Opinion: why raising the minimum wage in New York will not improve the well-being of residents - ForumDaily
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Opinion: why raising the minimum wage in New York will not improve the well-being of residents

Like any significant socio-economic phenomenon, raising the minimum wage raises a lot of discussion.

Фото: Depositphotos

In New York, although it competes with London for the title of “capital of the world,” the income of a significant part of the population still balances at the subsistence level, millions of people continue to receive salaries “in envelopes,” and thousands of small businesses are on the brink of survival. At the same time, the issue of adequate regulation of the level of the minimum wage cannot remain without proper attention both from the legislative authorities and from economic experts and analysts.

In 2016, New York State Governor Andrew Cuomo signed a number of legislative documents in the field of labor law obliging large enterprises in New York City (the criterion of “largeness” is the average number of employees, in this case, 11 people or more) by the end of 2018 to bring the minimum hourly salary to $15, and small businesses (up to 10 people) to the same size by the end of 2019. In more detail, the difference is as follows: if the “jump” for large ones is $2 per year ($11 by the end of 2016, 13 dollars by the end of 2017, and 15 by December 31.12.2018, 1,5), then the jump for “small” ones is 2016 dollars. As a result, the increase in the minimum wage from the end of 4,5 for small ones will occur by 4 dollars (as opposed to 1 dollars for large ones), but with a delay of XNUMX year.

The introduction of the requirement to increase the minimum hourly wage in other regions of the state has been delayed by 1-2-3 years or more, but is inevitable in any case. As for other regions of the United States, for example, Western America, then, for example, in Los Angeles, from 2016 to 2020 the minimum hourly wage will be raised from 10,50 to the same 15 dollars. By the way, the $15 wage goes back to when SeaTec, Washington, where the international airport is located, voted more than five years ago to pass the nation's first $15-an-hour minimum for about 6500 workers. Since then, the phrase “$15 an hour,” which once appeared on slogans, has become a legally enshrined figure.

On the subject: In the US Congress decided to raise the minimum wage twice

The current federal minimum wage is 7,25 dollars per hour, and since July 2009 it has not increased. In the event that the minimum state salary exceeds the federal rate, the company must pay salaries at a higher rate.

Despite the fact that the phrase “increasing the minimum wage” pleasantly pleases the ear and evokes thoughts about the prospects for increasing the well-being of citizens, there are also pitfalls in this issue, having studied which, one can come to the conclusion that this increase is by no means without negative consequences, which, perhaps no less than positive ones.

As a rule, the price of a product and the demand for it are balanced in a market economy. And if an enterprise, due to its activities, is not a rare monopolist, the profit in the cost of its goods (work or services) can be about 10-15%. This profit is enough for the owner to support his family, cover unforeseen expenses from extraordinary events and periodically direct part of the profit to modernize production, which is required by current realities. In the event that its cost increases by the difference that is formed due to an increase in the minimum wage level, his company may begin to balance on the brink of survival, since an increase in the value of his goods can offset the demand for them.

An increase in the minimum wage leads not only to an increase in the expense item “Wages”, but also to an increase in the expense item “Payroll taxes and fees”, and the owner of such a company may have to lay off some of the employees, which may have a negative impact on the level of employment in the country. The work that was performed by those dismissed will have to be transferred additionally to those employees who continue to work, without changing their wages, which may negatively affect their conscientious attitude towards their functional responsibilities. Also, a cornered employer can start paying wages in cash, bypassing official accounting, that is, gradually transferring employees to “work of the books.” This is how they call work here illegally, speaking about it in a whisper, and often they prefer to remain silent about it altogether. In contrast, by the way, to our post-Soviet countries, where it is not considered shameful to even include in the official “Curriculum Vitae” a line from the work biography, with a period for which not a penny of taxes or other fees was paid from the salary to fiscal and social services. Considering that there are quite a lot of such small businesses in the country, this may ultimately lead to the budget not receiving significant amounts of tax and pension contributions.

There is an opinion that increasing the minimum wage will lead to an increase in real incomes and the purchasing power of citizens. On the other hand, if we consider state-owned companies involved in supplying the country with electricity, water, and heat, then they will not be able to hide part of their salaries by issuing them in envelopes, at least because they are quite significant and are in plain sight. Consequently, the main way out of the situation to avoid bankruptcy is to increase the cost of utilities for the same people for whom the state raised the minimum wage. Also, large supermarkets and producers of basic food products will not be able to lay off employees en masse. They will be forced to raise prices for their goods, which will lead to inflation and, as a consequence, to a decrease in the purchasing power of citizens. As a result, the balance of purchasing power will be maintained and, as they say, that’s what it will do.

On the subject: How to live in America for the minimum wage

As you can see, an increase in the standard of living of citizens by increasing the minimum wage is very doubtful.

Policies in the field of regulation of household incomes should be more flexible and include not only administrative measures, but also carefully thought-out economic methods based on an analysis of the consequences of changing wage tax rates and revising social benefits for all categories of the population in order to bring their payments to a more equitable meaning . There is also no need to regulate the minimum wage “universally” for all business entities, focusing only on their staffing levels. It may make sense to create a department under the Department of Labor that sets its own requirements for certain large enterprises regarding the level of the minimum wage based on the indicators reflected in reports to the IRS for the previous full year of economic activity.

Also, wage regulation policy must be intertwined with immigration policy, which varies depending on the ruling party in a given state. In New York, for example, you can see a lot of unemployed people hanging around aimlessly on the subway, living comfortably on social benefits, and, as a rule, not being responsible for other family members. While in New York, for example, there are quite a lot of people who do not always have enough income to cover minimum expenses. Therefore, it would not hurt to direct part of the economic policy in the field of labor legislation towards a more equitable distribution of social benefits. And in a broader sense, to more adequately regulate the share of revenue and expenditure items in the federal and local budgets. This, in turn, will very likely lead to a more equitable distribution of resources in American society in general and, as a result, a decrease in crime rates and an increase in the real well-being of residents of New York and other regions of the United States.

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