As early as 1912 states began proposing minimum wage standards meant to protect women and children in the workforce. By 1920 thirteen states passed minimum wage laws. In a series of cases culminating with the 1936 case of Moreland v. New York ex rel. Tipaldo, 298 US 587, the United States Supreme Court struck down state mandated minimum wage laws. It was decided that the due process clause prohibited any state from impeding the ability of employers to contractually negotiate with their employees to determine wages.
The federal minimum wage was first established by the National Industrial Recovery Act (NIRA) of 1933 at $0.25 per hour. In Schechter Poultry Corporation v. United States, 295 US 495, the United States Supreme Court invalidated portions of the NIRA, effectively abolishing the federal minimum wage. It was not until 1938 that the federal minimum wage was reestablished under the Fair Labor Standards Act (FLSA) at $0.25 per hour. Initial opposition to the federal minimum wage came from agriculture, predominately in the south, that depended on cheap labor for their livelihood. This opposition did not consider the plight of the worker, who faced particularly poor living conditions.
The current federal minimum wage was last raised in 2007. At that time it was raised from $5.15 an hour to $7.25, phased in over several years ending in 2009. Prior to this, the federal minimum wage had not been raised in ten years. A full time worker who earns the current federal minimum wage makes only $15,080 a year. For a single person this places them marginally over the 2013 poverty threshold of $11,490.
In his 2013 State of the Union address President Barack Obama called on Congress to raise the minimum wage to $9.00 an hour. The proposed raise would be phased in over several years and would tie the minimum wage to the cost of living, allowing the minimum wage to rise with the rate of inflation. “This single step would raise the incomes of millions of working families,” the president said. “It could mean the difference between groceries or the food bank; rent or eviction; scraping by or finally getting ahead.”
The opposition to President Obama’s call to raise the federal minimum wage drew on the general themes that have been associated with prior calls to raise the minimum wage. The main thrust of the opposition is that it will kill jobs and won’t help those that it is intended to help. With the higher cost for payroll business will hire less people leaving more people looking for work.
These dire predictions about how the minimum wage is bad for business have yet to materialize. As low wage workers have more money to spend they spend it, almost entirely in their local community. With low wage workers spending more money in their communities businesses have more customers. A federal minimum wage of $9.00 per hour would pump $21 billion into the United States economy. Companies that support the raise in the federal minimum wage, such as Costco and Stride Rite, say it reduces employee turnover and improves worker productivity. All of which is good for business.
Minimum Wage In New York State
The minimum wage in New York State has been in line with the federal minimum wage since it was last raised in 2007. In his 2013 State of the State speech Governor Andrew Cuomo announced his plan to raise the minimum wage in New York State to $8.75 an hour. In doing so he noted that the current $7.15 an hour is below that of 19 other states and has not kept up with the cost of living in New York. Currently over 900,000 New Yorkers earn the minimum wage, this translates into just over $15,000 per year. In proposing this raise to the minimum wage Governor Cuomo noted this would increase the standard of living, reduce poverty and ensure that the most vulnerable members of the workforce can contribute to the economy. Opposition from the business community felt that this was the wrong time to raise pay and that any additional costs to businesses would put them under or force layoffs.
The Governor’s proposed budget for fiscal year 2013-14 included the proposed raise in the minimum wage in New York to $8.75. Response from the New York State legislature to this proposal in the budget was mixed. The Assembly, with leadership from Speaker Sheldon Silver and Labor Committee Chair Carl Heastie, agreed with President Obama that the minimum wage should be at $9.00 per hour. In support of this the Assembly passed bill A.38-A which would raise the minimum wage to $9.00 per hour on January 1, 2014 and starting January 1, 2015 would raise the minimum wage based on the rate of inflation. The minimum wage for tipped workers was raised to $6.21 starting on January 1, 2015 and was also tied to the rate of inflation in the same manner as the minimum wage for non-tipped workers. This bill had no sponsor in the Senate which means it will not become law. Passage of this bill showed the strong support of the Assembly majority to raise the minimum wage.
The Senate republicans, who have a coalition majority with a group of five democrats known as the Independent Democratic Conference (IDC), had a very different reaction to Governor Cuomo’s proposed raise of the minimum wage. Citing the unfriendly business climate in New York Senate republicans opposed the raise in the minimum wage. Opposition was based on the fear that businesses would be forced to lay off workers as they were already in a precarious place. Throughout the budget negotiations the Senate republicans would call for tax breaks for small businesses to offset any added cost associated with raising the minimum wage. Pressure fell to the IDC to make good on their support of raising the minimum and negotiate to include it in the enacted budget.
