Public Hearing to Examine the Overall Impact Increasing the Statewide Minimum Wage to $15/Hour Would Have on Workers, Employers, and the State as a Whole

Fiscal Policy Institute 20

Paul Sonn 21 General Counsel and Program Director

National Employment Law Project 22 23 24 25 1

SPEAKERS (Continued): PAGE QUESTIONS 2

Michael Seereiter 240 246 3 President and CEO

NYS Rehabilitation Association 4

Ann Hardiman 240 246 5 Executive Director

NYS Association of Community 6 and Residential Agencies 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 1 SENATOR MARTINS: Good morning. 2 Please rise, join me in the pledge of 3 allegiance. We'll get started. 4 (All participating in and present at the 5 hearing recite, as follows:) 6 "I pledge allegiance to the flag of the 7 United States of America and to the Republic for 8 which it stands, one nation under God, indivisible, 9 with liberty and justice for all." 10 SENATOR MARTINS: Thank you. 11 Good morning, everyone. 12 Thank you very much for being with us this 13 morning on this very important issue. 14 We have a rather aggressive agenda today, 15 with a wide array of speakers. 16 I want to thank everyone who has agreed to 17 participate, because we have, obviously, important 18 issues to discuss. 19 To start us off, we have George Gresham, who 20 is the president of 1199 SEIU. 21 [Applause.] 22 SENATOR MARTINS: Mr. Gresham, please, 23 please. 24 Now, I have to ask you -- 25 GEORGE GRESHAM: Sure. 1 SENATOR MARTINS: -- always bring a fan club? 2 [Laughter.] 3 GEORGE GRESHAM: Don't leave home without 4 them. 5 SENATOR MARTINS: Absolutely. Good for you. 6 It's good to see you. 7 Thank you for being here. 8 Obviously, this is an important topic that 9 affects all of us. 10 GEORGE GRESHAM: Yes, sir. 11 SENATOR MARTINS: Now, I had an opportunity 12 to review your testimony previously. 13 GEORGE GRESHAM: Yes. 14 SENATOR MARTINS: And, you know, obviously, 15 I think we all come from similar backgrounds, and we 16 can all relate to issues in our past, in our lives, 17 our parents' lives, and we can all relate back to 18 these issues that we're discussing here today. 19 GEORGE GRESHAM: Yes. 20 SENATOR MARTINS: Let me just tell you a 21 couple of things before I ask you to start. 22 GEORGE GRESHAM: Okay. 23 SENATOR MARTINS: I'm absolutely sure I speak 24 for all of my colleagues here. 25 We believe deeply in the dignity of work. 1 We believe deeply in the dignity of people 2 being able to support their families through labor. 3 GEORGE GRESHAM: Yes. 4 SENATOR MARTINS: And the dignity that comes 5 from receiving a paycheck and being able to provide 6 for yourself. 7 GEORGE GRESHAM: Yes, sir. 8 SENATOR MARTINS: That's part of this 9 discussion. 10 GEORGE GRESHAM: Yes. 11 SENATOR MARTINS: So with that -- 12 GEORGE GRESHAM: Very good. 13 SENATOR MARTINS: -- I ask you to relay your 14 comments to the Committee. 15 And for yourself and for everyone else who 16 will be testifying here today, we have your 17 testimony. So if you can avoid reading it, that's 18 great. Let's have a discussion, and let's go. 19 God bless. 20 GEORGE GRESHAM: Can you hear me now? 21 SENATOR MARTINS: Yes, sir. 22 GEORGE GRESHAM: Okay. 23 So maybe I'll -- I will avoid reading it, 24 and -- but I'm just going to look at some bullets to 25 make sure I don't forget any important points or 1 leave out any important points. 2 (Comments from audience members being 3 made.) 4 GEORGE GRESHAM: People can't hear me? 5 SENATOR SAVINO: Unfortunately, it doesn't 6 move. I think it's kind of permanent. 7 GEORGE GRESHAM: Well, I think we'll try it. 8 First of all, good morning to the Panel. 9 And I want to thank you, Senator Martins, for 10 convening this very important hearing. 11 Just as you said before I got started, this 12 is so important to the residents of New York. 13 This issue itself is important all around the 14 country, but to the residents of New York, when we 15 found out that, if we were to get the Legislature to 16 agree to raise the minimum to $15, that 3 million 17 individuals would immediately get an increase, that, 18 to me, is not a choice, not a choice, in making sure 19 that people are able to take care of their families. 20 There are, if you will, so many in our -- and 21 I'll try to stay away from my script, because 22 I think something like this can be easily spoken 23 from the heart, and I don't think I'm going to miss 24 any important major points to this. 25 You know, I've witnessed -- I originally was 1 born in the South. 2 My parents moved to New York from the South, 3 not because we didn't come from a beautiful 4 hometown, not because we didn't enjoy living in the 5 South, but because my parents could not make a 6 decent living in order raise a family. 7 And, so, we shared the experience of the 8 migration from the South, like many folks did in the 9 '50s and the '60s, and similar to what's happening 10 now with immigrants coming to this country, in order 11 to make a decent living. 12 And one of the things that I have learned 13 over this time is that people are willing to work 14 very hard, to do jobs that most people wouldn't even 15 consider doing, in order to take care of their 16 families, in order to make sure that the next 17 generation of their family are able to do a little 18 bit better than them. 19 That has always been the American dream. 20 But somehow, in modern times, with -- I must 21 say, with the grief that exists here, we find that 22 working people are working two and three jobs just 23 to take care of their families. 24 When that happens, we also find that the 25 children of those parents are being raised not by 1 the parents, but by the streets, because there's no 2 one at home to give them the guidance. 3 I have with me today Ms. Gibbs who is a 4 home-care worker, who works extremely hard on a 5 daily basis to take care of her client. And then, 6 at the end of the day, is not able to take care of 7 her family unless she were to have a second job. 8 As you said, our own life experiences get 9 caught up in this. 10 I am the son of a home-care worker. My 11 mother was a home-care worker in the state of 12 New Jersey. 13 And when we went home to visit her during the 14 holidays, there were never a holiday that she didn't 15 ask one of her four children to drive her to her 16 client's house to make sure that they would have 17 Thanksgiving dinner, or whatever the occasion was. 18 She would take food from our table to bring to them 19 to make sure that they had a decent holiday as well. 20 And that's not something you do for extra 21 credit, but it's something that you do because of 22 the calling and your care for humanity. 23 But it's very sad, very sad, when that person 24 then can't take care of their own family. 25 And so we are compelled today to ask the 1 State, to ask the Legislators, to consider the 2 $15 minimum increase. 3 Now, you're going to hear lots of testimony 4 today that is going to tell you that the people, 5 when they receive this money, this money is going to 6 spur the economy, that people immediately will spend 7 it. 8 They will spend it before they even get it, 9 to be quite honest, because of the compelling nature 10 of the finances that they have at home. 11 And so you're going to hear lots of testimony 12 about that. 13 You're going to hear, I'm sure, testimony as 14 to "why 15?" as if that is some magical number. 15 And, in fact, it isn't a magical number, and 16 you will hear testimony to that. 17 You know, I will say that, back when 18 Franklin Delano Roosevelt, proud resident of 19 New York, initiated the minimum wage, if it had kept 20 up with inflation, it would actually be $15 an hour 21 at this point on a national level. 22 And as we know, the cost of living in 23 New York is even higher than a national level. 24 But, to me, the concept of a minimum wage 25 should never be, How little can we pay a person to 1 get work done? But, rather, what is the minimum 2 standard that one needs in order to take care of 3 their family for an honest day's pay? 4 [Applause.] 5 SENATOR MARTINS: Let me just intercede for 6 one second. 7 GEORGE GRESHAM: Sure. 8 SENATOR MARTINS: And I appreciate the point, 9 but I'm going to ask everyone to, please, let's not 10 do that; and I'll tell you why. 11 Because we're going to have many people up 12 here discussing many issues today, and some of those 13 we all may agree with, some of those we may not, and 14 I do not want this to become interactive. 15 This is a forum for the Committee to be able 16 to listen, ask questions, and, hopefully, inform 17 public policy. 18 I don't want to have that kind of interaction 19 because it may interfere with our ability to have 20 that kind of a discussion. 21 I appreciate it -- 22 GEORGE GRESHAM: Understood. 23 SENATOR MARTINS: -- and I just would ask 24 that everyone please -- just, please, keep it to 25 yourselves. 1 I understand that it's there. I think we all 2 do. 3 But for purposes of our discussion here, 4 let's keep it to a minimum. 5 So, thank you. 6 GEORGE GRESHAM: I understand that. 7 And I'm certainly, at least the folks that 8 have come and are interested with me, will follow 9 that. 10 We had been misinformed. 11 We were told that the one who makes -- gets 12 the loudest applause gets to win the decision. 13 SENATOR MARTINS: Oh. 14 [Laughter.] 15 SENATOR MARTINS: Wow. 16 Well, I guess we're done here. 17 [Laughter.] 18 GEORGE GRESHAM: So, you know, Dr. King, we 19 often like to brag that we were Dr. King's favorite 20 union. 21 Those weren't our words. Those were his 22 words. 23 And he met with us six weeks before he was 24 assassinated, and gave a speech to 1199, which he 25 called us "the conscience of the labor movement." 1 And he used -- he wanted us to be a model for the 2 rest of the labor movement. 3 But in that speech he spoke about 4 two Americans, and he talked about the dignity of 5 work. 6 And he said in his speech that there is no 7 such thing as menial work. That all honest work has 8 dignity and pride. That the only thing that could 9 make it menial is the compensation you get or you 10 don't get for doing the work. 11 And so we are here today to say that, in this 12 land of milk and honey there ought not be any menial 13 work. That all work, honest work, comes with a 14 certain amount of dignity and pride. 15 There's no better feeling than to know you 16 can take care of your family. 17 Now, my father, as I said, and mother, came 18 to New York in order to better take care of their 19 family. 20 And, quite honestly, this is not a plug for 21 the union, but, my father, basically, did every 22 possible job you could imagine in order to take care 23 of his family. 24 The first was live-in domestics for a very 25 wealthy family in Great Neck, Long Island. 1 And it was when I -- until I became a 2 teenager when my father became a Teamster, and was 3 able to get a real living wage for the work that he 4 was doing then to drive a truck, that changed my 5 father's whole outlook on the world and the pride 6 that he had in himself. 7 You know, I'm old enough to go back to the 8 era when people had landlines for their phones at 9 home. And -- 10 SENATOR MARTINS: The only one of us here 11 that isn't old enough to remember that is 12 Senator Savino here. 13 SENATOR SAVINO: A shameless plug. 14 GEORGE GRESHAM: But you've heard stories, 15 I'm sure. 16 SENATOR MARTINS: She's seen it on TV. 17 [Laughter.] 18 GEORGE GRESHAM: And so that -- I remember 19 though, and maybe it was the budding organizer in 20 me, but, from time to time, my teacher would say, 21 I think I need to call to your home because you're 22 disrupting the class. 23 And I remember often she would call my home 24 and the phone was disconnected. 25 And I remember one time being embarrassed in 1 class, because she said that to the whole class, 2 "Your family doesn't keep the phone on." 3 And I remember how embarrassed I was because, 4 until my father became a Teamster and got a decent 5 salary, we weren't able to keep the phone on. That 6 was optional. 7 It was, when it was time to pay the bills, if 8 there weren't enough money left over, the phone was 9 the first to get disconnected, and that happened 10 pretty regularly. 11 But, when my father began to get a real 12 living wage, the phones never went off again, 13 I guess to my chagrin, because the teachers could 14 now get in touch with my parents when they really 15 wanted to. 16 [Laughter.] 17 GEORGE GRESHAM: But, it is a real story of 18 dignity. 19 Is this going to cost money? 20 It absolutely is not free, to make sure that 21 working people are able to make a decent salary. 22 But the benefits that you can measure, as far as the 23 economy and how that gets boosted, how many people 24 will get off public assistance because they're now 25 making enough money to apply for Affordable Care Act 1 or the coverage as well. 2 And then the intangible things that you're 3 not able to measure: The pride and the dignity and 4 the loyalty that people have to their own jobs, and 5 the lack of turnaround. 6 It is something that I just say, shame on us, 7 if we allow other matters to get in the way, and not 8 allow those 3 million people, like sister Gibbs 9 here, that work hard every day, to not give them the 10 dignity to go home and take care of their families. 11 They would rather be with their families than 12 that second job, and they would rather raise their 13 families than to have their children raised by the 14 streets because they're latchkey children. 15 So, I think I did okay without reading my 16 notes. 17 But, I hope I leave the impression on you of 18 how important this will be to so many people in the 19 state of New York. 20 And I just plead upon you to, not only you, 21 but to help influence your colleagues, to do the 22 right thing for the people of New York. 23 SENATOR MARTINS: No, I appreciate that. 24 Thank you very much. 25 GEORGE GRESHAM: Thank you. 1 SENATOR MARTINS: You know, I -- I'm struck 2 by, again, the narrative. As I said earlier, I read 3 your statement earlier, and you had certain 4 references in there. 5 Myself, my parents emigrated from Portugal, 6 and so, very similarly, not speaking the language 7 and coming over with nothing. My mom was a 8 seamstress. My dad worked in construction, until he 9 was able to become a carpenter, and that was his 10 trade. 11 GEORGE GRESHAM: Right, right. Excellent. 12 SENATOR MARTINS: And so I understand -- 13 GEORGE GRESHAM: Yes, sir. 14 SENATOR MARTINS: -- because that's very 15 real. And that's story for millions and millions of 16 people, not only here in New York, but across the 17 country. 18 GEORGE GRESHAM: Yes, sir. 19 SENATOR MARTINS: But, as we work around this 20 issue, and we work around the issue of a minimum 21 wage, and we work around the broader discussion of 22 the working poor, and we talk about our safety-net 23 programs, and we talk about all of the different 24 things that exist today, and barriers to people 25 having success, and training programs for people in 1 order for them to learn skills so that they can then 2 improve themselves and become a Teamster or a 3 carpenter, or any other trade, or any other skilled 4 professional, we are lacking here in New York State, 5 in terms of programs that are available and 6 opportunities that are available for the working 7 poor today. 8 And one facet of that is a discussion on 9 minimum wage, but we have to have a broader 10 discussion. 11 GEORGE GRESHAM: Yes, sir. 12 SENATOR MARTINS: And so all of this starts 13 with, I think, a half step back and a broader view 14 of what it is we're trying to do, because I do 15 believe that we do have to provide opportunities for 16 people so that they can do the same things that your 17 parents and my parents were able to do for us. 18 GEORGE GRESHAM: Yes, sir. 19 SENATOR MARTINS: So, knowing how this 20 effort, not only here in New York State, but across 21 the country, has been, literally, spurred, 22 encouraged, and promoted by SEIU. 23 I'm going to ask you: How did we get to 24 "15"? 25 I'm just going to ask. 1 Because, as a person, I have an incredible 2 amount of admiration and respect for, and we can 3 still learn a tremendous amount from, our 4 late-Governor Mario Cuomo used to say, "We campaign 5 in poetry, but we govern in prose." 6 And so we can discuss the poetry of this, we 7 all can. And we all have stories that can feed very 8 well into that discussion and that narrative, but we 9 do have to discuss this in prose. 10 GEORGE GRESHAM: Yes. 11 SENATOR MARTINS: How did we get to "15"? 12 And why is that number different? 13 Because when I -- I went on the 14 U.S. Department of Labor website, and they have this 15 great calculator on the website. 16 And everyone is more than welcome to go and 17 check, and plug in numbers. 18 And this is the U.S. Department of Labor's 19 website, when you plug in the minimum wage, any 20 number, and they'll tell you what it would be today, 21 adjusted for inflation. 22 So you go back to 1938, you go back to 1968, 23 you go back to 1907, whatever date you want to plug 24 in, and if you adjust it for inflation, it gets 25 you to somewhere when around $11 or so, between 1 11 and 12 dollars an hour. 2 That is -- folks, I'm just saying, it's a 3 mechanical thing. You put it in -- you plug it into 4 this calculator, and that's the number that comes 5 up. 6 So I need to understand, over time, how are 7 we adjusting that to the numbers we're discussing 8 today, and how does it fit in? 9 And then, in the broader discussion, 10 shouldn't we also be discussing those other facets, 11 not to the exclusion of a minimum-wage discussion, 12 but to complement it as well? 13 GEORGE GRESHAM: So let me answer that in 14 reverse. 15 Absolutely, I agree that we -- it has to be a 16 whole list. 17 If we really want people to be able to not, 18 only minimally -- because, remember, we're 19 discussing minimum wage here -- to minimally take 20 care of their families, but to be beyond that, to, 21 hopefully, get to the middle-class, and then broaden 22 the middle-class, then it has to be a holistic 23 approach. 24 It can't just be about raising minimum. 25 The educational programs and the kind of 1 trades, training, that you're talking about, are 2 totally necessary if we're serious about it, as well 3 as health care. 4 You cannot take care of your family if you're 5 not a healthy person and you don't not have 6 good-quality health care. 7 So all of those factors, in my opinion, of a 8 civil society. 