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Minimum wage hike hurts Cuomo's upstate focus

Rochester Business Journal
January 18, 2013

Revitalizing the upstate economy has been a goal for policymakers in New York for decades. Many of the jobs once provided by a booming manufacturing industry are gone from the region. Gone as well, according to demographic research, are many young people who left upstate in search of better economic opportunities.
 
The jobs that remain are mostly scattered around the service sector. Health care and social assistance providers are now the top upstate employers. There also are service industry jobs in hotels, restaurants, recreation facilities and tourist attractions. And the overwhelming majority of them are created by small businesses trying to scratch out a living where there are fewer customers and higher costs.
 
To his credit, Gov. Andrew Cuomo in his recent State of the State address made it a priority to revive the upstate economy. Expanding his regional economic development approach to a new targeted marketing campaign highlighting the opportunities within the upstate region is a promising approach. Unfortunately, it clashes with one of his other new priorities.
 
During his address the governor called for an increase in the minimum wage from $7.25 an hour to $8.75. He made the case by pointing out that a full-time worker earning the minimum wage in New York makes only $14,000 a year. Then, to dramatize the point, he ticked off a list of costly necessities like transportation, car insurance, gas, health care, food and utilities.
 
You won't get any argument from small-business owners that New York is a tough place in which to survive. They have to pay the same prices for all of those costly necessities. But they also have to pay workers, and the governor is proposing a 20 percent increase in the cost of labor for minimum wage employees. That's big. And it will come down hard on every segment of the upstate economy from tourism to agribusiness.
 
As a matter of course it will also affect their employees and people who need jobs. Studies by numerous researchers show that unemployment among low-level workers jumped the last time the federal minimum wage was increased. The same thing happened in states where the rate was raised. That's because businesses that pay the minimum wage usually can't afford to pay more. So they lay off workers, cut their hours or find ways to avoid hiring new employees.
 
It also is true that when the minimum wage is increased, low-level jobs become more attractive to people with higher skills and more experience. Younger candidates often find themselves in competition with better-qualified workers, so they're boxed out of the labor market. In fact, according to research by the University of San Diego, a large majority of minimum wage workers are not the primary breadwinners in their families and most of them come from middle-class and affluent households. Most people below the poverty line don't have jobs, so they're unaffected by the minimum wage.
 
Raising the rate, then, won't help the poor, but it is very likely to accelerate the migration of younger workers from Upstate New York to places with smarter economic policies.
 
The governor and other advocates for a higher minimum wage are obviously sincere in their intentions. But they are also working against themselves. Small businesses that form the backbone of the Upstate New York economy can't afford a 20 percent increase in labor costs. And the governor can't afford to undermine his own program with a policy that will destroy jobs even as he tries to create more.

Mike Durant is state director for the National Federation of Independent Business, an advocacy group that represents more than 10,000 small businesses in New York.1/11/13 (c) 2013 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email service@rbj.net.


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