d like to interview you about the impact an increase to the minimum wage would have on agriculture,” the news reporter asked. Three interviews later, I had run the gamut of local news media interviews about the proposed increase. In each interview I tried to emphasize that this story is not necessarily just about impact to farms, or to businesses. There is a much more important consideration to take into account that gets lost in the shuffle; does it really do any good?
First, what is the real cost to a business if the minimum wage is raised as proposed? One of our local wineries reported this: when minimum wage is $7.25 per hour you have to add 50 percent more to cover benefits and taxes the business pays for the employee. The actual cost for that business for an employee who earns minimum wage is $10.88 an hour. The labor cost percentage for the winery’s employees is 28 percent.
That means a minimum wage worker at $7.25 an hour must produce $38.85 an hour worth of product. Raising the minimum wage to $8.50 would force the winery to make its employees more productive or to consider further automating the operation to reduce labor needs. Employees would have to produce $45.50 an hour in product to cover the cost of employing them. The winery would lean even more heavily toward hiring employees who have more training and experience versus someone fresh out of school or who has never worked in the industry. Two other farms reported the same thing: as minimum wage goes up, they have to look for an employee who has better skills to meet the cost of employing them. Are we eliminating job opportunities for young or unskilled workers by raising minimum wage?
An individual who called my office after one interview said that raising the state’s minimum wage would siphon more money into our economy because people who earn minimum wage would have more to spend. How so? You bring money into an economy by making or growing a product and selling it elsewhere.
If a business has to pay their employees more money, they do one of two things; increase the cost of their product or they reduce their labor costs by automating or eliminating jobs.
The easiest way to control labor costs is to increase the cost of your product – except if you are a dairy farm or other businesses that don’t control the price paid for products. The next easiest method is to cut labor costs by automating or eliminating jobs. In either case, no more revenue coming into the economy has been generated. You purely redistribute what we already have and inhibit people from advancing into better jobs.
If businesses have to increase the cost of the products they produce, doesn’t that go against the whole reason for increasing minimum wage? The very people who will benefit from their wage increase will now pay more for the products they consume. There goes that extra $50 a week in the paycheck, if you work 40 hours. If a business eliminates jobs, then haven’t we really just stabbed ourselves in the back?
Jobs eliminated mean people unemployed. People unemployed mean more taxes paid by people who work to pay to support the unemployed. Where’d that extra $50 a week go?
Instead of claiming we are helping the poor by passing another unfunded mandate from Albany that will maintain the number of people who are poor, why don’t we help businesses be more successful in New York so they can hire more people? Why don’t we help businesses create better-paying jobs by allowing them to afford to hire young people fresh out of school and get on-the-job training so they can advance through the ranks?
I scratch my head and wonder, if raising minimum wage doesn’t make sense to me, how can people who are smarter than me think it makes sense? I guess I don’t understand the benefit of another unfunded mandate.