9 And if you want to do more than just the 10 minimum for working people, you must consider that. 11 So, yes, sir, I totally agree with you on 12 that. 13 As far as the number "15" is concerned, 14 I don't think there's any magic to it. And, 15 probably -- there are probably as many theories as 16 to what, in fact, if the minimum wage had kept up 17 with inflation, what it would actually be today. 18 I think the first part of that, though, for 19 to us even have this discussion, is the recognition 20 that the minimum wage has not kept up with 21 inflation. 22 That, in fact, the idea and the standards of 23 people working very hard, and still finding 24 themselves poor, the living, the working poor, is 25 something that has gotten away from all of us. 1 Now, the people that run the computers that 2 provides me the information tells me back, when 3 Franklin Delano Roosevelt made the national, that, 4 if adjusted for inflation, it would be at the "15." 5 mark. It's "15-point-something" is what I've been 6 told. 7 SENATOR MARTINS: I appreciate it. 8 GEORGE GRESHAM: And so -- but, I think, even 9 if that weren't accurate -- I believe that it is -- 10 I certainly wouldn't present it here to be shot down 11 by someone else, if I didn't. 12 SENATOR MARTINS: And so -- look, I'm not -- 13 GEORGE GRESHAM: No, I understand that. 14 I understand. 15 SENATOR MARTINS: -- I do understand that 16 different people have different ways of computing 17 it. 18 I was just using a common standard, because 19 it's the U.S. Department of Labor's own website. 20 But, what I will ask you is, if you would, 21 provide the Committee with that analysis. 22 GEORGE GRESHAM: Yes. Okay. 23 SENATOR MARTINS: I'll be able to share it 24 with my colleagues, and then at least we'll have the 25 benefit of that as well. 1 GEORGE GRESHAM: I'd love to do that. 2 Thank you, sir. 3 SENATOR MARTINS: As far as, you know, some 4 of the other concerns, and there have been people 5 who have reached out, and I think we'll hear from 6 them later today, that when we do consider 7 increasing the minimum wage, in certain respects, it 8 butts up against certain programs that we have in 9 place. 10 And you mentioned, that those programs, that 11 people will be able to come off public assistance. 12 GEORGE GRESHAM: Right. 13 SENATOR MARTINS: And the concern I have is 14 that, you know, many of our public-assistance 15 programs are, rightfully so, generous. 16 They are, and they should be. And we need to 17 continue to provide help to people. 18 But if the threshold that they press up 19 against causes them to lose that benefit, and the 20 benefit that they lose is greater than the amount of 21 money that they receive, we need -- "we" need to 22 consider, to the extent that it is a state decision 23 and not a federal decision, how do we ramp that 24 gradually so that we don't provide disincentives to 25 people earning more money? 1 Because I've heard from my own constituents, 2 and from people who have reached out and said, You 3 know what? If I make more money, I lose X benefit 4 or Y benefit, and I can't afford to provide for my 5 family. 6 I find it immoral that we have a system in 7 place that artificially keeps people poor. 8 And, so, I think part of our challenge and 9 our broader discussion here today is, let's look at 10 those programs, because they're there. We can 11 quantify it. 12 But, for some inexplicable reason, those 13 thresholds are so low, that if people, especially in 14 a place like New York where they make more money, 15 because it's so much more expensive to live here, 16 once they butt up against them, they lose those 17 benefits. 18 So, how do we address that? 19 Because, if we do increase the minimum wage 20 as a response to try and elevate, and in by doing 21 so, we prevent people from receiving certain of 22 benefits, and some of these decisions are going to 23 be federal decisions outside of our hands, aren't we 24 doing it -- by trying to help, aren't we actually 25 creating a disincentive and a problem for so many 1 people? 2 GEORGE GRESHAM: I understand. 3 So, there is a reason why Helen Schaub is 4 sitting to my right. She's my vice president of 5 legislative concerns, and so I'm going to pass the 6 baton to Helen. 7 It is a conversation that we have had 8 numerous times around this, so... 9 HELEN SCHAUB: So I want to thank you for 10 raising this, because, obviously, it's an important 11 question. 12 And I think we are all on the same page, that 13 you would never want to do something that would end 14 up giving people a net negative in terms of their 15 overall compensation and the supports that they 16 have. 17 And I think there's at least two reasons why 18 that would not to be case here. 19 One is, the vast majority of programs that 20 people use to support their families when they're 21 very low income, actually do not have kind of the 22 cliff that you would be talking about, where you 23 make a tiny bit of money, and then you fall off the 24 cliff and you lose a benefit that is very 25 significant. 1 So, for example, if you look at Medicaid, you 2 know, yes, there's' threshold. 3 You go over the threshold, but then, in 4 New York State, you're eligible for the basic health 5 plan, which has the advantage of being paid for by 6 the federal government and not 50 percent by the 7 state government, but provides a very similar level 8 of benefit. And it's not until you get 9 significantly higher that, then, you would go on the 10 exchange, where you do have to then contribute more, 11 but you have significant income that enables you to 12 do that. 13 So everyone who's looked at it -- and we'd be 14 happy to provide you with analysis in Oregon, which 15 took a very careful look at this -- says that, yes, 16 you -- as you move up, and appropriately, the -- 17 many of the programs target people with very low 18 incomes. 19 So as your income rises, you then are no 20 longer eligible for some of those programs. 21 So even if it's true that you have to pay, 22 for example, a little bit more for your health 23 insurance, you have a net positive. 24 And the reason for that, is that we are 25 talking about a significant increase. 1 If we were talking about raising the minimum 2 wage 25 cents, or 50 cents, you might start to run 3 into some of those problems where the benefit that 4 people lose is greater than the income that they're 5 receiving. 6 But when we are talking about making a 7 significant step forward to actually catch the 8 minimum wage up to where it should be, if it had 9 kept pace, then we avoid some of those problems of 10 making tiny incremental increases that end up with a 11 net negative. 12 So, both, because most of the programs do not 13 have a sharp cliff, and because we're talking about 14 a real enough increase that people can actually 15 afford the additional obligations that they might 16 have; for example, if they have to contribute more 17 to their health insurance, every analysis that has 18 looked at this says that it is a net positive for 19 people to, you know, get an increase of this degree. 20 SENATOR MARTINS: And I appreciate that. 21 You know, there are so many facets. 22 And that's why, when we discuss the issue, 23 and as so many people have discussed the issue as 24 being one-dimensional, it's troubling, because, you 25 know, even something as simple as federal income 1 taxes, and the effect of an increase in the person's 2 responsibility to pay more in terms of a federal 3 income tax. 4 So their income goes from 18, potentially, to 5 30; and, yet, a chunk of that comes right off the 6 top and goes right to the feds, and they don't get 7 to keep it. 8 And, yet, in the context of that, they don't 9 keep it; yet, we run up against some of those 10 thresholds that you discussed, and you start to 11 weigh in some of the expenses, some of the taxes. 12 And, so, the last thing we need, and I think 13 the last thing we can afford to do is, in an effort 14 to try and help people, actually put them in a worse 15 position, as odd as that may sound. 16 And so, again, let's walk our way through 17 this. 18 Certainly, I have appreciated your testimony. 19 Any questions? 20 SENATOR SAVINO: Yes. 21 SENATOR MARTINS: Senator Marchione. 22 SENATOR MARCIONE: First, President Gresham, 23 I would just like to say I think Dr. King would be 24 very proud of you as the leader of your union. 25 Your sincerity, I feel your heartbeat, you 1 not having to use your notes, really, and speaking 2 so clearly and precisely. 3 GEORGE GRESHAM: Thank you. 4 SENATOR MARCIONE: I just wanted to say that. 5 With that, I have two questions. 6 Out of the 80,000 workers that you represent, 7 how many of them are making minimum wage? 8 GEORGE GRESHAM: Go ahead. 9 HELEN SCHAUB: So the "80,000" figure is -- 10 it refers to our home-care membership, and they are 11 all making $1 above minimum wage. They make $10 12 right now. 13 SENATOR MARCIONE: So none of them are 14 currently making minimum, but this would certainly 15 affect them? 16 GEORGE GRESHAM: Yes. 17 HELEN SCHAUB: Well, yes. They would -- if 18 they were -- they are making less than fast-food 19 workers are required to make now in New York City 20 under the Fast-Food Order, and certainly would 21 benefit from every raise that is being proposed 22 here. 23 GEORGE GRESHAM: Part of what the problem 24 that currently exists, the legislation that had went 25 through, the executive order that went through, for 1 the fast-food workers. 2 So, if you imagine Ms. Gibbs trying to take 3 care of her family. 4 And I have to tell you, as the son of a 5 home-care worker, as we can all imagine, it's very 6 difficult work to take care of people when they're 7 in the most vulnerable stage of their life, and 8 incapacitated in many ways. 9 And I often tell, to encourage people, about 10 the pride and dignity of the work we do, and how 11 special they are to do that, I say, "Close your eyes 12 and just think of a member in your family that 13 should not go near any patient at all, should never 14 be in the care of another individual, because they 15 don't have the human capacity to do that." 16 So if you imagine the work that goes into 17 that, and then to find out, though, you could 18 actually take care of your family if you were to 19 stop doing this and to go and flip hamburgers. 20 And it's not to denigrate the work that 21 people do do. 22 But when those are the choices, and at the 23 end of the goal, the only reason you work at all is 24 to make sure you can take care of your family, then 25 you're likely to make those decisions. 1 As far as, you know, our membership, the 2 80,000 are the home-care workers. That is our 3 largest category of the lower-paid workers. 4 But we also have workers that work in nursing 5 homes and other areas that also are not making a 6 living wage. 7 SENATOR MARCIONE: Do you have any discussion 8 for us, relative to those individuals who have been 9 with you for a while and, perhaps, are making $15 an 10 hour, after working their way up and working very 11 hard in this industry, what do you envision for 12 them? 13 What about the compression issue, have you 14 given thought to that? 15 Can you discuss that with us? 16 GEORGE GRESHAM: I know this, because one of 17 the things that people don't know, as far as my own 18 history, is that, when I became a health-care 19 worker, the first job that I had was in 20 housekeeping. 21 And because of the union, I was able to go 22 and formally get my degree and become a professional 23 technical worker. 24 And I know that, as a professional technical 25 worker, I never forgot where I came from, and never 1 thought that because I went to school and was 2 blessed to get that opportunity to finish my 3 education, that those who did other work that didn't 4 command the same salary didn't deserve that. 5 And so that I would say, for our senior 6 home-health aides that are there at that moment, 7 will never feel, I believe, will never feel that, 8 you know, I have to pull myself up by the 9 bootstraps, and this person just comes along, 10 through a legislative pen, and making the money. 11 Rather than that, they're going to say, it's 12 about time that they're able to make a living wage 13 to take care of their family. 14 Now, it's certainly human nature is definite. 15 It certainly would probably be different if 16 we were talking about $40 an hour and an entree 17 immediately into the upper middle-class. 18 But to wonder whether one should make a 19 living wage for an honest day's work, I don't think 20 that will be an issue at all. 21 I think that, rather than that, it will be a 22 massive celebration about the fact that we can now 23 move on to the next level and talk about, now, what 24 are the educational opportunities that can allow me 25 to make more than the minimum wage? 1 I can guarantee you, of -- we have 2 450,000 1199 members in 5 states and the District of 3 Columbia. 4 I can guarantee you, none of them aspire to 5 make the minimum. They all aspire to make the 6 maximum that they can make. 7 [Laughter.] 8 GEORGE GRESHAM: And the minimum is just -- 9 the minimum is just the road to getting to the other 10 point. 11 And I don't think anyone is going to want to 12 deny their fellow coworker, or someone in a 13 different industry, the right to make a living wage. 14 SENATOR MARCIONE: Thank you. 15 GEORGE GRESHAM: Thank you. 16 SENATOR MARTINS: Senator Savino. 17 SENATOR SAVINO: Thank you, Senator Martins. 18 First, I want to thank Senator Martins for 19 holding this hearing, for the start of what I hope 20 is a very robust discussion about, how do we 21 establish a living wage here in New York State, and, 22 hopefully, becoming the model for the rest of the 23 nation? 24 I want to thank you, President Gresham, for 25 your testimony, and for your leadership on this 1 issue. 2 And I with to pick up where you just left 3 off. 4 It is appropriately the province of 5 government to establish the floor for workers. 6 That's what FDR did in 1938, after, one would 7 say, several hundred years of unions agitating in 8 this country. 9 But we started it there. In 1938, the 10 government established the floor. 11 It has always been, though, the province of 12 the labor movement to establish the ceiling, or to 13 lift the ceiling. 14 And so that's what, I think, in answer to 15 Senator Marchione's question about: What happens 16 when we establish a rate change for entry-level 17 workers and we bring everybody up, what happens to 18 those above? 19 Well, the collective-bargaining table is 20 where you will resolve that for workers who have 21 been there for longer. 22 But you also represent 80,000 people in the 23 home-care industry, and several dozens of thousands 24 in the nursing-home industry. 25 And in an industry by which your wages are 1 held captive by the state government, the Medicaid 2 cap has had a deleterious effect on real wages for 3 your members for a very long time. 4 So I'm thrilled that you're going to be part 5 of this discussion, because, in the next several 6 weeks, we are going to be engaged in the budget 7 process, where I would imagine we're going to be 8 handed a budget for the Department of Health and 9 Medicaid that's going to be flat. It's going to be 10 a zero-growth budget. 11 And we're going to be told to accept that, in 12 that room. 13 And then, in another room, being asked to 14 approve $15 an hour that will affect your workers. 15 And at some point, the floor and the ceiling 16 are going to hit there. 17 So what we need is your leadership, and the 18 leadership all of those in this room, to help us 19 lift the cap on Medicaid so we can improve and 20 increase reimbursements to the agencies that employ 21 your workers so that they can weather that 22 $15-an-hour wage increase. 23 Are you with us on that? 24 GEORGE GRESHAM: I can, absolutely. 25 SENATOR SAVINO: Thank god. 1 GEORGE GRESHAM: Absolutely. 2 [Applause.] 3 GEORGE GRESHAM: Absolutely. 4 SENATOR SAVINO: It's critically important 5 that government help where it can. 6 If we're going to establish the floor, then 7 we have to be able to pay for that, we're going to 8 have to provide. 9 And that doesn't just apply to your agencies, 10 the agencies that your workers work in, but also the 11 nonprofits. 12 And one of the others things that I hope that 13 this robust discussion really spurs, is that we, as 14 a government, begin to reexamine the way we value 15 social services; not just in home care and health 16 care, but in child-welfare services and in human 17 services and in shelter services. 18 If we're going to attract people that want to 19 commit their lives to those types of services, we've 20 got to compensate them decently so that they can 21 provide for their own families. 22 The real, I think, travesty, is that we have 23 thousands of social-services workers in this state 24 who themselves are dependent on social services to 25 make ends meet. 1 We need to lift everyone out of poverty; 2 establish a real floor for workers -- 3 [Applause.] 4 SENATOR SAVINO: Nope, you'll get yelled at. 5 [Laughter.] 6 SENATOR SAVINO: -- establish a real floor 7 for workers in -- and also acknowledge that are 8 additional costs to that. 9 I don't think any of us are kidding 10 ourselves, that if we force employers to pay a 11 higher wage, that there will be an effect on those 12 employers. 13 That's a fact. We know that, we understand 14 that. 15 But we all need to be part of this 16 discussion. 17 And I welcome you to the forefront of this 18 fight. 19 And I hope that when this legislative session 20 is over, we have done something real for working 21 people here in New York State. 22 GEORGE GRESHAM: Thank you. 23 SENATOR SAVINO: Thank you. 24 [Applause.] 25 SENATOR MARTINS: I hear you. She hears you. 1 [Laughter.] 2 SENATOR MARTINS: You know -- any other 3 questions? 4 Tough questions from Diane Savino. 5 Senator Perkins. 6 SENATOR PERKINS: Oh, thank you. 7 So thank you very much for your presentation, 8 and your extraordinary leadership over the years, 9 for your workers, and for our city, and for our 10 state, and for me personally as well. 11 You know, I like the idea of this minimum 12 wage, so to speak, or, $15. 13 I don't think that's the answer. 14 I don't want to ask you the question, because 15 you told me you have a policy person here. 16 The answer that I am looking for is: What is 17 the living wage? 18 What is the living wage? 19 I know we try to do a living wage in the past 20 when I was in the city council, but, what would a 21 living wage be? 22 Not a minimum wage. Not the floor. 23 But what would it really be, a wage for the 24 average working person to have a decent living? 