New York City’s minimum wage is increasing to $15 per hour effective in 2019, but they are not the only region to do so. Minimum wages have been increased in many areas with a high cost of living, including cities in California and Washington State. In fact, as many as 30 states have wages above the Federal Minimum Wage requirements, which were raised from $7.25 in 2009 to $10.10 in 2014.

In March, 2016, The Center Wage and Employment Dynamics at Berkeley hypothesized about the effects of increasing NYC’s minimum wage in a brief. What were their findings? You may be surprised.

Findings from New York City’s Minimum Wage Study

The study took into consideration current and past data, but couldn’t hypothesize about unknown future factors and dynamics that can, or will, come into play during the wage increase period of 2019-2021. So, while these findings are subject to change, their basis is a strong foundation of economic understanding, Census and Department of Labor Statistics, consumer and labor markets, as well as business models.

Approximately a third of the working population will be effected by the minimum wage increase. Many are surprised by how many workers truly earn minimum wage and will see the impact on their paychecks in New York State as a whole.

Minimum wage workers will earn nearly $5000 more per year. The increase for workers will be approximately $400 per month more in their pockets. Other workers will likely see an increase due to the ripple effect it causes.

Retail, healthcare and restaurants are the most impacted industries. Together, these three account for nearly half of all minimum wage workers who will experience the change. This also means these businesses will feel the impact the strongest.

Payroll cost increases are below 3.5%. While specific industries, such as restaurants, grocery stores, retail and food manufacturing, may be the hardest hit, overall payroll increases stay fairly low. This is due to offsets by automation of tasks, increased worker production, price increases, and employee attrition.

Price increases to absorb costs will be below inflation rates. The study shows that payroll costs in most businesses account for about 25% of expenses, and passing on the increase will be under 2%, which is the average annual US inflation rate.

Overall, the study determined a positive impact of the New York minimum wage increase. They did note however, it was outside the scope of their study to determine the effects on those governed by public policy, such as nonprofits and state and local employees. Additional limits to the study include not fully considering the impact on other geographical areas in New York. New York City, for example, has a much higher cost of living than rural and agricultural areas of the state.

It was also unclear if job growth will continue on its 2% average annual growth or slow down due to the increase, but this is due in part to job market conditions that are unknown and unpredictable.

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