NY's New Minimum Wage: You'll Pay For It

Mar 28, 2013

A provision buried deep in New York's tentative budget shows taxpayers will get part of the bill for raising the minimum wage.

The deal to raise the state minimum wage from $7.25 an hour to $9 by 2015 includes a "minimum wage reimbursement credit" for employers. The credit would reimburse employers for part of the difference in wages from the current $7.25 minimum wage as it rises to $9 an hour by 2016. Once it reaches $9 an hour, employers would pay 40 cents and taxpayers $1.35 of the extra $1.75 an hour workers are paid.

Advocates for the working poor fear the credit will prompt employers to replace adults with students.  Frank Mauro of the Fiscal Policy Institute believes employers would do this so they could claim the credit.

Mauro notes the credit would apply to small businesses as well as major chains. The total cost of the credit won't be made public until after the budget is enacted.

Mark Dunlea of the Hunger Action Network calls the deal “a big subsidy for the corporate low-wage economy.”

The measure would prohibit firing an adult solely to hire a teenager and collect a credit, but Frank Mauro says that would be hard to enforce.

The Cuomo administration says the credit was a compromise to raise the lowest wages for millions of New Yorkers.  Mauro thinks the tax credit concept is ill-conceived and poorly drafted.

Ken Pokalsky, Vice President of Government Affairs for the Business Council of New York State, explains his group had proposed a straightforward training wage. He  adds that the minimum wage increase promotes a social good, making more money available to low income families. He says New York State already spends $800 million  a year on the state counterpart to the federal earned income tax credit, which gives money to working heads of low income households with children, effectively bringing the minimum wage up to $11 an hour.