25 We're talking about 15 as a minimum. 1 What would a real living wage be? 2 HELEN SCHAUB: So, I don't have the numbers 3 in front of me, but I know that many people -- and 4 I'm sure you'll hear it later this morning and this 5 afternoon -- many people have done what they call a 6 "sustainability calculator," and there's analysis 7 from every region of the state, looking at, what are 8 the costs? 9 What are the housing costs? 10 What are the child-care costs? 11 What are food and transportation costs? 12 Actually plugging all of those in, to 13 understand, for a family of a particular size, what 14 would it take just to make sure you can pay for all 15 those things: you can get to work, you can buy 16 groceries, you can pay for child care? 17 So, I'd be happy to send you the link. 18 I know they've done those calculations for 19 every region, and I know 15 doesn't quite get you 20 there. It is still lower than that sustainability 21 level in almost every region in the state. 22 SENATOR PERKINS: So I'm sorry you couldn't 23 give me that number right now, but I'm glad what you 24 did give me, is what we really need to understand, 25 is that sustainability is what we're talking about. 1 Not just the minimum of what it takes, but it 2 really -- what do we want working families to really 3 have to sustain themselves in a way that is decent? 4 GEORGE GRESHAM: That's right. 5 SENATOR PERKINS: And, so, I think that this 6 is a great conversation as a step in the right 7 direction, but we've got to move -- we've got to -- 8 you know, we've got to move a little bit faster than 9 this. 10 And for us to be quibbling about this, 11 I think is disrespectful to working families. 12 GEORGE GRESHAM: Thank you, sir. 13 SENATOR PERKINS: That we all respect, that 14 make it possible for all of us to be here. But we 15 have to start talking more about a living wage, not 16 a minimum wage. 17 GEORGE GRESHAM: Thank you, sir. 18 SENATOR MARTINS: Anyone else? 19 Well, Mr. Gresham, thank you very much. 20 GEORGE GRESHAM: They're going through the 21 motions there. 22 [Laughter.] 23 GEORGE GRESHAM: I just -- just to -- one 24 other thing that my family and your family can 25 relate to, although most people wouldn't think of it 1 that way. 2 When my parents actually left the South 3 10 years before they brought me and my -- at that 4 time, my sister, and it ended up being four of us. 5 Once my father became a union member, he could 6 afford two more children. 7 [Laughter.] 8 GEORGE GRESHAM: It's a true story. 9 But -- so the first 10 years we were raised 10 by my grandparents. 11 And so my father had been in the North for -- 12 and mother had been in the North for 10 years. 13 When they brought me up, I understand the 14 issue of immigrants speaking a second language, 15 because until I came north, I thought I spoke 16 English. 17 [Laughter.] 18 SENATOR MARTINS: You learned you didn't. 19 GEORGE GRESHAM: But I had to learn it again. 20 And even my teachers and my parents couldn't 21 understand a word I said because I had one of the 22 strongest, thick Southern accents ever. 23 So I felt that I had to learn English as 24 well. 25 SENATOR MARTINS: George, you did a very good 1 job. 2 GEORGE GRESHAM: Well, thank you, Senator. 3 SENATOR MARTINS: You're fluent. 4 GEORGE GRESHAM: Thank you, sir. 5 SENATOR MARTINS: Thank you very much. 6 Thank you. 7 SENATOR MARTINS: Our next -- next up today 8 we have E.J. McMahon, who is the president of the 9 Empire Center for Public Policy. 10 Mr. McMahon, welcome. 11 E.J. McMAHON: Thank you. 12 Good afternoon. 13 Thank you for inviting me. 14 Thank you very much. 15 The notice for this hearing is appropriately 16 focused on the core question you need to consider in 17 weighing Governor Cuomo's proposal, and that 18 question, of course, is: What impact would such a 19 policy have on workers, employers, and the economy 20 as a whole? 21 I really think that's the question that needs 22 to be carefully considered. 23 I'm going to suggest to you in my testimony 24 that I think there's some compelling evidence in 25 support of the following answer: 1 On balance, a mandated $15-an-hour minimum 2 wage would be a counterproductive policy with a 3 negative impact. 4 It would disrupt labor markets, reduce job 5 creation, drive up prices, and chill the business 6 climate. 7 Now, as far as individual New Yorkers are 8 concerned, I would suggest that the negative effects 9 will be felt, ironically, most strongly by the very 10 people this policy is supposed to help, and who 11 I believe you want to help most, which is marginally 12 younger, low-income workers struggling to get or 13 keep a foothold in our economy. 14 On a geographic basis, the negative impacts 15 are likely to be disproportionately concentrated in 16 Upstate New York, and will be worst of all, 17 ironically again, in those upstate regions that are 18 struggling most to retain and create jobs. 19 My organization recently co-sponsored 20 research to estimate the impact on employment of 21 this the policy. But before I get into those 22 findings, I would like to create some context for 23 this discussion which I think is relevant to some 24 things said earlier also. 25 And there are some charts attached to my 1 testimony that illustrate this. 2 The historical path of the minimum wage, 3 federal and state, adjusted to 2015 dollars, begins 4 in 1938. 5 The first federal minimum wage which applied 6 to a very narrow group of industries, actually, by 7 today's standards, was, in those terms, 25 cents an 8 hour, which in today's dollars is $4.20 an hour. 9 During a 25-year period that coincided with 10 the great post-war economic boom, the federal 11 minimum wage, and this in the 1950s, until about 12 1970s, was steadily raised in stages, and hit the 13 equivalent of more than $10 an hour by the end of 14 the 1960s. 15 New York's minimum wage peaked in 1970 at the 16 2015 equivalent of $11.35 cents an hour. 17 Over the last 50 years, New York State's 18 minimum wage in today's dollars has averaged a 19 little over $8.30 an hour, over the last 50 years. 20 By the way, if you stretched the comparison 21 back 60, it's only very slightly higher. 22 The current New York minimum wage of $9 an 23 hour is the highest New York minimum wage in 24 37 years, adjusting for inflation. 25 Even discounting for future projected 1 inflation over the next 6 years, of 2 1/2 percent if 2 the Budget Division is correct, assuming the same 3 phase and schedule adopted by the Wage Board for 4 Fast-Food Workers, a statewide minimum wage of 5 $15 an hour in today's terms, as of 2021, would 6 still easily be the highest in New York's history. 7 A minimum wage of $15 an hour would be 8 considerably higher than the minimums now scheduled 9 to take effect over the next several years in our 10 adjoining states. 11 Now, while some cities elsewhere in the 12 country, such as Seattle, have enacted local laws 13 that have begun moving them up to a $15-an-hour 14 minimum wage, with some exceptions, such a policy 15 has not been enacted on a statewide basis anywhere. 16 As illustrated in Figure 2, adjusting for 17 exchange rates and purchasing parity differences, 18 $15 an hour is higher than the current minimum wage 19 in countries around the world. 20 Indeed, as of 2014, only 7 of 25 developed 21 nations had minimum wages higher than $9 an hour, 22 and none had minimum wages higher than $12. 23 Most pertinent of all, from your standpoint 24 in weighing this proposal, are the very wide 25 differences in prevailing market-wage levels in 1 different regions of New York State, which, since 2 you all know New York well, reflect -- is, largely, 3 reflective of the very wide differences in living 4 costs in different parts of the state. 5 Based on Labor Department data, as shown in 6 Figure 3 attached, the medians for different -- the 7 median hourly wages for all jobs in different 8 New York regions are lined up against $15, as well 9 as last year's 8.75. 10 Those medians range from a high of just under 11 $22 an hour in the New York City metro area, which, 12 in the Labor Department's definition, includes 13 White Plains, and Wayne, New Jersey, to a low of 14 $15.30 in the Glens Falls area. 15 Other upstate regions with median wages just 16 above $15 an hour included Utica-Rome at 15.91; the 17 non-metro part of Capital Region/Northern New York 18 at 15.77; Central New York at 15.59; and southwest 19 non-metro New York, that would be out in the 20 Western Tier, at 15.49. 21 Even assuming these medians move in tandem at 22 the same rate projected for total statewide wages 23 over the next few years, a statewide minimum wage of 24 $15 an hour would represent a very high percentage 25 of the current hourly minimum wage throughout 1 Upstate New York, especially, again, in those 2 regions, such as the Southern Tier, that have 3 struggled most to create jobs. 4 Which brings me to our own study. 5 The authors of that paper, 6 Economist Douglas Holtz-Eakin, and Ben Gitis of the 7 American Action Forum, drew on three credible 8 research models to estimate low, medium, and high 9 impacts from raising the statewide minimum wage to 10 $15 an hour. 11 And the complete paper is attached to my 12 testimony. 13 Their key finding, as further explained in 14 the paper, is that a $15 minimum wage phased in on 15 the Wage Board's schedule in different regions of 16 the state could cause us -- could cause our 17 job-creation totals to be $200,00 lower, at a 18 minimum, under the low-impact estimate. 19 And that depending on which other methodology 20 was applied -- and there's more details of those in 21 the paper, and even in my written testimony -- the 22 job impact could be as much as 432,000 jobs; or even 23 in the high-impact estimate, 588,000 jobs. 24 Job losses would be smaller, but still more 25 than New Yorkers should be willing to tolerate if 1 the State was to set the minimum at $12 an hour, 2 according to Holtz-Eakin and Gitis. 3 By the way, Doug Holtz-Eakin was unable to be 4 here today. Unfortunately, we were unable, on the 5 notice provided, to bring some of these economists 6 into town, but would welcome a chance to do that 7 some other time. 8 Conversely, wage gains from the minimum wage 9 would range from a high of $10.6 billion; that is, 10 with the lowest job loss, it would be the highest 11 net-wage gain, $10.6 billion; to a low of just over 12 a billion dollars if the very high job-loss estimate 13 turned out to be correct. 14 Based on national labor-force data, our paper 15 also estimated that less than 7 percent of the wages 16 generated by a $15 wage would actually go to 17 households in poverty. 18 Now, advocates have suggested that a 19 67 percent boost in the minimum wage, which is what 20 you're being -- considering now, will ignite a 21 purely virtuous cycle in which low-wage workers 22 spend all of their higher pay on goods and services, 23 resulting in a net boost to the overall economy. 24 But there are two sides to that coin. 25 A minimum wage won't generate higher incomes 1 out of thin air. In fact, to a great extent, it 2 will redistribute incomes, in some cases, from one 3 group of low- and minimum-wage -- medium-wage people 4 to another. 5 Consider how the $15-an-hour wage scenario is 6 likely to play out in just one important section 7 that touches many working families across the state. 8 As of 2014, there were 11,370 child-care 9 workers employed in the 11 metropolitan areas of 10 Upstate New York, earning hourly median wages 11 ranging from $9 an hour in Binghamton, to just below 12 $11 an hour in Ithaca. 13 The biggest urban metros in Upstate New York 14 all had median child-care-worker wages below 15 $10 an hour. 16 That's as of 2014, median hourly wages. 17 Now, obviously, in addition to being 18 obviously important, child care is labor-intensive, 19 and licensed child-care centers are subject to 20 strict staffing levels. You can't automate child 21 care. 22 Given the figures I just cited, the 23 imposition of a $15 an hour minimum wage inevitably 24 will result in significant increases in child-care 25 costs for hundreds of thousands of parents at all 1 income levels, some of whom are actually receiving 2 government subsidies through -- paid through 3 nonprofit associations, which are a whole other area 4 of discussion here. 5 A significant raise for those 6 11,000 child-care workers, and it would be, will 7 require a significant increase in child-care 8 expenses for hundreds of thousands of parents and 9 families. 10 And as salaries rise for child-care workers 11 employed in licensed facilities, which is really 12 what this count involves, families with informal 13 child-care arrangements also will need to pay more 14 because of the prevailing wage increase. 15 The most common assertion we hear in 16 connection with the push for the $15 minimum wage, 17 as Governor Cuomo has put it, is "no one who works 18 full-time should live in poverty." 19 And, of course, few would disagree with that. 20 In fact, this is not a new concern in 21 New York State. 22 It was a desire to boost low-wage workers out 23 of poverty that inspired Governor Mario Cuomo to 24 successfully propose and initiate, 22 years ago, 25 New York State's own supplement to the federal 1 earned income credit, a program that has enjoyed 2 broad bipartisan support in Washington since the 3 mid-1970s. 4 By the way, the earned income credit, as its 5 name implies, is not public assistance. It is 6 earned. It's related to work. 7 For the single parent let's count how -- what 8 the EITC amounts to. 9 Counting the EITC and other state and federal 10 wage supports and tax benefits, including child tax 11 credits, which are refundable, but which go to all 12 middle-class and working families, as well as 13 supplemental nutritional assistance, better known in 14 the past as food stamps, a single parent of two 15 children, employed full-time in New York at 16 $9 an hour, can collect total cash income of just 17 under $35,000 a year, which works out, at a 40-hour 18 work week, to 16.81 an hour. 19 These figures do not include any additional 20 benefits, such as housing and child-care subsidies 21 or health insurance under Medicaid or the ACA. 22 For the single parent of two, in that 23 example, a $6-an-hour pay raise would result in a 24 net-cash income gain, when all is said and done, of 25 $2.72 an hour, due to the phase-in reduction of the 1 EITC and other means-tested cash supports I just 2 mentioned. 3 Now, it's one thing for this offset to occur 4 in the course of a low-wage worker's natural 5 progression up the pay ladder. 6 It's quite another thing to assume that the 7 only way to boost the incomes of these particular 8 workers, who, keep in mind, make up a subset of all 9 minimum-wage workers, is by forcing employers and 10 their consumers across the state to pay billions of 11 dollars more to a much larger number of workers, 12 most of whom have family incomes above the -- well 13 above the poverty line. In fact, multiples of the 14 poverty line. 15 If poor workers are your real concern, and 16 they ought to be, by far, the most efficient way to 17 help them is through improvements and restructuring 18 of the earned income credit, which, to be sure, 19 really is going to require some cooperation or 20 waivers from the federal level as well, because of 21 the way earned income credit flows now, because the 22 earned income credit and tax credit encourages poor 23 heads of household to seek work without jeopardizing 24 employment opportunities for anyone else. 25 Now, you've heard it implied, and I guarantee 1 you, you will hear it implied and stated by some 2 witnesses following me, that economists throughout 3 the nation, if not the world, have somehow now 4 reached a broad understanding and consensus that 5 increases in minimum wages have no negative impacts 6 anywhere, anytime, on employment. 7 Let me stress, that's simply not true. 8 Last month, for example, Professor Clemens at 9 UC San Diego, who is one of the authors of one of 10 the methodologies used -- cited in our paper, 11 published new research findings that recent federal 12 minimum-wage increases had reduced employment among 13 young workers. 14 His findings were not inconsistent with 15 research published in 2012 in the Cornell University 16 "ILR Review," which found that New York's 2004 17 increase in the minimum wage was associated with a 18 reduction in employment of less-skilled, 19 less-educated workers. 20 Now, economists are going to continue to 21 disagree on the strength and significance of 22 employment impacts from minimum-wage increases. 23 That is guaranteed. 24 But in today's New York context, by far, the 25 most important takeaway from the ongoing debate in 1 this field, is this: The vast majority of 2 minimum-wage research published by academic 3 economists on all sides of this issue has focused on 4 wage hikes that were much smaller and much more 5 limited in scope than what you are now being asked 6 to approve in New York State. 7 In fact, prominent economists, otherwise 8 sympathetic to calls for a higher federal minimum 9 wage, have pointedly declined to endorse calls for 10 an across-the-board wage floor as high as $15 an 11 hour. 12 To cite just one, Professor Alan B. Krueger 13 of Princeton University, former chairman of 14 President Obama's Council of Economic Advisors, 15 recently wrote in the "New York Times" that, and 16 I quote, A $15-an-hour national minimum wage would 17 put us in unchartered waters and risk undesirable 18 and unintended consequences, unquote. 19 As Professor Krueger concluded in his column, 20 quote, Economics is all about understanding 21 tradeoffs and risks. 22 The tradeoff is likely to become more severe, 23 and the risk greater, if the minimum wage is set 24 beyond the wage -- the range studied in past 25 research. 1 In some, a $15-an-hour statewide minimum wage 2 in New York would entail some very big tradeoffs, 3 affecting the livelihoods and finances of millions 4 of New Yorkers; some positively, others negatively. 