On $15 minimum wage, economists lack data – not opinions

As politicians wrangle over the merits of a $15 minimum wage for New York workers, economists and policy experts on either side of the issue are revisiting a classic labor debate, weighing whether a higher minimum wage would ultimately help or hurt the state’s economy and workers. Nevertheless, some economists believe that the Fight for $15 movement has so much momentum that perhaps economists should focus on how to best implement a $15 minimum wage, which Gov. Andrew Cuomo has made a priority, and not whether it’s the best economic policy.

While several major U.S. cities have passed laws mandating an hourly wage of at least $15 for all workers, a similar New York state proposal would be historic. The proposed 67 percent increase, from $9 to $15 an hour, would be the largest single bump in a state minimum wage in U.S. history, economists say.

“We have no basis to go on for a statewide hike of this magnitude,” said Linda Barrington, an associate dean at Cornell University and executive director of the Institute for Compensation Studies. “For the economics community in general, this is totally unprecedented – which is not to be in support or opposition.”

Without a historical reference point, economists are left with a data gap, which is often filled by ideologically driven perspectives.

“Part of what's happening to economists is they're being used as evidence in opposition, but more accurately, we just can't say,” Barrington said.

In her testimony before the state Senate Labor Committee earlier this month, Barrington distanced herself from what she called the “$15 per hour, good or bad?” argument, instead stressing the importance of planning “robust study” before, during and after the implementation of a $15 minimum wage in addition to programs that could help offset unintended consequences of the rollout.

But while more moderate voices like Barrington urge circumspection, advocates on either side of the debate are less shy. These louder voices fall into two general categories: conservative economists who predict that the wage hike would kill jobs, and liberal economists who argue low-wage workers need a raise.

E.J. McMahon, president of the conservative Empire Center for Public Policy, is among those blasting Cuomo’s proposal. Introducing a recent report, McMahon wrote that, “A $15 minimum wage ultimately would cost the state at least 200,000 jobs, with proportionately larger employment decreases in upstate regions.

McMahon advocates leaving minimum wage legislation to individual municipalities, explaining that the state’s economic conditions vary widely from county to county. “That would be a lot more rational and would bring a lot more sense to the debate than having a blanket minimum wage from Montauk all the way out to Niagara Falls,” he said. Economists who espouse a universal state minimum wage are ignoring reality, he said. “Those folks will not acknowledge that there is a difference between Binghamton and Manhattan,” he said. “That’s preposterous.”

Meanwhile, James Parrott, chief economist at the Fiscal Policy Institute, which recently compiled data for a report supporting a $15 wage floor for nonprofit workers, suggests that the lowest-earning segment of the population would benefit tremendously with very little or no negative impact on businesses.

“E.J.’s been promoting (a study) saying the sky will fall on New York if you raise it,” Parrott said. “E.J. would say that even if you were proposing $12 an hour. His study wouldn't be any different. He just doesn't believe in minimum wages.”

McMahon conceded that he would, in fact, also oppose a $12 minimum wage, but wouldn’t say if he opposed minimum wages in general. “I’m not sure whether I agree to it or not, but how’s that relevant to this debate? It’s like we're having a debate on theology and you’re saying I don't believe in God,” he said. “What the hell are you talking about? That's immaterial to this debate.”

When considering how to create good policy for modern New York’s $15 minimum wage, Barrington said, it’s important to remember our country’s own economic and political backdrop.

“The context, which is why this is getting such traction right now, is that we're at this historically high point of inequality overall,” Barrington said, noting the rising populism on both sides of the political spectrum, specifically the popularity of Donald Trump and Sen. Bernie Sanders.

“And why? What's different?” Barrington asks. “What's different is we've never had this level of income inequality. We've beaten numbers from the late 1920s."

Barrington suggests that there may be enough momentum behind the “Fight for $15” movement that it’s prudent to ask the best way to implement the raise, not if, but when it does pass. But that doesn’t make it any less important to ask the critical questions, while there’s still time.

Namely, is $15 the right number? And if so, how should it be phased in responsibly?

Dave Cooper, an economic analyst with the Economic Policy Institute in Washington, D.C., acknowledges that the $15 figure came out of the Fight for $15 movement, and not a economic research model.

“That was a good, easy number that they could use to rally people,” Cooper said, quickly adding, “And it happens to line up pretty nicely with what a number of indicators show would be a wage that would provide enough income to have a modest but adequate standard of living.”

But there’s disagreement on this point.

Alan Krueger, an economics professor at Princeton University and former chairman of President Obama’s Council of Economic Advisers, recently penned an editorial in The New York Times in favor of a $12 federal minimum wage, but against a $15 minimum wage, saying that it would “risk undesirable and unintended consequences.”

Advocates for the $15 minimum wage say that it’s important to remember that the change won’t happen overnight.

“Nobody is saying that we should go to $15 an hour in one fell swoop,” Parrott said. “So all the proposals are phased increases – 10 to 12 percent increases a year is what it comes to.” Businesses that complain about this are ignoring the fact that their competitors will have to deal with the changes as well, he said.

“If you ask many business people, they would say, ‘Ah! That would kill me!’ And yet, if that becomes law and all of their competitors are faced with the same situation, do you think they're going to throw in the towel? C’mon. They will adapt to that.”

Again, critics are unconvinced.

“This is like saying, ‘We're not going to cut their heads off, we’re going to strangle them slowly,’” McMahon said. “The pain will be felt first by marginal, low-skill workers,” McMahon added. 

Economic prognostications aside, a Quinnipiac poll from September showed 62 percent of New Yorkers backed the governor’s plan, which has buoyed the hopes of workers rights groups and put pressure on the Republican-controlled state Senate.

The sentiment among pro-$15 minimum wage economists is that people support the proposal despite the historic nature of the increase, believing that it provides a necessary correction to an imbalanced system.

“Over the last 40 years, we’ve allowed our economy to pay workers so little that they have to turn to public assistance or work multiple jobs to get by. And there's no reason for that. We don’t need to have done that,” said Cooper, the Economic Policy Institute analyst. “We can choose the type of economy we want to have.”

But ultimately, economists admit that they don’t know what will happen if the minimum wage is raised to $15 an hour – they can only share their opinion on whether it is worth the risk.

“We like to be evidence-based,” Barrington said of her fellow economists. “And we don't have evidence."

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