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Study: Minimum-wage hikes boost retail employment
BY CARRIE MASON-DRAFFEN
Newsday Staff Writer
April 3, 2006
A new study has ratcheted up the debate over whether minimum-wage hikes cause job losses in New York State.
According to the Fiscal Policy Institute, a research group in Albany, the state's minimum-wage increases have helped small businesses, not hurt them.
The study takes aim at critics who maintain that minimum-wage hikes cost jobs. That was a reason cited by Gov. George Pataki for vetoing legislation to increase New York State's minimum wage. But the Legislature overrode his veto and the minimum wage rose to $6 last year and to $6.75 this year. It will climb to $7.15 an hour next year, the last in a three-year rise.
By contrast, the federal minimum has remained at $5.15 an hour since 1997. As a result, 18 states and the District of Columbia have raised their minimums above that rate. Companies in those states almost always have to pay employees the higher rate.
The institute's study, an update of a 2004 report with similar findings, again focused primarily on the retail industry, which the researchers considered most likely to employ low-wage workers.
The latest study found that between 2004 and 2005, the year covering the first of the three minimum-wage hikes, retail industry employment in the state rose 1.3 percent, compared with 0.8 percent for nonfarm job growth overall. Employment also rose in other higher-wage states, the study found.
Researchers also concluded that in the same period the work hours for some of the most unskilled workers didn't drop, but instead increased from a mean of 30.7 hours a week to 31.3.
And small businesses may have benefited indirectly from the wage hikes, the researchers said.
"There may be a Henry Ford effect at work here," they write. "If you pay workers more, they can buy more, boosting the overall economy, especially among small retail businesses."
Opponents said the findings are too optimistic.
Mark Freedman, director of labor law policy for the U.S. Chamber of Commerce in Washington, D.C., countered that some states with higher minimums also have unemployment rates above the 4.8 percent national average.
"Their claim that there isn't a relationship between job loss and an increase in the minimum wage doesn't exactly hold up in that comparison," Freedman said.
Bruce D. Phillips, a senior economist with the National Federation of Independent Business, added that some of the higher-wage states have some of the highest job vacancy rates and businesses there focus on increasing workloads rather than hiring.
James Parrot, the institute's chief economist and one of the study's authors, stands by his findings.
"I offered a hypothesis and tested it," he said. "They are dealing in the realm of speculation."
The dispute may be largely moot on Long Island, said Pearl Kamer, chief economist for the Long Island Association.
"I don't think people [on Long Island] are willing to work at the minimum, so you are almost forced to pay above the minimum wage," she said. As a result, "it is very difficult to see how the minimum wage could in any way constrict employment [here]."
Copyright 2006 Newsday Inc.
BY CARRIE MASON-DRAFFEN
Newsday Staff Writer
April 3, 2006
A new study has ratcheted up the debate over whether minimum-wage hikes cause job losses in New York State.
According to the Fiscal Policy Institute, a research group in Albany, the state's minimum-wage increases have helped small businesses, not hurt them.
The study takes aim at critics who maintain that minimum-wage hikes cost jobs. That was a reason cited by Gov. George Pataki for vetoing legislation to increase New York State's minimum wage. But the Legislature overrode his veto and the minimum wage rose to $6 last year and to $6.75 this year. It will climb to $7.15 an hour next year, the last in a three-year rise.
By contrast, the federal minimum has remained at $5.15 an hour since 1997. As a result, 18 states and the District of Columbia have raised their minimums above that rate. Companies in those states almost always have to pay employees the higher rate.
The institute's study, an update of a 2004 report with similar findings, again focused primarily on the retail industry, which the researchers considered most likely to employ low-wage workers.
The latest study found that between 2004 and 2005, the year covering the first of the three minimum-wage hikes, retail industry employment in the state rose 1.3 percent, compared with 0.8 percent for nonfarm job growth overall. Employment also rose in other higher-wage states, the study found.
Researchers also concluded that in the same period the work hours for some of the most unskilled workers didn't drop, but instead increased from a mean of 30.7 hours a week to 31.3.
And small businesses may have benefited indirectly from the wage hikes, the researchers said.
"There may be a Henry Ford effect at work here," they write. "If you pay workers more, they can buy more, boosting the overall economy, especially among small retail businesses."
Opponents said the findings are too optimistic.
Mark Freedman, director of labor law policy for the U.S. Chamber of Commerce in Washington, D.C., countered that some states with higher minimums also have unemployment rates above the 4.8 percent national average.
"Their claim that there isn't a relationship between job loss and an increase in the minimum wage doesn't exactly hold up in that comparison," Freedman said.
Bruce D. Phillips, a senior economist with the National Federation of Independent Business, added that some of the higher-wage states have some of the highest job vacancy rates and businesses there focus on increasing workloads rather than hiring.
James Parrot, the institute's chief economist and one of the study's authors, stands by his findings.
"I offered a hypothesis and tested it," he said. "They are dealing in the realm of speculation."
The dispute may be largely moot on Long Island, said Pearl Kamer, chief economist for the Long Island Association.
"I don't think people [on Long Island] are willing to work at the minimum, so you are almost forced to pay above the minimum wage," she said. As a result, "it is very difficult to see how the minimum wage could in any way constrict employment [here]."
Copyright 2006 Newsday Inc.