5 In a prolonged period of slow economic 6 growth, such as the one we're now in, the loss of 7 any jobs, much less a potential, possible, minimum 8 shortfall of a couple of hundred thousand jobs, is a 9 risk you should not be willing to take. 10 The research we published, and the work of 11 other organizations and economists, indicates that 12 enacting the biggest increase ever in New York's 13 minimum wage would indeed benefit many low-income 14 workers; that is, those who still have work, or can 15 find it, at the expense of others, those who can't 16 or don't. 17 The biggest losers in this equation will 18 ultimately be stuck with the ultimate minimum wage, 19 which is zero. 20 Thank you very much, and I'll be happy to 21 take any question you may have. 22 SENATOR MARTINS: Thank you. I appreciate 23 it. 24 You know, part of the concern that I have -- 25 and before I get started, you made references to a 1 median wage. 2 E.J. McMAHON: Right. 3 SENATOR MARTINS: Describe that for us. 4 E.J. McMAHON: Well, the "median wage" is the 5 halfway point. 50 percent of the people make less, 6 50 percent make more. 7 SENATOR MARTINS: Right. So when we're 8 talking about a median wage in an area like 9 Binghamton, Southern Tier, 15.40-something I think 10 is what you said -- 11 E.J. McMAHON: Right. 12 SENATOR MARTINS: -- that means that half of 13 the population in that area that's working is 14 earning less than $15.40 right now. The other half 15 is earning more than $15.40. 16 E.J. McMAHON: Right. As of 2014, that's 17 what they were earning. 18 SENATOR MARTINS: So the prospect of a 19 minimum-wage increase and the effect on the business 20 community in that area is something, obviously, that 21 is of concern. 22 Now, in preparation for this, and for other 23 discussions that we've had, I think we've all had 24 opportunities to -- I hope we've all had 25 opportunities, to research the issue of the effect 1 of a median wage on minimum wage, and what that 2 ratio should be. 3 But to the extent that perhaps we have it, 4 where is that norm expected to be? 5 E.J. McMAHON: Well, it's one of those 6 countless areas in where economists you can consult 7 disagree. 8 A lot of advocates of higher minimum wages in 9 the federal level think that it should be back in 10 the neighborhood of, I think, 60 percent of the 11 full-time wage. 12 In fact, advocates of this higher wage 13 believe that the minimum wage should be related 14 solely to the full-time, full-year wage, rather than 15 the wage for all jobs. 16 I would disagree. 17 I would say wages are wages. 18 And, in fact, many of the jobs we're talking 19 about, many of the workers we're talking about, in 20 fact, it's, roughly, 50/50, a little more on the 21 positive side, are not full-time, and maybe are not 22 depending on and supporting a family on the wage. 23 There's a whole mix of people in this. 24 So, the norm is what you think it ought to 25 be, but let me point out one thing. 1 Professor Krueger is one of many people, I'm 2 not going to speak for him, but he's made his 3 viewpoint very clear, and there are others 4 (inaudible) in addition to him. 5 Among those advocating a higher minimum wage 6 in the federal level, much higher than $7.25, 7 including those who have done the work, most of the 8 advocates in this room have cited in the past in 9 favor of some high multiple of a full-time wage, 10 have also suggested, and there's not unanimity on 11 this, some would disagree, that there is some 12 greater ability to absorb higher wages in wealthy 13 areas than there is in less-wealthy areas. 14 That, in fact, minimum wages should -- if you 15 set minimum wages at some multiple of the median 16 wage, say even the median full-time wage, what you 17 will quickly find is it's going to differ by state, 18 for starters. 19 Secondly, again, I don't have to tell you, 20 New York State itself is very diverse. So by that 21 analysis, you should also be looking at having a 22 differing wage within New York State. And that is 23 something that has -- that no one has paid attention 24 to. 25 In fact, one of the surprising things about 1 this proposal, which, in its dimensions, is 2 completely unprecedented, would be this is -- you 3 have never been presented with any proposal like 4 this before, is how it is completely oblivious to 5 very significant differences and disparities in 6 labor markets and wage levels across the state, 7 which vary widely, as I've cite -- as the speakers 8 I've cited indicate. 9 So the answer to your question is: It's 10 whatever you want it to be. 11 There are people who try to make a case for 12 it to be a certain level. But even those 13 analysts -- and I can send you citations to them -- 14 who favor a higher federal minimum wage pegged at 15 some level, acknowledge differences among states, 16 and, in fact, have not called for a $15 minimum 17 wage. 18 SENATOR MARTINS: No, I appreciate that. 19 You know, I know that there are 20 well-respected, learned economists out there on 21 various areas of the spectrum. 22 But, whether it's Professor Neumark or 23 Professor Krueger or Professor Holtzer, all people 24 who have, frankly, advocated for minimum wage 25 increases, they've also all warned that it is the -- 1 the amount of this increase, and the incremental 2 increase as large as these are, because what I've 3 seen, and I'd love to hear you comment on this, is 4 we're talking about making this in over three years, 5 or six years, if we're going use the Governor's 6 model; if we're going to use the Governor's model 7 that he has used so far for fast-food workers, that 8 he has used so far for state workers, that he has 9 used so far for SUNY. 10 So I'm assuming that the Governor is going to 11 continue to be consistent. 12 And let me take the opportunity to lament the 13 fact that, although we're here discussing the 14 minimum wage, and here we're discussing a concept, 15 and although we invited the commissioner to be here 16 today, and representatives of the Governor to be 17 here today, they chose not to be here, so we will go 18 and we will extrapolate off what he's already done 19 in order to conceptualize the discussion here today, 20 because it would have been better if they had had 21 somebody here and they could have clarified it for 22 themselves. 23 But, historically, in New York, and 24 elsewhere, when we talk about phasing in 25 minimum-wage increases, even those we did here in 1 2009, they were phased in in small amounts. And 2 that seems to be the traditional way of handling 3 minimum-wage increases. 4 Even as far back as you go, you see that 5 those increases, typically, are significantly less 6 than $1-an-hour increases per year, but, certainly, 7 not multiple dollars. 8 And what we're discussing here today is 9 multiple-dollar increases. 10 What is the effect of that? 11 E.J. McMAHON: Well, I mean, again, you'll 12 get varying opinions on that. 13 I would simply observe that the -- what the 14 schedule of the Wage Board has was $1 an hour every 15 year, for four years, I don't have it in front of 16 me, culminating in 75 cents and 75 cents, or 17 something. 18 SENATOR MARTINS: Statewide. 19 E.J. McMAHON: Statewide -- 20 SENATOR MARTINS: New York City was 21 significantly higher. 22 E.J. McMAHON: -- a dollar a year, dollar a 23 year, dollar a year, dollar a year. 24 New York State -- New York City, different. 25 So every year you'd have a bigger -- you'd 1 have, in nominal terms, a bigger minimum-wage 2 increase than you've ever had before. 3 Now, I've heard it argued that, well, that 4 should ease the pain upstate. 5 I would suggest that, really -- you're really 6 comparing strangulation to, sort of, beheading. 7 I mean, we won't do it all at once. We'll 8 kind of slowly squeeze. 9 Let me use the example of the specific sector 10 I cited, which is relatively small, but which is 11 very important to working families: child-care 12 workers. 13 So, you have child-care workers whose median 14 wages now in the most populated metro areas upstate 15 are under $10 an hour. 16 And you're going to, in stages, every year, 17 increase the minimum by $1 an hour every year for 18 several years in a row. 19 What do you think that does to child-care 20 bills and costs for people paying for it each and 21 every year that it happens? 22 Now, that's quite aside from the point, a lot 23 of what you've heard today is about whether people 24 deserve a higher wage, or should get a higher wage, 25 or whether we should value work in a different way. 1 But I'm talking about, basically, the basic 2 hard-market consideration here is, the money does 3 not come from nowhere. 4 You have people who earn a particular wage in 5 a particular industry that's at a level we now know, 6 that is going to have to go up very significantly 7 each and every year for a number of years. 8 The fact that it's over -- you know, 9 certainly, it would be a calamity if it went up 10 67 percent all at once. 11 But it -- really, it's still unprecedented. 12 Even under the schedule the Wage Board has 13 adopted, it's still unprecedented. 14 And, in fact, the chart I gave you, I think 15 Figure 1 or 2 shows, if you just look at the scale 16 of it. 17 Even compared to the very significant run-up 18 in the federal minimum wage in the -- during the 19 boom, during the '50s and '60s, which was this sort 20 of concentrated period of minimum-wage increases, 21 it's bigger than that, and a bigger, shorter -- and 22 a bigger increase in a shorter time. 23 So, I just think -- I would like to add one 24 thing to some remark you made, Senator. You were 25 talking about the business community. 1 I'm not here to talk for or express concern 2 about, quote/unquote, the business community. There 3 are other people here to do that. 4 The point in fact of the research we 5 co-sponsored, and the point I'm trying to make here 6 today, is that you ought to be concerned about 7 individual workers and about employment 8 opportunities in New York State. 9 Forget about the businesses. 10 If those -- those come through the 11 businesses. 12 And I'm not saying you should disregard the 13 interests of business, but the point is, I -- 14 businesses will speak for themselves. 15 I'm talking about, you ought to be thinking 16 about workers, and opportunities for workers, and 17 how counterproductive this will be for workers, 18 especially the workers who are going to -- who are 19 supposed to be most benefiting from this. 20 SENATOR MARTINS: And we'll have 21 representatives from the business community, we'll 22 also have representatives from the not-for-profit 23 community, who will also be testifying later today, 24 and they can get into those particulars. 25 But, you know, you mentioned the earned 1 income tax credit, and the ability that we have here 2 in New York to directly assist people who are 3 working, as opposed to a safety-net program, as 4 opposed to other forms of public assistance, that 5 there is a route already in place, or a program in 6 place, that will actually put more money in people's 7 hands, because that's really -- part of this is, how 8 do we give people the ability to support themselves, 9 and, on the other hand, weigh the impact to the job 10 creators out there? 11 And if there's a way of more directly putting 12 money in people's hands, as opposed to, perhaps, 13 impacting or devastating certain employment sectors 14 in this state, you mentioned earned income tax 15 credit as a means of doing that. 16 How do -- how would we do that? 17 E.J. McMAHON: Well, I mean, that there's no 18 question that the way to most directly and 19 efficiently concentrate more resources on low-income 20 workers, is to -- without affecting hiring patterns 21 and opportunity, is through the earned income 22 credit. 23 And, again, you can go to his article, not to 24 be -- just cite one guy, among many, that was -- 25 Krueger, among others, made that point also. 1 Many economists, some who think there's an 2 impact, and some who think there's not, have all 3 talked about how the earned income credit is the way 4 to concentrate most efficiently added income to 5 people who are in low-wage jobs. 6 Now, that's not to say, to a surprising 7 degree, the earned income credit has not been 8 sufficiently examined and revisited by researchers. 9 There's a paucity of research on how to improve the 10 earned income credit. 11 One big problem with it is, it's paid -- the 12 limits of the program are such that it is paid once 13 a year. 14 People have to go to tax prep, file their tax 15 return, and then get a check for several thousand 16 dollars, and the child credits are part of that. 17 If there was a way to somehow -- there have 18 been experiments that have been sort of 50/50. 19 If there was a way to somehow make it -- to 20 run it regularly through somebody's paycheck, which 21 the ACA mechanism on insurance may actually have 22 created an opening to. 23 Perhaps New York could even pilot a program. 24 There's one big problem here also. 25 Our EITC, about which we've written in favor 1 in the past in my organization, is 30 percent is 2 geared as federal -- 30 percent of the federal 3 level, we spend a billion dollars a year on that 4 program. 5 The federal EITC, (unintelligible) based on 6 that structure, so we'd have to change our 7 definition, and there would be a budget outlay 8 increase for that. 9 Although, when you start hearing from the 10 non-profit industries about how much it could would 11 cost just them to even -- many of whom haven't 12 caught up with the $9, much less $15, the figure 13 won't look as big as you think. 14 The federal minimum -- EITC is geared, 15 generally, in a general way, to the federal minimum 16 wage, so it doesn't actually peak. It's kind of out 17 of joint with places with higher minimum wages now. 18 I think a lot of interesting work could be 19 done in figuring out how to enhance the minimum 20 wage. 21 The President, President Obama, has spoken 22 about enhancing the EITC for single individual 23 workers, which is very -- there's almost nothing at 24 the moment. And there's been a lot of thought, and, 25 again, potential bipartisan support for doing that; 1 and, also, for sweetening it for married couples who 2 don't get any real -- who don't get, arguably, 3 sufficient benefit from it now. 4 So that's kind of where the thought is. 5 I think a lot of work can be done to examine 6 the EITC in more detail and figure out how to make 7 it more effective. 8 SENATOR MARTINS: Of the jobs we have here in 9 New York State, can you tell me, roughly, if you 10 know, what percentage are from small businesses, 11 what percentage are from large businesses? To the 12 extent that you do. 13 E.J. McMAHON: Offhand, I forgot to research 14 that. I'm sorry. 15 I'm sure subsequent witnesses will know it. 16 A lot of low-wage jobs, obviously, are with 17 small businesses and small firms. And the general 18 economic understanding is that profit margins and 19 operating margins are thinnest in small businesses 20 and the types of businesses that employ low-wage 21 workers. 22 SENATOR MARTINS: When we discuss these 23 issues, you know, there are people who will discuss 24 these issues and think of the large stores, the 25 multi-billion-dollar corporations, whether they're 1 fast-foods, or whether they are, you know, the 2 Walmarts or the Home Depots or the Lowes or...you 3 fill in the blank. 4 When I discuss this issue, I think about the 5 shop at the corner at the end of my block. 6 And, so, it contextualizes these issues for 7 me because, you know, someone put a figure to this, 8 and I think it actually may have been the Governor, 9 that this will put $15.6 billion into the economy. 10 But this isn't $15.6 billion that wasn't 11 already in the economy. This isn't new money. 12 That is money that is coming from somewhere 13 else. 14 And to the extent that there's an argument 15 that's going to be made that that money is coming 16 from large retail, multi-billion-dollar companies, 17 there's a discussion. 18 And, so, I would like to focus on, and 19 perhaps it's not with you, perhaps it will be with 20 somebody else, if you don't wish to comment on it, 21 but the amount of money that comes from those small 22 businesses, frankly, those people whose kids are 23 going to school with my kids, and who own businesses 24 locally, is a real concern, because they're no 25 longer going to have the money to spend, and they 1 were spending it. 2 So what do we -- how do we deal with that? 3 E.J. McMAHON: Well, I mean, I don't think, 4 for instance, that the idea of, somehow, doing some 5 tax trade-off and we'll make it up to them in the 6 back end, that is a -- should be a non-starter, 7 because you're talking, wages are part of your gross 8 above-the-line expense. 9 Taxes are a sliver of your operating margin, 10 which, in the case of many of these businesses, is 11 very small. 12 The cost of the higher minimum wage for many 13 of these businesses will be probably hundreds of 14 times more than any savings from any conceivable 15 tax; in fact, hundreds of times more than you pay in 16 tax. 17 I think that it is ironic that much of this 18 discussion has taken to sort of objectifying big 19 multinational, even global, chains, such as 20 McDonald's, as the so-called, sort of supposed 21 "evil-doers" who are taking advantage of and are 22 exploiting low-wage labor. 23 When, in fact, if you implement a policy like 24 this, like all labor regulations of all sorts, the 25 employers that are most -- best situated to deal 1 with it, absorb it, and, after, whether or not they 2 fend it off, you know, surviving, are big employers. 3 At the end of the day, you will end up with 4 more retail, more service, more food service, being 5 done by and owned by chains, the bigger -- the 6 bigger the more likely, than by community 7 businesses, if you do this. 8 There's no question about it. 9 SENATOR MARTINS: So if I have a local 10 hardware store and I have a Home Depot, and this 11 goes into effect, what you're suggesting is, a year 12 or two, three years, down the road, my local 13 locally-owned, small-business-owned hardware store 14 is out of business, and Home Depot is still there? 15 E.J. McMAHON: Well, think about that. 16 And there's been -- there has been research 17 on this, and exponential studies about it. 18 But just from your own experience, when a 19 Walmart on Home Depot comes into a community, the 20 first thing that happens is, the guy with the local 21 hardware store freaks out, because he thinks, Well, 22 that's it. They sell rakes for half of what I do. 23 Then what happens is, they realized they keep 24 of a lot of their business, they certainly keep me, 25 because when you walk in and you're not sure what 1 size to bolt the buy, the guy you've known for years 2 knows, walks you down the aisle and says, You take 3 this one instead of this one. 4 Whereas, somebody in Walmart doesn't know 5 anything, if you can find them. 6 So the local business survives on the basis 7 of the service it provides, which equates to the 8 people it employs. 