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 employers Upstate. There are also 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, in his recent State of the State address, Governor Andrew Cuomo has made it a priority to revive the Upstate Economy. From 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 per hour to $8.75 per hour. He made the case by pointing out that a full-time worker earning minimum wage in New York makes only $14,000 per 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 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. That’s big. And it will come down hard on every segment of the Upstate economy from tourism to agri-business.
And 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.
Also true is 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 bread-winners in their families and most of them come from middle-class and affluent households. And, 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.
Governor Cuomo and the 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.