Income Analysis of a $15.00 Minimum Wage in New York City
Despite growing income inequality and a disturbing stagnation in the wages of working Americans, Congress has not raised the national minimum wage since 2009. With the current federal minimum of $7.25 per hour widely seen as inadequate, the number of states adopting their own minimum wage has grown to 29. Moreover, a growing number of municipalities across the nation have adopted local minimum wages that are higher than the federal level and higher than their respective state levels.
Cities with local minimum wage laws include San Francisco, San Jose, Oakland, San Diego, Santa Fe, Albuquerque, Seattle, Chicago, Louisville and Washington D.C., as well as Montgomery and Prince George’s counties in Maryland. A number of other cities are considering them.
The economic rationale for adopting minimum wages that differ across states and metropolitan areas is strong. There is a 35 percent difference in the cost of living between the highest-cost state (Hawaii) and the lowest-cost state (Mississippi), and in virtually every state the cost of living in the largest metropolitan area is higher than in the small cities and rural areas of that state.1 There is also evidence that worker productivity varies with metropolitan area size.
In the 2013-2014 New York State legislative session, bills were introduced in the Assembly and Senate that would have raised the State minimum wage to $10.10 per hour and allowed cities within the state to establish their own minimum wages up to 30 percent higher than the statewide rate, or up to $13.13. In June, 2014, New York City Comptroller Scott Stringer released an analysis of the income effects of a $13.13 minimum wage on City residents.
During 2014, the cities of Seattle, SeaTac and San Francisco adopted local minimum wages that phase in a $15.00 per hour minimum wage, and the Los Angeles city council is currently considering an ordinance that would raise its minimum wage to $15.25. There is interest in raising the minimum wage in New York City to a similar level, as evidenced by budget legislation introduced by the New York State Assembly in 2015.
The Assembly bill (which was not enacted in the final State budget) proposed raising the statewide minimum wage in increments to $12.60 per hour by 2019, and raising the minimum in New York City to $12.50 in 2017, $13.75 in 2018, and $15.00 in 2019. It also would have raised the minimum wage in the other downstate counties of the Metropolitan Commuter Transportation District (MCTD) in tandem with the increases to the New York City minimum. This brief provides an analysis of the potential income effects of a $15.00 minimum wage, using the phase-in schedule of the Assembly proposal.