In the end the minimum wage was raised in the fiscal year 2013-14 enacted budget, but not for everyone. The minimum wage will reach $9.00 per hour by December 31, 2015 after an increase to $8.00 per hour on December 31, 2013 and an increase to $8.75 on December 31, 2014. Despite support from the Assembly, future raises in the minimum wage will not be tied to the rate of inflation but rather will be subject to unpredictable forces such as politics.
Tipped workers are another story. The proposed budget from Governor Cuomo included an increase for the minimum wage of tipped workers from $4.60 to $6.03 per hour. The final deal that raised the minimum wage did not include any increase for tipped workers. Instead, the Commissioner of the Department of Labor, Peter Rivera, is authorized to convene a wage board under section 655 of the Labor Law to examine the wage of tipped workers and determine if a change should be made to the minimum wage for them. This board is to determine if any change in the wage for tipped workers is necessary to provide adequate maintenance and protect the health and livelihood of these workers. Commissioner Rivera is then authorized to issue a wage order to change the minimum wage for tipped workers under Labor Law section 656.
A raise in the minimum wage for tipped workers is long overdue. The majority of tipped workers are in the food service industry, which face three times the rate of poverty as the rest of the United States workforce. This continues despite the fact that the restaurant industry is growing even in a recovering economy. According to the National Restaurant Association projected sales at restaurants in 2013 is expected to be $660.5 billion, a figure that is up 9% in the last two years. With this industry experiencing growth they can afford to increase the minimum wage paid to their many dedicated employees.
Senate republicans expressed concern for possible youth job loss if the minimum wage was raised. To address this concern they supported the Minimum Wage Reimbursement Credit, which provides a tax credit for employers in New York State that hire a teenager between the ages of 16 and 19 that is a student and is paid the minimum wage. The tax credit amounts to the difference in the current minimum wage and the increases (i.e. 75 cents per hour in 2014, $1.31 per hour in 2015, and then $1.35 per hour from 2016-19). It will be reduced accordingly if any raise in the federal minimum wage should take place during the term of the credit. This credit stipulates that it cannot be used if a current employee is fired in order to hire a teenager eligible for the credit. Recent projections from Governor Cuomo’s administration project a cost to taxpayers of $35 million in 2015 and $65 million in each of the following three years.
The stated purpose of this tax credit is to allow businesses time to adjust to the new minimum wage. Employers who will benefit most from it are large employers such as Wal-Mart and McDonalds, not the small businesses that were touted as needing the credit most. These are employers who already profit from many state and federal tax breaks and loopholes; they do not need the further support of New York tax payers. Teenage workers, who are facing some of the highest rates of unemployment, will be stuck in minimum wage jobs in order for their employers to receive the credit.
During negotiations on the minimum wage a training wage for young and unskilled workers was suggested as a way to help the business community. Senate republicans supported this proposal saying it would encourage employers to hire teenagers. This would allow employers to pay teenagers, who are already susceptible to being taken advantage of by employers, a subminimum wage. This proposal was not included in the final budget.
The minimum wage serves to provide a floor on wages so that all employees will be treated equally. However, farm workers were not included in the New York minimum wage until July 24, 2009 when the Commissioner of Labor promulgated a wage order for farm workers. Under this wage order farm workers are entitled to the federal minimum wage. The New York State Minimum Wage Act requires that all wage orders be increased in proportion to any increase in the New York State minimum wage. This will ensure that farm workers are included in the new minimum wage negotiated in the recent budget.
Youth who work on farms are not entitled to the minimum wage they would receive if they worked elsewhere. Teenagers who are 16 or 17 and do harvest work have different rates of pay depending on how many seasons they have worked for the same employer. During the first season they are paid $3.60 per hour and during the second season they are paid $3.80 per hour. After the third season they are entitled to the minimum wage. When a 16 or 17 year old does non-harvest work they are paid based on the number of hours that they have worked. During the first 300 hours of employment by the same employer they are paid $3.60 per hour, after the second 300 hours working for the same employer they are paid $3.80 per hour, and after that they are paid the minimum wage. These rates of pay have not been changed since 1992 and they were not included in the changes to the minimum wage made in the budget. This subminimum wage places young farm workers at a disadvantage and should be abolished. All workers deserve to be paid the minimum wage.