9 The Home Depot/Walmart model is much less 10 intensive in terms of employment, and, of course, 11 it's spread across a much bigger base of capital 12 support than the local hardware-store owner who 13 maybe has the, you know, Ace franchise. 14 And those are the -- that's just to cite that 15 type of business. 16 Clearly, you don't need to -- you know, this 17 is based on your own experience. You can figure out 18 what will happen here. 19 It makes it much hard, that much harder, on 20 the individual, the small employer, or the employer 21 with a small -- with two or three stores in a 22 particular community, than on the larger employer. 23 The larger employers will complain, I assume, 24 but at the end of the day, they'll deal with what 25 they have to deal with. They are big, fat, 1 capital-intensive businesses with huge marketing 2 budgets. 3 SENATOR MARTINS: You know, I -- and I will 4 ask this as the last question -- 5 I know my colleagues have some questions as 6 well. 7 -- as I was reviewing the materials for the 8 Wage Board that was convened recently, and you look 9 at some of the statistics that existed there -- and 10 I certainly suggest that, whoever is interested, 11 should go back and take a look at it -- they looked 12 at the number of employees by -- for fast-food 13 franchises. 14 So, those franchises that had fewer than 15 10 employees, those that had between 10 and 20, 16 those that had over 100, and they are -- they gave 17 the average salaries that were paid to their 18 employees, given the number of employees that they 19 had. 20 And what you will find is that: 21 The larger ones, those that had more than 22 100 employees, or more than 500 employees, were 23 actually paying their workers over $15 an hour. 24 And those that had fewer employees, they were 25 small franchisees, the kinds that we were discussing 1 just now, were actually on the lower end of the 2 scale. 3 So the larger companies have an opportunity 4 by that, and I'll extrapolate, to be able to support 5 the higher wage. 6 So, I appreciate that. 7 Senator Savino. 8 SENATOR SAVINO: Thank you, Senator Martins. 9 Thank you, E.J. McMahon. 10 I might not always agree with your findings, 11 but I certainly have great respect for the work that 12 your center does, and the thought-provoking 13 information that you bring forward. 14 So I want to go over a couple of points that 15 you made, because I've read in other articles where 16 you've talked about the EITC, and I think you're 17 right. 18 I think, regardless of what happens with 19 minimum wage here in New York State, I think it's 20 time for us to reexamine whether the EITC really is 21 a valuable tool for working families, and what we 22 can do to prop it up. 23 So can you expand a bit more, are you 24 suggesting we shouldn't raise the wage? We should 25 spend more time focusing on how to make EITC a more 1 valuable tool for working families? 2 E.J. McMAHON: Well, first of all, I think 3 there is no question that it is a valuable tool. 4 I think one of the things that we haven't 5 done certain state-focused work on, and we have an 6 exceptionally large number of people in 7 New York State who claim the EITC, is: 8 Are there better delivery mechanisms? 9 Are there -- how, and whether, we can enhance 10 it again for single individual workers? 11 And how you would distinguish between 12 individual workers who are college students over the 13 summer, but maybe have claimed emancipation to get a 14 loan; and individual workers who are trying to 15 support themselves, solely? 16 There's all these sorts of questions. 17 These are questions that have come up with 18 the EITC in the past. 19 I do think that, first of all, the EITC 20 should not be overlooked, which it has been, 21 I think, in general, is almost always overlooked in 22 this discussion. 23 The implication in this discussion always is, 24 that people out there are supporting families purely 25 on the wage without any sort, without any other 1 cash. 2 And there is cash, and it's not -- "public 3 assistance" is the wrong name for the earned income 4 tax credit. 5 SENATOR SAVINO: Oh, I agree. 6 E.J. McMAHON: Public assistance is standard 7 welfare. 8 Public -- the earned income tax credit is 9 earned. 10 And the same goes for the child credit, which 11 goes to people way up -- most taxpayers up the 12 income scale get the tax credit, get the child 13 credit. 14 So you're being treated the same as anybody 15 else. 16 But I do think -- I think we need to look at 17 it. I think we need to do the kind of research that 18 you can do only if you have access to the State Tax 19 Department's records, and I could do some 20 blind-research involving a comparison, both, of 21 people in TANF welfare-to-work programs and the EITC 22 roles. 23 I think there's not enough we know about how 24 effective it is. 25 I don't think enough recent research has been 1 done, to actually talk to families who get the EITC, 2 to find out what the strengths and weaknesses are. 3 And, again, to focus a particular, not just 4 on the levels, but on the delivery mechanism. 5 Should there be a regional difference in the 6 EITC? is another issue. 7 So, I think there's a lot of interesting 8 questions surrounding the EITC that, really, we 9 haven't asked, and that you need a government entity 10 to sponsor those questions in order to get into the 11 data at the level you need. 12 SENATOR SAVINO: Right. 13 You also brought up the issue of, using the 14 example of child care-care workers, that if we were 15 to raise the wage for -- raise the minimum wage for 16 workers everywhere, they would also be entitled to 17 an increase in the minimum wage. 18 But that's also a group of workers for whom 19 the majority of their income is capped, based on the 20 subsidy that a working family has to obtain that 21 child care. 22 E.J. McMAHON: Right. 23 SENATOR SAVINO: So a lot of them are -- 24 their income is depressed simply by government 25 policies. 1 So would you think it might be a good idea 2 for us to revisit the subsidy rate for child care? 3 E.J. McMAHON: Well, here -- I think that an 4 honest way of approaching it, and I respect the way 5 you've been talking about this, is because what 6 you're implicating is, Well, if we're going to do 7 this, we're going to have to spend a ton more money. 8 I mean, basically, that's the implementation 9 of what you're saying; and the answer is yes, if you 10 believe wholeheartedly in this. 11 And I do think the economic consequences 12 throughout the private-sector economy, direct and 13 ripple effects, will be more negative than you can 14 stand. 15 But if you were just looking at the impact on 16 public-sector budgets, and confronting it honestly, 17 as I think you're doing, is you have to recognize 18 that there are untold hundreds of millions of 19 dollars in costs associated with the wage levels now 20 paid to employees of non-profits, many of whom don't 21 make -- are just barely getting up to $9 an hour, 22 much less $15. And that there's been no talk of 23 that. 24 I think, when you -- when we -- when you 25 really dig into the expense of that, I think it's 1 going to be very large, perhaps shockingly large. 2 And, remember, let's say we ignored that, 3 even though we shouldn't, let's say you adopted this 4 and ignored that. 5 And as you point out, there's caps. 6 But, remember, this becomes the prevailing 7 wage. 8 So, the non-profit program is employing the 9 person whose wage is capped. And the commercial 10 child-care center, or the other child-care center 11 that doesn't have subsidized clients, is not capped. 12 So that person now can get a job at another 13 place that pays -- is required to pay more. 14 That's -- this is how it can disrupt labor 15 markets. 16 It's also wise, I think as an important 17 point, when you begin to hear about and get 18 documentation of the impact on nonprofits, and 19 I think also, probably, the impact on small 20 business, I think the natural first tendency of the 21 Legislature is to say: We need carve-outs. We've 22 got to slow this schedule down. We've got to carve 23 out. We have to exclude. We have to have a 24 training wage. 25 The problem is, if this 15 -- if this minimum 1 wage increase is to have any meaning at all of the 2 sort you ascribe to it, it's going to affect labor 3 markets. 4 Just because I have a carve-out doesn't mean 5 I'm going to be in danger of losing employees or 6 having wage pressure because of the places that 7 don't have a carve-out. 8 So, there are those effects. 9 And I do respect what you're doing, which is 10 at least to try to call attention to the fact that 11 there are tremendous costs with this, particularly 12 to those services that are subsidized: human 13 services that are subsidized, by government. 14 SENATOR SAVINO: Thank you. 15 I have two more questions, and I'll be very 16 quick. 17 Even though we don't have a proposal before 18 us, you know, we assume we know what we're talking 19 about, based on, you know, rallies that have been 20 held, and public comments that the Governor has 21 made, and we can look at the Wage Board and the 22 action that they were asked to take, and I think 23 what the Governor has proposed for SUNY and some 24 other state employees. 25 So we think we know what we have, but we 1 don't have a bill. 2 But part of the discussion, (unintelligible) 3 has been made, in an effort to blunt the impact, so 4 to speak, on businesses and small businesses, has 5 been a suggestion that perhaps the State should 6 provide a tax cut to small businesses. 7 What's your opinion on that? 8 I don't have an opinion on it -- 9 E.J. McMAHON: I don't -- whatever other 10 reason there would be for doing a tax cut for small 11 businesses, this is not the one. 12 This is not apples to oranges. 13 This is like apples to, you know, mangos, or 14 palm trees. 15 I mean, this is, you're talk -- again, wage 16 costs, and it varies, depending on the type of 17 businesses, but wage costs are part of gross 18 expense. 19 Your taxes is applied to your net income. 20 Businesses -- you're talking about 21 businesses, in many cases, with margins, basically, 22 their profit or income margins, of 1 to 4 percent, 23 to which we then apply a 6 1/2 percent maximum tax 24 rate, or varying, depending on the income tax. 25 So you're talking about a small percentage of 1 a small percentage. 2 The labor cost is the gross above-the-line 3 expense. 4 You can construct many models of a business, 5 a "small business," defined as, in the Governor's 6 new small-business tax cut, for instance, a small 7 business with, say, 50 or 60 employees, which has 8 average wages of, say, fifty, fifty-five thousand 9 dollars, including some people who are clustered in 10 low-wage jobs just above the minimum wage at the 11 bottom. 12 When you say -- when you force them to apply 13 that to this business, that business's wage costs -- 14 that business may have a net income of $200,000, 15 taxable. It has wage costs of millions of dollars, 16 2 or 3 million dollars. 17 And you're increasing the wage costs, which 18 may be 2 or 3 million dollars, by, let's say, on 19 average, because they're not all minimum wage, 10 or 20 20 percent. 21 Well, 10 or 20 percent of 2 or 3 million 22 dollars is more than your entire net income. 23 So it's not -- there is no way this one thing 24 relates to the other. It's not even worth thinking 25 about. 1 I mean, you do a minimum-wage increase -- 2 and, frankly, I was united with some of the people 3 in this room who are normally -- we normally -- 4 normally, we disagree on minimum wage. 5 When the small minimum-wage tax credit was 6 enacted several years ago, people on both sides, and 7 we all spoke out, we said, This is a bad idea. This 8 is not -- this is counterproductive. It's 9 pointless. Don't do it. 10 It was done anyway. 11 But, I mean, I don't think you should even 12 think about it. 13 SENATOR SAVINO: And no one claimed it 14 either. It's amazing. 15 E.J. McMAHON: Well, I mean -- well, yeah, 16 because it was pointless. I mean, I'm not 17 surprised. 18 But, I mean, that's the -- and if it had been 19 more generous -- if it had been generous enough to 20 claim, it would have had counterproductive 21 unintended consequences that you wouldn't like. 22 So, it was -- I wouldn't even think about it. 23 SENATOR SAVINO: And I have one -- thank you 24 for that. 25 I have one final question. 1 One of the reasons why -- this is very 2 contentious, the minimum wage. 3 I've been in the Legislature now since 2005. 4 And I think the 2004 cycle was a big fight 5 over whether we should raise the minimum wage then 6 to, I think, $6 an hour. And we've done it three 7 times since then. 8 But it's always difficult, and it's -- you 9 know, and the same arguments come forward that, you 10 know, employers can't handle it, and it will harm 11 workers, it will eliminate jobs at the low end...all 12 of the arguments we're going to hear today, written 13 large, again. 14 But here we are, trying to discuss it. 15 So in your opinion, as an economist -- 16 E.J. McMAHON: I'm not an economist. 17 SENATOR SAVINO: -- an expert at these 18 things -- 19 E.J. McMAHON: Okay. 20 SENATOR SAVINO: -- in your opinion, since 21 it's taken 85 years, almost, for the minimum wage in 22 the United States to go from 25 cents an hour to 23 $7.50 -- 85 years, right? -- would it be better if 24 we took the politics out of it, if we eliminated 25 this, and we were to raise the wage, establish a 1 base floor that provides a living wage, that 2 provides predictability for employers so that they 3 know what they're facing, and then peg it to the 4 rate of inflation? 5 E.J. McMAHON: Well, a lot of people have 6 advocated that. 7 There's not broad agreement on it, but a lot 8 of people who were for a higher federal wage have 9 advocated that. 10 I would note that none of the most serious 11 advocates of that have talked about going to 15, and 12 indexing it. 13 SENATOR SAVINO: But -- 14 E.J. McMAHON: But, yes, that's been a 15 serious proposal. 16 I think, I don't think I misspeak, I think 17 even Mitt Romney supported indexing the minimum 18 wage. 19 SENATOR SAVINO: Imagine that. 20 E.J. McMAHON: But, not 15. 21 I think that the other thing we should be 22 conscious of, though, again, which I think is 23 getting more, sort of, belated recognition from 24 those economists who are writing about raising the 25 federal minimum, is recognizing the regional 1 differentials, because they've looked a Seattle and 2 said, Hmm. Seattle's like this bubble of wealth 3 creation right now. It's booming. It's filled with 4 people going out to dinner, basically, okay, 5 allegedly. 6 Well, Binghamton is not Seattle. 7 You know, Elmira is not Seattle. 8 And, that, I think there's also, if you were 9 thinking about automatic ratcheting devices, that 10 you -- not necessarily endorsing that idea, but 11 getting at what you're getting at, if you're 12 thinking of, Let's just do it one and done. Let's 13 just do something and ratchet it? You also ought to 14 be thinking about regional wage norms, and not 15 simply having statewide ratcheting devices in a 16 state as large and diverse as New York. 17 SENATOR SAVINO: Well, I thought I had, that 18 was the last one. 19 But then on that point, while there are 20 different wage rates by state, recognizing 21 New York's more expensive than Nebraska, and the 22 feds set the real floor, we set our on ceiling here, 23 or our own wage floor, which is -- whatever, has 24 there ever been an experience where a state has more 25 than one minimum wage -- 1 E.J. McMAHON: Yes. 2 SENATOR SAVINO: -- within their state? 3 E.J. McMAHON: New Mexico does, for instance, 4 they're all high. And New Mexico is a very sick 5 puppy. 6 SENATOR SAVINO: They're all high? As in -- 7 E.J. McMAHON: They're all high minimum 8 wage -- well, no, they're not high, in that. 9 You're thinking of other legislative battles. 10 They are -- they had extremely high minimum 11 wages. 12 In fact, Santa Fe was the only place you 13 could find in the country that, in one fell swoop, 14 went quickly, on a percentage basis, as much higher 15 as the feds as this would take us, about 10 years 16 ago. 17 It was very poor -- the New Mexico economy 18 has performed very poorly. 19 It has a variety, I think, much of the state 20 has different minimum wages. Highest in Santa Fe. 21 They're all higher than the federal minimum 22 wage. 23 They're all pretty high, by national 24 standards, and I don't think it's come out too well. 25 SENATOR SAVINO: But the establishment of 1 different wage rates within the state -- 2 E.J. McMAHON: Oh, that's a pattern, yes. 3 And there are -- obviously, it's happening in 4 California now. Los Angeles is going to -- on its 5 way to 15. 6 The state of Washington, with Seattle. 7 There are states that permit local minimum 8 wages, yes. 9 SENATOR SAVINO: Thank you. 10 E.J. McMAHON: You're welcome. 11 SENATOR MARCIONE: I have one. 12 SENATOR PERKINS: I have a quick question. 13 SENATOR MARTINS: Yes, Senator Marchione, and 14 then we'll come to you, Senator. 15 SENATOR PERKINS: Of course. Whenever you're 16 ready. 17 SENATOR MARCIONE: Thank you, E.J., for your 18 testimony today. 19 Certainly can see that you have some serious 20 concerns about $15 an hour. 21 But, would you have a suggestion or an 22 alternative or a compromise that you think would 23 work in New York, and still help people perhaps have 24 a higher minimum wage? 25 E.J. McMAHON: Well, putting aside the fact 1 that I wouldn't advocate necessarily any increase in 2 minimum wage; but, rather, than looking at a pause, 3 at least now, after the increases we have had. So 4 I'm not advocating it. 5 However, I think that, actually, we were just 6 leading to this, I think, almost. 7 I think Senator Savino had the better 8 approach last, year which was the fair labor -- 9 "fair local wage" bill, which would allow 10 New York City and counties in New York State to set 11 wages. 12 And as your own -- I pulled out your memo of 13 justification, because I thought it made some points 14 that are still very valid, relevant to this debate, 15 which was, first of all, that it would have 16 recognized the -- as you put it, the wide variation 17 in the cost of living in different parts of the 18 state, which has not been recognized in this 19 discussion. 20 Secondly, you wouldn't have the State 21 completely evaporate from the discussion, because 22 you would basically peg what localities could do to 23 some maximum percentage of what the state set, which 24 in your bill was 30 percent above -- 25 SENATOR SAVINO: Right. 