Employers work to prepare for new minimum wage

About 9.5 percent of the workforce in Fulton County, and 11 percent in Montgomery County, will be getting a raise at the end of the month thanks to New York state’s new minimum wage law.

New York’s minimum wage is set to increase from $7.25 per hour to $8 on Dec. 31. It will increase again to $8.75 per hour on Dec. 31, 2014 and then finally to $9 per hour on Dec. 31, 2015.

A study by the progressive Fiscal Policy Institute, which used data from 2011, showed the minimum wage increase will likely affect about 774,000 workers across the state – 8.9 percent of the workforce.

Proponents of the minimum wage hike have argued it will put more money into the hands of people who’ll spend it, while opponents say the wage hike will eliminate jobs and hurt the economy.

Fulton Montgomery Regional Chamber of Commerce President Mark Kilmer said the chamber supports the increase, in part because it will be phased in slowly over three years.

“Early on we were against it because the original proposal was to bump it up real drastically over one year, which wouldn’t have given businesses time to prepare for it, and it would have been a disaster. We like the more gradual increase. The chamber’s position has been that we believe that everyone needs to earn a living wage and it hasn’t been bumped up in years, but we also believe it’s meant to be a beginning wage for people, not a lifelong option,” he said.

New York state’s last minimum wage increase was in 2007, when it went from $7.15 per hour to $7.25. Historically the state’s minimum wage has never jumped up as quickly as it will over the three-year phase-in. The highest past increase was when it went to $5.15 in 2001 from $4.25 per hour, a rate set in 1992.

Some critics of the increase point out that even at $9 an hour New York state’s minimum wage would still be lower than it was in the 1970s.

The U.S. Bureau of Labor Statistics CPI Inflation Calculator shows New York’s minimum wage in 1972, nominally $1.85 per hour, adjusted for inflation would equal $10.32 per hour today. The minimum wage in 1976, $2.30 per hour, would be $9.42 per hour today and the minimum wage in 1979, $2.90, would equal $9.31 per hour today.

Kilmer said a survey of the chamber’s 1,000 members showed that none of the local manufacturing companies would be affected by the increase because they already pay greater than minimum wage. He said most small, family retail stores also pay greater than minimum wage.

“Some of our members that would have a lot of minimum wage workers would be places like McDonald’s, Burger King and probably a lot of restaurants,” he said.

The minimum wage is lower for restaurant workers and other service industry jobs that typically include tips.

The minimum wage for such service employees will range from $5 to $5.63 per hour, depending on what type of work they are doing. Tips also factor into the service worker minimum wage.

Luigi Lanzi said his family employs between 60 and 70 people at their four restaurants in Fulton County during their peak summer period, most of them minimum wage service workers. He said after tips most of his wait staff actually make close to $20 an hour, but he believes the minimum wage increase will still affect his business.

“Your payroll is one of your biggest expenses. We’ll just have to raise prices, pretty much everything will have to go up,” he said. “That kind of increase affects everything; anybody who has employees will have to raise prices. Everybody’s in the same boat. It’ll hurt us a little bit because we can’t raise prices that much, so some of it will come out of our pockets.”

Tax credit

Some of the cost of the minimum wage increase will be subsidized by taxpayers, at least for businesses that hire students ages 16 through 19. This part of the law would give employers a 75-cent-per-hour tax credit for each student paid the minimum wage in 2014, $1.31 per hour for each student paid the minimum wage in 2015 and $1.35 for each student paid the minimum in 2016, 2017 and 2018; after that the credit expires.

James Parrott, a vice president at the Fiscal Policy Institute, blasted the tax credit provision.

“I think it’s the dumbest idea that’s ever been enacted in New York state,” Parrott said. “It’s the dumbest idea ever enacted. First, it was done with no public hearings on it during the time of the passage of minimum wage increase. The way it’s structured, it provides an incentive to hire fewer adults and hire teenagers who are students and not hire teenagers who aren’t students, and you only get the credit if you pay exactly the minimum wage, so if a business hires somebody at the minimum wage and they turn out to be the best employee you’ve ever had, you can’t reward them and still get the tax credit.”

According to the Fiscal Policy Institute’s study of the issue, when the tax credit reaches $1.35 per year it will provide businesses that receive it a bonus of $2,808 a year per full-time minimum wage worker.

Lanzi said his family’s businesses won’t be bothering with the tax credit even though they do employ a number of students who’d likely fit the criteria for the credit.

“We don’t take advantage of any of the tax credits on that stuff. With the paperwork, they make it very difficult, so we don’t bother too much for it. It’s big business that always makes out on those,” he said.

Parrott said his organization estimates that 11.3 percent of retail giant Walmart’s New York state minimum-wage workforce is composed of teenagers who work an average of 18.7 hours per week, or about 972 hours on an annual basis. He said if Walmart paid all of its teenage student employees exactly the minimum the company could qualify for as much as $19 million in tax credits over the next five years thanks to the new law.

“Like many business tax credits, in practice, the companies likely to access these credits are only the larger ones that can maneuver through the paperwork requirements and have the people who can make sure they get them,” Parrott said.

Kilmer said the chamber hasn’t yet conducted any information sessions for its members on how to use the minimum wage tax credit.

“That’s something we’re going to look at and maybe inform our members and see what we can do to simplify it,” he said.