Newsday (New York), January 4, 2005, Tuesday

Copyright 2005 Newsday, Inc.

Newsday (New York)

January 4, 2005 Tuesday
ALL EDITIONS

SECTION: BUSINESS & TECHNOLOGY; Pg. A42

HEADLINE: Wage hike bad for economy?;
Some experts say the increase from $5.15 in '97 to $7.15 by 2007 may hurt small businesses

BYLINE: BY CARRIE MASON-DRAFFEN. STAFF WRITER

BODY:
Just what effect will the increase in the state minium wage have on businesses in New York State?
Economic prognosticators are split on the issue. The rate, $5.15 since 1997, rose to $6 an hour Saturday and will jump again in stages to $7.15 by 2007. The overall increase will be 39 percent.
"It's a fairly large increase," said Lawrence Kahn, a professor of labor economics and collective bargaining at Cornell University's School of Industrial and Labor Relations in Ithaca. Kahn, for one, believes the increase could hurt businesses.
The state Senate last month overrode Gov. George Pataki's veto of the bill, after a similar move by the Assembly in the summer. Pataki had said the hike would hurt small businesses and force employers to cut jobs.
While most studies of the effects of federal minimum-wage increases in 1990 and 1991 didn't turn up widespread unemployment among teenagers, the largest group earning minimum wage, the 39 percent hike in New York State could produce a different picture, according to Kahn. "Most of the other minimum-wage [increases] that have been studied have not been that large. It's possible that this would have some negative effects, especially on the most vulnerable workers."
But Martin Melkonian, professor of economics at Hofstra University, said that, overall, minimum-wage increases benefit the economy by raising employment.
"Low-wage workers, when given an increase, are likely to spend it all," he said. "As a result, there is going to be an increase in demand throughout the economy. As others get an increase in demand for their labor, there is going to be an increase in employment."
What's more, Melkonian points out, when you factor in inflation, the minimum wage has actually dropped since the 1960s. "What this legislation is going to do is restore the minimum wage to roughly where it used to be," he said.
Others weighing in on the increase also were divided.
Daniel Cantor, executive director of the Working Families Party, which lobbied six years for the increase, estimates the hike will mean more money for 175,000 families on Long Island and 275,000 in New York City. "We're thrilled," Cantor said. "This was a long overdue raise."
But Richard M. Bivone, president of the Nassau Council of Chambers, argued that the increase will hurt. Local businesses are already locked in a struggle with chain-store rivals, and that battle will worsen because of higher expenses, he said.
"It's hard when you have competition," he said.