1 E.J. McMAHON: -- which is, I think, was 2 11.70, or something. 3 But, I think that if you have to do anything, 4 or you want to consider doing anything, I think that 5 that is a far better approach, that allows local 6 communities and local elected officials to recognize 7 the dynamics of their own labor markets and to weigh 8 all of the pluses and minuses. 9 I think that's a far better approach, it was, 10 and it is, than the approach we anticipate is going 11 to be presented to you by the Governor. 12 SENATOR MARCIONE: You don't not feel that 13 county-by-county is detrimental to the businesses 14 that are there? 15 That in Saratoga you would pay, you know, a 16 certain amount, in Albany you pay a different 17 amount? 18 E.J. McMAHON: Well, I think what we would 19 frequently find out, is I think the counties would 20 quickly learn whether -- what kind of difference it 21 made. I think that they would have to think about 22 that in setting their wages. 23 My prediction, based on nothing but hunch, is 24 that very few would move far out of line with many 25 others, outside of New York City. 1 But, you would have a discussion that was far 2 more relevant to and grounded in local reality than 3 we're having now, which, frankly, with all due 4 respect for people in this room, has been carried 5 out, largely, with references to McDonald's in 6 mid-town Manhattan. And that's not -- that is not 7 relevant to a situation with nearly 50 percent of 8 the hourly wage earners in the Southern Tier. 9 SENATOR MARTINS: Thank you. 10 SENATOR MARCIONE: Thank you. 11 SENATOR MARTINS: Senator Perkins. 12 SENATOR PERKINS: Thank you. 13 Thank you very much for the work you're 14 doing, and being here today. 15 You mentioned Allen B. Krueger? 16 E.J. McMAHON: Yes. 17 SENATOR PERKINS: And as a former advisor to 18 Barack Obama? 19 E.J. McMAHON: Right. 20 SENATOR PERKINS: Are you implicating that 21 Barack Obama subscribes to the points of view that 22 you or Mr. Krueger had on this? 23 E.J. McMAHON: Wouldn't for a -- I'm not sure 24 where he stands. 25 I think he's proposed a $12 federal minimum 1 wage. And members of his administration have been 2 in the neighborhood of this proposal. 3 So I'm not sure where he stands. 4 SENATOR PERKINS: Okay. I just wanted to be 5 sure. 6 E.J. McMAHON: Right. No, I'm not -- I -- 7 SENATOR PERKINS: That's a slippery slope. 8 E.J. McMAHON: I wouldn't dare imply anything 9 as being the President's position. 10 SENATOR PERKINS: Okay. Thank you. 11 E.J. McMAHON: You're welcome. 12 SENATOR MARTINS: Thank you, Mr. McMahon. 13 E.J. McMAHON: You're welcome. 14 SENATOR MARTINS: Next up we have 15 Mr. Hector Figueroa, president of SEIU 32BJ. 16 Mr. Figueroa, great to see you again. 17 Hope you had a good New Year. 18 HECTOR FIGUEROA: Great to see you too. 19 And, good morning to you, Mr. Chairman, 20 Senator Martins, and all members of the Standing 21 Labor Committee. 22 And, Happy New Year to us all in this room. 23 SENATOR MARTINS: Amen. 24 HECTOR FIGUEROA: Feliz navidad. 25 So, I understand that you have a copy of our 1 testimony, so I going to make some references here 2 and there to some aspects of it. 3 And then I would like Jameel Mitcham (ph.), 4 who is one of our security officers who is currently 5 employed at the New York Public Library system, and 6 he earns $11 an hour, to relate to you his personal, 7 you know, experience and his thoughts as to why 8 raising the minimum wage to $15 an hour would make a 9 big difference to workers like him. 10 SENATOR MARTINS: Thank you. 11 HECTOR FIGUEROA: So, why don't you start, 12 and then I will complement you. 13 JAMEEL MITCHAM (ph.): Good afternoon, 14 Senators. 15 SENATOR MARTINS: Good afternoon. 16 JAMEEL MITCHAM (ph.): Yes, like he said, my 17 name is Jameel Mitcham, and I work with NYPO Library 18 in New York City. 19 And I'm glad to be a part of this campaign 20 for the "Fight for 15," and, you know, it's not -- 21 it's about money, yeah, money is important. But 22 it's also about the livelihood in the community and 23 my -- and our families, you know, is affected by 24 this too. 25 And, you know, I just want to say that, you 1 know, thanks to everyone who's in support for this. 2 And I hope that we all get it together for the whole 3 of New York State, not just, you know, the city. 4 The state as a whole. 5 And I'd like to thank you for your time and 6 patience, and have a good evening. 7 SENATOR MARTINS: Thank you. 8 HECTOR FIGUEROA: And I'm sure Jameel would 9 be open to questions after I make a brief 10 introduction. 11 SENATOR MARTINS: Of course. 12 HECTOR FIGUEROA: Thank you. 13 So, first of all, I really want to thank you 14 for the opportunity to be here today. 15 I found both the previous testimonies, both, 16 by my brother George Gresham from 1199, and by 17 E.J. McMahon from the Empire State Policy 18 Center (sic), very illuminating and helpful, and it 19 speaks to the depth and to the interests of this 20 Committee of really examining the question of 21 raising the minimum wage statewide to $15 an hour as 22 being a serious endeavor. 23 And I want to, you know, thank you for that. 24 From the perspective of Local 32BJ, and I'd 25 like to give some background on us, we are a union 1 that is along the East Coast. Our jurisdiction goes 2 beyond New York. 3 We have 145,000 members, that go from 4 New Hampshire all the way to Florida. 5 So we have experience in many multiple 6 markets with many multiple rates, with many 7 different initiatives, whether they are in 8 Connecticut, Massachusetts, or, Philadelphia, 9 recently, for airport workers, about raising wages 10 for low-wage workers. 11 We are incredibly proud of the 75,000 members 12 that are here in New York State, and what we have 13 accomplished over 80 years through collective 14 bargaining. 15 Since 1934, our union has been able to 16 negotiate good jobs that, you know, pay living 17 wages, provide benefits, and doing it in, you know, 18 the process of bargaining with, you know, the 19 real-estate industry in the states, but also, 20 largely, in downstate and the city. 21 We have been coming to these hearings 22 precisely from having bargained new contracts for 23 45,000 workers in the greater New York metro area. 24 Not just New York, but also Connecticut and 25 New Jersey. 1 And those contracts have provided for raises 2 for workers that go as high as almost $27 an hour, 3 you know, in New York City, and, you know, have 4 injected into our economy half a billion dollars in 5 new money, whether it goes to wages, health 6 insurance, pension. And if you multiply that in 7 the way that economists calculate, probably to 8 over 2.2, 2.3 billion dollars to the greater 9 New York City metro area. 10 So we come to this hearing, we hope, with a 11 background of having been working on this issue from 12 the collective bargaining side, but, also, as part 13 of a movement, the "Fight for 15," that while it 14 began among fast-food workers that courageously went 15 on strike in 2012 in New York City, largely, with 16 the support of SEIU and many community activists 17 here, made the road to this inaction, New York 18 Communities for Change, many others, these workers 19 really, essentially, were able to capture the 20 imagination of the country because, by the time they 21 took action, it had become very apparent that income 22 inequality is one of the biggest challenges of our 23 country, I would say also our state, our city face, 24 at this moment. 25 The Economic Policy Institute has established 1 that New York State is second only to Connecticut in 2 the polarization in income, the income gap, that 3 exists, you know, for any other state. 4 So it is that preoccupation, the fact that 5 the gap between the rich and the poor has grown so 6 severely over the last 30, 20, years, plus the 7 erosion in the earnings of workers, that bring us 8 here today, I believe, to this hearing, but because 9 workers took action on the street and demanded 15, 10 just like predecessors many decades, a century, 11 before demanded an 8-hour working day at a moment 12 that people were working 12, 10, 16, 18 hours a day. 13 So, I want to look at the poetry for the 14 moment, understanding that prose is the way that we 15 enact law, because the poetry is what compels us to 16 have this hearings, it's what compels us to act, 17 it's what helps us to (unintelligible) humanity, and 18 the travails and the challenges that workers like 19 Jameel face, and that we keep that element as we 20 debate the prose to what course of action we take. 21 We have been experiencing in 32BJ, 22 significantly, the impact of raising wages. 23 In Washington this year, and as part of our 24 testimony, we raised the wages for security 25 officers. The wages went up $6 an hour. 1 Workers there provided testimony, like Jameel 2 here today. 3 One worker in mind was Chanta Jennifer (ph.), 4 who, I want to quote her because I believe she 5 captured the sentiment of workers who are going to 6 be the subject of this bill if we successfully pass 7 it. 8 She said at the time, testified in the 9 (unintelligible), "I am proud to be part of the 10 city's defense system as a security officer, but, at 11 the time, my wage of 8.24 an hour, I cannot support 12 by 3-year-old son, and that's really all that we ask 13 for." 14 Likewise, workers that are demanding $15 an 15 hour today in New York State, that's all that 16 they're asking for, is to recognize the value of 17 their work, and to recognize that they need to make 18 and meet, and that they have to be able to work for 19 a living without being constantly, constantly, 20 having to balance out whether they buy medicine, 21 whether they pay the rent, whether they buy, you 22 know, the goods, you know, to have food at the 23 table, balancing out so many needs, some of them 24 finding themselves in shelter homes because they 25 cannot afford for themselves and their families. 1 So -- so that's clearly the problem they 2 have, and I know that this Committee, each and one 3 of you, you may have a different view of how to 4 solve the problem. 5 I come here with the assumption and under the 6 belief, by looking at your trajectory as 7 legislators, that you care about the problem, and it 8 is not that you ignore that reality. 9 When we passed the wage increase for security 10 officers in Washington, D.C., the impact that we 11 experienced was that the economy, the market, 12 absorbed that increase. That there were no 13 reductions in the level of employment of security 14 officers. There were no security companies that 15 found themselves unable to meet the demand. 16 They were able to meet the increase. 17 The same experience we had when we raised 18 wages through organizing workers, among workers in 19 New Jersey, where workers were making about $6 an 20 hour in 2001, and through the efforts of 32BJ, they 21 are now beyond the $15 an hour that we are 22 discussing here at the table; and, yet, the market 23 absorbed that. They continue to work. 24 And the way that many of the businesses 25 reacted was by increasing productivity, by 1 organizing the workforce in a different way, by 2 trying to provide the same service, you know, 3 perhaps charging a little more or there, or, perhaps 4 charging the same amount, but finding other areas in 5 their operation where they could compensate for the 6 increase in wages. 7 We also have the other reality that, 8 beginning this movement, not only fast-food workers, 9 but also home-care workers, some of whom were here, 10 or may still be here in the room, airport workers, 11 have been making the demand for 15. 12 And I know that one of the questions that you 13 raised before is, "why 15?" Why not some other 14 number? 15 We can find many rationals for this. 16 But I would say, if we were in 1963, and 17 Dr. King were testifying here -- and by no means am 18 I pretending to be Dr. King -- but I do believe that 19 workers like Jameel is what Dr. King had in mind 20 when he had the march in Washington in 1963. 21 One of the demands of that march was an 22 increase of the minimum wage to $2 an hour. 23 $2 an hour. 24 And I have been here waiting to do the 25 testimony, in the BLS calculator, Senator, that you 1 encouraged everyone to use, and I think it's a very 2 valuable tool, it's $15.51. 3 Dr. King was fighting for $15 an hour for 4 low-wage workers. 5 SENATOR MARTINS: Got it. 6 HECTOR FIGUEROA: We are about to be 7 celebrating his birthday in two weeks. 8 Dr. King would have used both poetry and 9 prose to say that, $2 then, $15 now, it is the kind 10 of money that, when you put it in the hands of 11 workers like Jameel, can make a difference for 12 themselves, for their families, for their 13 communities, provide more than a minimum level of 14 living. 15 And that is 2015 of the (unintelligible) 16 calculator. 17 And at the end, wait for 2018, I imagine it 18 will be a little higher than 15.51. 19 So this is all to say that, as legislators, 20 while looking at the balance and the costs, you 21 know, the cost and opportunity that this presents, 22 balancing out all different perspective, I strongly 23 encourage, from the experience of our union in 24 raising wages, and witnessing through collective 25 bargaining, that the economy adjusts to that, to the 1 experience -- the live experience of workers like 2 Jameel, and to the dream of Dr. King, and an entire 3 movement, to do the right thing, to pass this 4 legislation. It increases it gradually. 5 And there will be other things that I will be 6 very happy to work with you, and our members will be 7 very happy to work with you, whether it is an earned 8 income tax credit, whether it is child-care support, 9 whether it is affordable housing, whether it is 10 helping businesses survive. 11 In my neighborhood in Jackson Heights, it is 12 not wages that is driving small businesses away. It 13 is increasing rent, it is increasing in insurance. 14 It is, quite frankly, a code of regulating 15 businesses that should be looked at, as to what 16 businesses can and cannot do, to make sure that it's 17 up to the (unintelligible), and to the way that 18 businesses operate. 19 So I believe that those things are very 20 important, but doing that overall package, to help 21 low-wage workers, should not get in the way of doing 22 what is most needed, what is immediate, what 23 compelled Dr. King to march and hundreds of 24 thousands to march in 1963; and that is a 25 $15-an-hour minimum wage. 1 SENATOR MARTINS: Hector, always great to see 2 you. 3 We had an opportunity to participate in a 4 panel about a month ago, and there was something 5 that you said that struck. 6 And you know, we can continue to use the 7 "poetry and pros" analogy, if you like, but you said 8 back then that, we wouldn't be having this 9 discussion if it wasn't for the poetry of this 10 "Fight for 15." 11 And, you know, that's true. 12 You know, we're here, having a discussion 13 about minimum wage. 14 We're having a discussion about the working 15 poor. 16 We're having a discussion about earned income 17 tax credits. 18 We're having a discussion about safety-net 19 programs. 20 We're having a discussion about so many of 21 those things that we should be having a discussion 22 on, because of that effort. 23 Now, I value that, and I think that the 24 importance of that discussion is there. 25 I also think it's rather poetic that you were 1 able to check that Martin Luther King, Jr.'s effort 2 for $2 back in 1963 is $15.50 now. 3 But, you know, it's appropriate, because it's 4 a fight that continues. 5 So one of the issues, and Senator Savino 6 brought it up earlier, is, you know, is there value 7 in tagging this to inflation, going forward? 8 Is there a value in our doing that so that 9 we're not, obviously, moving by leaps and steps 10 periodically, and sporadically? 11 Because, frankly, if I hear anything from the 12 business community, aside from, obviously, their 13 concern about this, and the not-for-profit 14 community, it's that these increases, and the amount 15 of these increases, is a real concern for them. And 16 for many of them, we'll put them out of business. 17 And so if we have the ability of phasing in 18 those increases incrementally, it gives the business 19 community, I believe, and not-for-profit community, 20 a much better opportunity to absorb them over time. 21 And, so, is that something you're advocating 22 for? 23 HECTOR FIGUEROA: Well, it depends what the 24 base is that we start from, and what the policy goal 25 is. 1 The policy goal is to maintain the value of 2 labor, so to speak, right, the hourly pay, not 3 taking into account compensation, benefits, paid 4 leave, and other things that are assumed are somehow 5 provided, right, either by employer or maybe the 6 worker is able to cause himself or herself. 7 The inflation cost-of-living adjustment could 8 make some sense, but there are other criterias that 9 you may also want to consider as a legislator. 10 What you want to do, sometimes, is to look at 11 the moment in which the economy is, the kind of 12 needs that need to be provided, and then do an 13 adjustment accordingly. 14 That's why the process of raising the minimum 15 wage is not purely mathematical operation. 16 You know, there is poetry, there is prose, 17 and then there is mathematics. 18 And I'm glad that it is not a pure mathematic 19 operation because the historic needs change. Right? 20 SENATOR MARTINS: Hector, if you start 21 talking about Common Core... 22 HECTOR FIGUEROA: Yeah -- no. 23 [Laughter.] 24 HECTOR FIGUEROA: Well, that falls into a 25 different category. I'm not going to mention what 1 that category of language that goes into. 2 But I would say, you need to look at 3 increases in productivity, you need to look at what 4 workers need. 5 In an economy where people increasingly 6 depend on others to take care of the children 7 because both spouses in a household work, that 8 brings a different kind of minimum-wage need than in 9 an economy where that is less of a reality. 10 There are wage differentials among workers. 11 If collective bargaining succeeds and there 12 is a rebound on labor, or if you look just at 13 New York, should you use the inflation rate? Or 14 should you use the average collective-bargaining 15 settlements, and then establish a raise in the 16 minimum wage based on what the average 17 collective-bargaining agreements, you know, bring 18 forth; what Peter negotiates, what George 19 negotiates, what we negotiate, and then looking at 20 the difference between that and the minimum wage. 21 So I would say there is not a simple answer. 22 I am in favor of maintaining having 23 additional increases from the base that makes sense. 24 To us, $15 an hour, by 2018, is a sufficient 25 phase-in. 1 You asked a question earlier, too: What is 2 the living wage today? 3 That depends on how many dependents you have. 4 That depends on where you live. Right? 5 Senator Savino knows about this, because we 6 worked -- 7 SENATOR MARTINS: Are you a single parent? 8 Are you a two-income household? How many children 9 do you have? 10 And you can -- 11 HECTOR FIGUEROA: (Unintelligible). 12 And if you use the MIT calculator -- again, 13 that's the good thing about not being the first man 14 to testify, I can check that in my iPhone -- it can 15 go from, you know, 22, 23 dollars, to as big as $42 16 an hour, if you are a single parent in Long Island, 17 Nassau County, or on the Northern Fork. 18 SENATOR MARTINS: I know it -- 19 HECTOR FIGUEROA: I know, and that's why I'm 20 using that example. 21 It could be as high as $42 an hour for a 22 parent with three children that depend on that one 23 income. 24 So, again, what we are looking at is, to me, 25 it is not going to be a practical, timely enterprise 1 to arrive to a very logically, very well-grounded, 2 98 percent, R-square equation, you know, of 3 certainty of what the numbers should be. 4 I think that we need to respond to the fact 5 that, you know, $15 an hour is a policy that is 6 gaining momentum in the country. That "$15 an hour" 7 happens to be a number, that it is where 64 million 8 workers in this country are. Almost 50 percent of 9 workers in this country are earning $15 or less. 10 That is a number that, based on the standard 11 cost of living, based on the activity of the 12 fast-food workers, is a number that finds its way 13 into the economy. 14 I would argue, and I have said this to City 15 and State, (unintelligible), that the number, 16 eventually, will have to become higher, but there 17 are many ways in which it can become higher. 18 If we could have workers' greater ability to 19 bargain, we, their employers, without fear of being 20 intimidated, by coming together under a sitting 21 contract; if we provide a safety net of training, of 22 upgrading productivity and skills; if we address the 23 problems of affordable housing and access to 24 location, the number will go up. 25 And you know what? That will be good for our 1 economy, because in a low-growth economy, if the way 2 that small businesses in my neighborhood or in the 3 Northern Fork are going to survive is on the 4 dependents, on the -- and I like to use the term 5 "dependents" almost as a substance-abused term on 6 low-wage work, we're not going to get to that 7 economy. 8 That is an economy that is a high-growth 9 economy where people can afford to pay more for the 10 doughnut at the bakery, you know, around the corner, 11 or to pay a little bit more for groceries, or be 12 able to afford higher child care. 13 How do we get to that economy that sustain 14 high wages and the ability for people to be paid for 15 the true value of the service they provide is a 16 challenge. But I think raising the minimum wage to 17 15 is actually a step in the right direction of 18 getting to that economy. 19 But I agree with you that it would require 20 many other things, from collective bargaining to 21 training. 22 SENATOR MARTINS: And you're absolutely 23 right, and I agree with you. 24 I often say that, you know, in this thing we 25 do here, which is trying to set public policy, we 1 need to play chess, and we have to stop playing 2 checkers. 3 You know, it's not one-dimensional. 4 You have to take a 360-degree view of an 5 issue from the standpoint of that low-wage worker, 6 and then remove yourself. 7 And go to that small-business person and take 8 a 360-degree view from that person and their 9 opportunity to continue to run that business and 10 employ those people. 11 And then we've got to come back and look at 12 it from the perspective of the large multinational 13 corporations that, frankly, may have the ability to 14 absorb it, so they're going to be less likely to be 15 opposed to something like this. 16 But we have to look at different 17 perspectives, and I certainly appreciate the 18 perspective that you bring to our discussion here. 19 Now, you're an employee of the library? 20 JAMEEL MITCHAM (ph.): Oh, I'm not exactly an 21 employee of the library. I'm contracted through the 22 library. I work at the library through -- 23 HECTOR FIGUEROA: He works for a private 24 contractor employed by the public library. 25 JAMEEL MITCHAM (ph.): Yeah, I'm -- my 1 business I work with is actually Spartan Security, 2 contracted through the library. 3 SENATOR MARTINS: Very well. 4 So your employer is contracted with -- 5 JAMEEL MITCHAM (ph.): The library. 6 SENATOR MARTINS: -- the library. 7 JAMEEL MITCHAM (ph.): Uh-huh. 8 SENATOR MARTINS: And would that be covered 9 through any policies that the City may have with 10 respect to setting living wages? 11 Because I know that there was an effort that 12 the City has had to set living wages for their 13 contracted services. 14 You know, is there a way that that can 15 happen? 16 Because, you know, one of the efforts that 17 we've also discussed, and it's come up a couple 18 times today, is, you know, there is the ability of 19 local communities, whether they're counties or 20 whether they're cities, to also set, in their own 21 way, certain minimum-wages or living-wage 22 requirements. 23 How does that work? 24 JAMEEL MITCHAM (ph.): I'm not exactly sure, 25 but I can find out. 1 SENATOR MARTINS: No, no worries. We can 2 always look it up. 3 But, you know, I appreciate you being here, 4 and thank you very much for that perspective as 5 well. 6 Senator Savino. 7 SENATOR SAVINO: Of course. 8 Thank you, Senator Martins. 9 Thank you, Hector, for your testimony. 10 I've -- you know, I've known you probably 11 longer than anybody on this panel up here. 12 HECTOR FIGUEROA: We were very young. 13 SENATOR SAVINO: We were very young. Very 14 young and idealistic. And we still are. 15 But I just want to hit on two points, because 16 you have been involved in both the "Fight for 15" 17 for fast-food workers and the fight for airport 18 workers. 19 All of them are contracted, and you represent 20 this young man who's a security guard, now working 21 for a company that's contracted to the public 22 library; which opens up a whole other issue about 23 wage stagnation and wage depression that's occurred 24 over the past 25 years in what I believe has been, 25 you know, this -- the privatization of what used to 1 be government jobs, to contracted agencies that 2 depress wages. And you're picking up the slack for 3 them, and rightfully so. 4 And thank god for -- 5 HECTOR FIGUEROA: I mean, in the case of 6 CUNY, we raised wages so high that CUNY wants the 7 work back. 8 SENATOR SAVINO: Right. 30 years ago, we 9 would have been likely to work for the public 10 library as a City employee. 11 So, you're now coming in and lifting workers 12 up, and, again, rightfully so. 13 Because I think one of the things I've seen 14 in the "Fight for 15" campaign, as well as the 15 airport, the Port Authority -- the campaign against 16 the Port Authority, is the workers usually carry 17 signs that say, you know, "$15 an hour and a union." 18 Now, some people think that they don't have 19 the right to join the union, which, in fact, they 20 do. They're neither farm workers or domestic 21 workers or independent contractors. 22 But, the impediments to unionization, or 23 joining a union, are pretty difficult to overcome 24 even in a state like New York. 25 So do you think part of this "Fight for 15" 1 across the workforce should also involve a 2 discussion about, whether it's card-check 3 neutrality, something we talked about years ago, and 4 nobody really hears about much -- hears that much 5 anymore, or ways that we can make it easier for 6 workers to band together for mutual aid and 7 protection, so that they can negotiate at the 8 bargaining table, lifting that ceiling that we talk 9 about? 10 Do you think there are things we can do in 11 this conversation that will address that as well? 12 HECTOR FIGUEROA: I think there's things in 13 this conversation that should address that. 14 I believe that the passage of the 15 minimum-wage law for $15 an hour statewide should 16 not be held upon having that discussion. 17 But I -- certainly, I agree with you that it 18 needs to be. 19 We need to look at our procurement practices, 20 and our procurement practices, using the power of 21 government, to really make sure that contractors of 22 government services, or providers of services and 23 goods to the government, are acting responsibility 24 toward the workers. 25 Not only, you know, cases like wage theft and 1 exploitation, but even respect for labor rights and 2 respect for civil rights of the workers that they 3 represent. 4 And a stronger government asking, that, to 5 me, makes a lot of sense, and it makes sense to me, 6 on both sides of the aisle. 7 It is not an issue, again, of left or right. 8 It is an issue of right or wrong, because 9 government should be using its power to make sure 10 that the private-sector determination of wages 11 through collective bargaining, and the process of 12 workers exercising their rights when they are 13 respected, you know, is not going to be interfered 14 by government to suppress it even more. Right? 15 Sometimes the practices of buying services 16 are exactly doing that. They're undermining, you 17 know, what in some sectors has been negotiated in 18 the private sector. 19 So, yeah, it is something to look at. 20 I also believe that we should take a look at, 21 you know, how companies, small businesses, are 22 really participating, or not, on the millions, 23 sometimes billions, of dollars that government makes 24 available to them, is, in our experience, that goes 25 beyond the scope of this hearing. 1 I'll be happy to talk to you about that. 2 That some small businesses are actually not 3 getting the aid that you all legislate or the 4 federal government. 5 SENATOR SAVINO: Really? 6 HECTOR FIGUEROA: And that corporations, said 7 companies, said multiple ways of operating, that 8 capture those dollars, capture those tax -- you 9 know, subsidies and credits, and they are, 10 ultimately, the one who benefit, and not the 11 intended party. 12 I also think that, you know, our tax system, 13 you know, should be looked into. You know, working 14 people carry most of the burden. Many corporations 15 pay very little. 16 But back to the question of collective 17 bargaining, it will be an interesting discussion to 18 have on how we can address workers that are 19 excluded, like farm workers. 20 We are 100 percent in support of an issue 21 that has come before this body and the Assembly and 22 the governor in the past. 23 Sometimes they have succeeded, sometimes they 24 haven't, to help farm workers. 25 Domestic-workers, (unintelligible), 1 advancement in their interests. 2 If you look also at those group of workers, 3 taxi workers, and you increase protections for them, 4 that also helps send the message, right, that 5 workers' rights needs to be protected in the places 6 where they are actually eligible for collective 7 bargaining. 8 But I would say, that kind of more proactive 9 government may appear as big government to, you 10 know, folks who worry. And that's why government 11 works, because you have ying-yang of government. 12 But it's not really about big government. 13 It's about making sure that there is a level 14 playing field for everybody. And the government, 15 instead of either being different, or making the 16 level playing field harder for some, make sure that 17 everybody plays by the rules. 18 SENATOR SAVINO: Thank you for that. 19 And because you've been involved in so many 20 of these campaigns, and SEIU, particularly, has been 21 a leader across the country, you guys have been 22 involved in some of the successful campaigns for 15. 23 So some of the arguments against raising the 24 wage to $15 an hour, or even raising it this 25 quickly, or, you know, there's always the same 1 thing, whether it's the fast-food industry or the 2 retail economy, that it's going to contribute to 3 tremendous job loss. It's going to affect the 4 workers who can least afford to lose the job. 5 And, in other words, if I have to hire -- if 6 I have to pay this much money, I'm going to want 7 workers with more experience and more education. 8 I'm not going to take a chance on that single mother 9 or that, you know, at-risk youth. 10 But there's been evidence now in other 11 cities. 12 So what's been the experience in places like 13 Seattle or San Francisco where they've gone through 14 this already? 15 Has the sky, literally, fallen -- 16 HECTOR FIGUEROA: The sky has not, literally, 17 fallen. You know, those cities have adjusted. 18 Now, E.J. talked about Seattle as an 19 exceptional city in the country. 20 I actually don't think it's so exceptional. 21 You know, there are many neighborhoods in 22 Seattle that are not the hipster neighborhoods. 23 They're just regular neighborhoods in the suburbs 24 and in downtown that have adjusted to this. Barber 25 shops. 1 And, you know, it's not like businesses are 2 closing down. We're still experiencing the 3 increases, but, so far, there is no indication that 4 it actually happened. 5 San Francisco, you know, also has a very high 6 wage economy, has passed ordinances to pay wages. 7 They haven't experienced that. 8 Chicago, they're in the path to 13. They're 9 not experiencing that. They're experiencing many 10 other kind of problems of a nature that 11 (unintelligible), but that is not the result of 12 raising, you know, in the past, to go to $13 an 13 hour. 14 In L.A., time will tell, but I doubt very 15 much if you're going see a hemorrhage of business. 16 Are there adjustments? Are there winners and 17 losers? Yes, there are. 18 But there are winners and losers right now 19 out of the inaction that we do. 20 You know, Jameel, I don't consider him a 21 loser, but he struggles, because there is not a 22 minimum that can help him and his co-workers. 23 Right? 24 If we don't do anything of significantly 25 raising wages, he'll be losing, but his loss is not 1 countered because it's already taken as a given 2 fact. 3 I mean, E.J. referred to the increase in cost 4 in child care, which I think is, also, that we 5 should look at that, and work on the social-service 6 providers and non-profits, is very important to 7 figure out how they fit in this equation. 8 But, we also are ignoring that raising the 9 minimum wage will help many families being able to 10 afford child care in the first place, who can no 11 longer afford it because they earn too little. 12 So we have to look at kind of both sides. 13 And I think that, all too often, we like to 14 keep everything constant in analysis and just look 15 at the variable that we are advocating for. 16 To me, the best experience is one that really 17 happens in the real world. 18 I don't -- I haven't seen a single reference 19 toward, or discussion, with the family of AFL-CIO. 20 I leave this (unintelligible) for the 21 policymakers that suggest that the sky is going to 22 fall. 23 That there will be adjustments that need to 24 be done? Sure. 25 And we're smart enough, and we have a 1 democratic system, that we will be able to respond 2 to whatever changes might be necessary. 3 But not taking the risk, I think that is 4 wrong. And I think the level of the problem that we 5 face is unprecedented. 6 And, you know, sort of like piecemeal 7 approaches to addressing income inequality no longer 8 works. 9 If we only use piecemeal approaches, the gap, 10 the need, will not be to raise the minimum wage to 11 15. It will become, then, 25, and then what we 12 going to do? Raise it $10? Raise it 9? 13 You know, like, we are still within that, 14 I would say, window of opportunity; that raising it 15 to 15 will give us a platform to then consider 16 future increases on whatever, you know, math we want 17 to use to secure decent wages. 18 If we miss this window, the window is getting 19 narrower and narrower and narrower, and it's going 20 to become more of a social problem. 21 SENATOR SAVINO: Thank you. 22 HECTOR FIGUEROA: Thank you. 23 SENATOR MARTINS: Senator Perkins. 24 SENATOR PERKINS: Yeah, I just wanted to 25 thank you, also. 1 I -- in listening to you, you talked about 2 poetry. You talked about prose turning into poetry. 3 You talked about mathematics. 4 And then, most importantly, you talked about 5 the morality that had been brought to this 6 conversation, by resurrecting the name of Dr. King. 7 So I want to thank you for that. 8 (Unintelligible). 9 HECTOR FIGUEROA: (Unintelligible). 10 SENATOR MARTINS: Hector, great to see you. 11 HECTOR FIGUEROA: Thank you so much. 12 SENATOR MARTINS: Thank you very much. 13 Jameel, thank you very much for being here 14 with us. 15 JAMEEL MITCHAM (ph.): Thank you. 16 HECTOR FIGUEROA: And thank you for letting 17 me just before lunch, because it helped us make our 18 remarks sweet and short. 19 SENATOR MARTINS: Thank you. 20 Next we have Ken Pokalsky, who is the vice 21 president of the Business Council of New York State. 22 Ken, good to see you. 23 KEN POKALSKY: Good morning -- or, good 24 afternoon. 25 And I guess we can still say, Happy New Year. 1 SENATOR MARTINS: Yes. 2 KEN POKALSKY: I appreciate the opportunity 3 to be here today. 4 I think I've interacted with you all before. 5 You know I enjoy a robust conversation, so 6 I appreciate the opportunity. 7 The Business Council, I think you know, but 8 I don't know if everyone in the room knows, we're a 9 statewide 100-year-old employer association. 10 We represent about 2400 companies that employ 11 about a million people in New York State. 12 About 80 percent of our membership are 13 small-business employers of 100 or less, and quite a 14 number of them are much smaller than 100. 15 And within our membership we have 60 local 16 chambers of commerce located across the state whose 17 membership is primarily small business. 18 This fall, as I do most years, I get out of 19 Albany, I meet with our membership, including our 20 chamber members. 21 Now, I have no illusion that I would win the 22 applause test that Mr. Gresham suggested earlier 23 today, but on Monday, as an example, I was in a room 24 about this size, with about 150 chamber members, 25 mostly small-business owners and some people who ran 1 non-for-profit, and, frankly, this was the only 2 issue they wanted to talk about. 3 We were there to give a forecast or preview 4 of the 2016 legislative session. 5 This is the only thing they wanted to talk 6 about. 7 And I'll tell you, they're quite nervous 8 about the potential impact of a $15-an-hour minimum 9 wage. 10 So, in response to the request to talk about 11 the economic context and the economic impact, that's 12 the perspective I want to share with you today. 13 Not to read my testimony, and I'll bounce 14 around, I'll probably get lost once or twice, so 15 bear with me; but, here goes. 16 As you've said, Governor's projection of the 17 impact of $15 fully implemented is just under 18 $16 billion a year. 19 So let me put that into perspective of our 20 membership who has been advocating for more 21 competitive, less-costly business climate in 22 New York State. 23 We've done some useful things in the last 24 several years. 25 Through restructuring of UI taxes, we've 1 saved about $200 million in aggregate, statewide, in 2 UI taxes' interest costs, in repaying a federal 3 debt. 4 Caveat, we had to raise taxes by $3 billion, 5 because that was our federal borrowing, but, it was 6 cost savings of $200 million. That's great news. 7 In 2014, the Governor proposed, you adopted 8 with broad bipartisan support, business corporate 9 tax reform, bank-tax reform, that, once fully 10 implemented in 2016, is a business-tax reduction of 11 about $600 million a year. 12 Again, from our perspective, good news. 13 Real-property tax cap, the aggregate value, 14 since its inception, to commercial, industrial, 15 utility property-tax payers, in aggregate, add up 16 all the years altogether, is probably about a 17 billion dollars a year so far. 18 That's all the years added up together. 19 As we heard earlier this year, the Governor 20 will be proposing about a $300-million-a-year 21 additional small-business tax reduction as 22 2013/'14 -- or, 2017 executive budget. 23 These are all positive steps, in our view, in 24 improving the state's business climate, but their 25 aggregate value would be absolutely dwarfed, 1 dwarfed, by the impact of this proposed minimum-wage 2 increase. 3 By the way, if it's -- it's being pegged at 4 about $16 billion a year, the total property taxes 5 paid in New York State in a given year by all 6 commercial, industry, and utility property owners is 7 about $15 billion. 8 So if you want to do an offset, you could 9 repeal all property taxes. 10 The point is, you really can't do an offset. 11 There's no feasible way -- no feasible way to do 12 that. 13 The other thing our members like to remind 14 people, remind policymakers in Albany, is that, you 15 know, New York is an expensive place to do business. 16 And, by the way, New York is a leader in 17 increasing its minimum wage. 18 At $9 an hour, we're exceeded only by 19 8 states. 20 There's two states right now at $10 an hour. 21 Some smaller states, Alaska and Vermont, at 22 9.75 and 9.60. Oregon's at 9.25. Connecticut, at 23 9.15. 24 We join a few other states at 9. 25 You know, we're 25 percent above the national 1 level, so we are a leader among states. 2 And even with this recent activity, we've 3 seen other states adopting higher minimum wage. 4 No state, that I'm aware of, is seriously 5 considering going to $15 like we are here. 6 And questions were asked to the last witness 7 about, what's happening at localities that are 8 moving towards 15? 9 I didn't have my chart with me this morning, 10 but most aren't -- most, particularly the West Coast 11 cities who are adopting a step-up to $15, aren't 12 anywhere close yet. They're closer to where we are 13 now. They're in the $10 to $11 range. 14 And we're already seeing, it's too early to 15 tell, it really is, but, we saw an immediate 16 reduction in restaurant jobs in Seattle right after 17 the first step increase there. 18 It's recovered a bit. 19 You're seeing some numbers coming out of 20 Los Angeles County, which, for hospitality industry, 21 I believe they went immediately to $15 an hour. And 22 you're seeing a significant reduction in -- or, the 23 start of reduction in hotel jobs in 24 Los Angeles County. 25 So the lesson there from these other 1 jurisdictions is: 2 One, it's too soon to tell. 3 Two, they're not anywhere close to $15 yet, 4 but some of the job numbers are certainly raising 5 concerns. 6 Next point: Looking at the impact on an 7 employer. 8 When we went to $9 an hour, effective just 9 several days ago, compared to the federal minimum 10 wage, when you count direct cost of wages, things 11 that will go up automatically -- federal 12 withholdings, worker's compensation costs, which are 13 pegged to wages -- that's just about $4,000 per year 14 per FTE for the employer, compared to 7.25. 15 When we go to 9 -- if we were to go from 16 $9 an hour to $15 an hour, that's an additional 17 $13,400 and change, per job, per year. 18 $13,400, going to 15; compared to the federal 19 minimum wage, and some of our members do compete 20 with the national -- with national businesses, 21 that's a $17,300 difference, per job, per year. 22 These are real numbers. 23 We find it hard to take seriously an argument 24 that the typical employer can absorb wage 25 increases -- and for many employers, wages are their 1 largest cost of doing business -- without any 2 significant adverse impact. 3 And it's true, that when we did the 4 minimum-wage bill in 2013, relatively few 5 New Yorkers were making the minimum wage at $7.25. 6 Federal data for that year showed about 7 200,000 people out of the workforce of a little over 8 7 million were making $7.25. 9 People weren't making -- weren't at the 10 minimum wage. 11 As you go higher, and as E.J. McMahon 12 presented his data earlier, in labor markets, 13 particularly in labor markets in Upstate New York, 14 where the median wage today isn't much over 15, and 15 in some places it's not over 15, as you approach 16 that, a $15 minimum wage is impacting far more 17 positions, far more employers, and far more jobs. 18 As a matter of fact, some data we looked at, 19 out of 785 occupational categories tracked by the 20 Federal Bureau of Labor Statistics, over 150 of them 21 had median wages under $15 an hour. 22 And I think people expect that to affect 23 sectors like retail, food service, health and social 24 service. 25 It's also directly impacting a diverse range 1 of occupations, everything from pharmacy aides, to 2 electronic equipment assemblers, industrial truck 3 and tractor operators, and others. 4 Point being, $15 minimum wage has an enormous 5 impact in New York State labor markets, particularly 6 in Upstate New York, and will affect many, many 7 sectors that you're probably not thinking when you 8 talk about increases in the minimum wage. 9 Now, people have talked about, you know, what 10 the minimum wage would be if it kept up with 11 inflation, and any number of ways to look at it. 12 We've looked at it as well. 13 New York State adopted its first numeric 14 minimum wage of $1 an hour in 1960. Adjusted for 15 inflation today, that's well under -- it's well 16 under $9 an hour. It's way under. It's about half 17 of $15 an hour. 18 But to me that's not the most important 19 comparison to make. 20 I think what you really need to look at is 21 what wages are in the regions of New York State. 22 Median wages in New York City are far higher 23 than most parts of Upstate New York. The median 24 wages in the labor markets differ dramatically. 25 And the thought that a $15-an-hour minimum 1 wage, even if it was delayed by a couple of years, 2 would have no adverse impact on upstate jobs, we 3 think, is missing the point. 4 The last point I'm going to make is that, you 5 know, we represent for-profit business. 6 We also have within our membership, and in 7 through our chamber network, a lot of 8 not-for-profits, social-service entities, and 9 employers who work for those, people -- employers 10 who work with those social-service agencies to 11 place -- to do workforce development to place 12 at-risk youth in their first jobs. 13 And we're hearing a significant concern 14 there, that those efforts will have a 15 double-negative effect here. 16 First, the social-service agencies themselves 17 will see a significant cost in doing business. 18 And, second, the types of jobs that they're 19 trying to place at-risk youth into will be difficult 20 to find if the wage mandate goes from $9 an hour to 21 $15 an hour in a relatively short period of time. 22 Now, the Business Council is a member of an 23 organization we've called "Minimum Wage Reality 24 Check." That's a coalition of us and about 30 other 25 chambers, business trade associations, agricultural 1 organizations, and others, who have come together to 2 make sure that the administration, the Legislature, 3 and the general public hears the economic context 4 and the economic concerns that employers have about 5 proposals to increase the minimum wage, whether it's 6 to $15 an hour, or something different. 7 We do think that all of the above -- the 8 executive, the Legislature, and the general 9 public -- need to know, and I think they will 10 respond to, the types of concerns that we're 11 raising. 12 This will -- we do think this will have an 13 adverse effect, and have a particularly adverse 14 effect in labor markets where median wages are not 15 high, and communities, frankly, are still struggling 16 to recover jobs lost in the 2008 recession. 17 So, again, I appreciate the opportunity to 18 provide testimony today. 19 I welcome any questions or comments you have. 20 SENATOR MARTINS: Thank you. 21 Thank you very much. 22 What's the minimum wage in California? 23 KEN POKALSKY: I believe the statewide 24 minimum wage is $10 an hour today. 25 SENATOR MARTINS: And in Texas? Do you know? 1 KEN POKALSKY: I believe Texas tracks the 2 federal minimum wage. 3 SENATOR MARTINS: 7.25? 4 KEN POKALSKY: I believe so. 5 About 22 -- 6 SENATOR MARTINS: I'm just -- you know -- 7 KEN POKALSKY: About 22 states do not have a 8 state minimum wage, so they're subject to federal, 9 7.25. 10 SENATOR MARTINS: -- as we consider this 11 issue, and I appreciate the differences and the 12 different perspectives, and, for me, it's a question 13 of jobs, and how do we keep the jobs we have? how do 14 we encourage people to invest in this state and 15 bring jobs with them? 16 And are we saying that if there's a $10 job 17 out there, working in a manufacturing job that's 18 being provided in Massachusetts or New Jersey or 19 Pennsylvania, that we don't want those jobs here in 20 New York? 21 I mean, is that what a public policy like 22 this says, that those jobs aren't good enough for us 23 so we don't want New Yorkers doing those jobs, or -- 24 so that they should take those jobs to other states 25 and provide those jobs and opportunities elsewhere? 1 Because there's a consequence, because we're 2 not in this alone. This is not just us. 3 We have other states around us. And many of 4 our -- many of those jobs and manufacturers and 5 businesses that we try to attract to our state will 6 simply go elsewhere. 7 Have you calculated the effect of that on a 8 significant minimum-wage increase on that? 9 KEN POKALSKY: Well, we know this, that -- 10 because I just ran these numbers yesterday -- since 11 1990 -- and we know that manufacturing in the U.S. 12 isn't what it used to be. 13 Since 1990, the U.S. has lost, roughly, 14 30 percent of its manufacturing employment. 15 Over that period of time, New York State has 16 lost about 54 percent of its manufacturing 17 employment; half a million manufacturing jobs we 18 don't have today that we had in 1990. 19 New York City, by the way, has lost 20 71 percent. New York City has lost its 21 manufacturing base. 22 The median wage in production work in 23 manufacturing, statewide, right now is about $17 an 24 hour. 25 These are the jobs, quite frankly, the 1 advocates are begging for, above $15 an hour. 2 These are the jobs, the entry. These are not 3 engineering positions. These are production -- 4 floor-production jobs, median about $16 an hour, 5 $17 an hour. 6 Our concern, over time, New York State has 7 become a high cost-of-doing-business state. 8 Until the natural gas boom dramatically 9 changed the energy markets in New York, we were, 10 historically, the most expensive place for electric 11 power. 12 Manufacturing is power-intensive. 13 We remain, or we become again, one of the 14 highest worker's comp-cost states in the nation. 15 We are, for manufacturing, the highest-cost 16 real-property tax. 17 We have a lot of headwinds to our 18 manufacturing base. 19 And that's -- those are the reasons, 20 cumulatively, why we've been losing manufacturing 21 jobs at almost double the national rate for 22 two generations. 23 I think the better, more sustainable approach 24 to addressing the need for quality jobs, is to make 25 sure we are attractive to retaining and creating 1 quality jobs; not taking jobs that are inherent in 2 low-margin industries, and mandate that the wages go 3 up to a point where we don't think they're going to 4 be sustainable. 5 SENATOR MARTINS: You know, one of the issues 6 that's come up as we've held hearings on increasing 7 minimum -- excuse me, on workforce development and 8 training, is that, you know, there are areas of the 9 state where there are mid-skill-level jobs 10 available, but simply not the skills able to provide 11 them. 12 You know, how do we factor in other aspects, 13 you know, for offsetting increased wages with 14 increased training opportunities, to allow those 15 opportunities? 16 Is that something that you've had an 17 opportunity to look at? 18 KEN POKALSKY: Sure. 19 And, you know, we're working on a 20 manufacturing-specific legislative agenda that we're 21 going to be announcing in a couple of weeks. 22 Once of the things we hear all the time is, 23 how do you make the connection between people 24 looking to get these jobs and make sure they have 25 the skills needed? 1 We have a couple relatively small state 2 programs that provide funding for incumbent 3 worker -- either incumbent-worker training to 4 upgrade their skills, or to tailor job training to 5 meet the specific needs of an employer. 6 These -- in a state budget of $140 billion, 7 give or take, these are, you know, single-digit 8 million-dollar-a-year programs. 9 We think there are -- we're going to 10 highlight some of the specific programs where we 11 think some additional funding is going to help 12 create pathways for people who need to upgrade 13 skills, to take jobs that are naturally, you know, 14 higher paying than you might find in the retail or 15 food-service industry. 16 SENATOR MARTINS: You know, as I -- we 17 discuss numbers, lots of numbers, and we throw 18 numbers around, and percentages, and median wages, 19 and we talk about, you know, job losses in the 20 hundreds of thousands. 21 Again, when I sit down with my business 22 community, with my chambers of commerce, with my 23 small businesses, even as I walk around my own 24 community and, you know, partake in, whatever, 25 wherever I happen to be going, there's a real 1 concern out there among small businesses that there 2 could be devastating consequences. 3 I'm sure that they have reached out to you, 4 and that you've heard from your own constituents. 5 What are they telling you? 6 KEN POKALSKY: I'll give you some examples. 7 When I was in Central New York, Monday, 8 talked to a person who's got her business plan 9 written. She's doing sort of a high school tutorial 10 business. And she had $15 -- she's paying her 11 retained educators $15 an hour in her business plan. 12 She said, "With support-staff costs 13 approaching $15 an hour, I'm not going to open the 14 business." 15 That's just one example. 16 What we hear -- and we hear concerns like 17 that from businesses, large and small. 18 We know, if you go to restaurants and retail 19 stores, you're seeing automation at the front end. 20 That's a -- probably, regardless of what the 21 minimum wage is, that's something you're going to 22 see. 23 You're seeing businesses looking at ways to 24 mitigate labor costs. 25 You're looking at businesses -- we're meeting 1 with someone tomorrow, who, just with the fast-food 2 minimum wage coming into effect, they're asking us 3 what advice we have for dealing with wage 4 differentials between what their current labor rates 5 are and what they're going to be competing with in 6 other sectors. 7 So it comes in all shapes and forms, but, 8 generally speaking, for people who are directly 9 affected by it and will be indirectly affected by 10 it, it's just a concern. 11 They say, Well, you know, we'll -- many of 12 them will figure out a way to survive. It will be 13 in -- you know, with different -- they may, their 14 business plans will change, their employment numbers 15 may change, the hours available may change, prices 16 will change. 17 But there's almost a universal concern. 18 SENATOR MARTINS: You know, the Governor has 19 suggested that there will be tax breaks for 20 businesses to offset a minimum-wage increase. 21 And, you know, I agree, anybody who takes a 22 moment to actually analyze that out, just 23 understands that that's not possible to absorb that 24 15, nearly 16 billion dollars. 25 We just don't have the ability in the state 1 budget to absorb that. 2 Increased wages are a cash-flow issue. You 3 pay wages every week, or every two weeks. 4 Tax breaks are something you take at the end 5 of the year, if, in fact, you have net profits to 6 take a break against. 7 What would you suggest would be factors that 8 we could consider that would offset any minimum-wage 9 increase, and whether it's to -- you know, to 10 whatever number? 11 How should we be approaching, if, in fact, 12 there is going to be a minimum-wage increase, 13 considering offsetting the impacts to small 14 businesses in a meaningful way? 15 KEN POKALSKY: Well, we think there's things 16 the State should do, regardless of what you do with 17 the minimum wage, that would make New York State a 18 little bit more easier place to do business. 19 We need to rein back in the cost of 20 worker's comp, and you do that in ways to making the 21 process work better. 22 We adopted, for example, durational caps on 23 permanent partial-disability benefits. 24 But, what was supposed to be a 10-year cap on 25 benefits, as a practical matter, is like a 16-year 1 cap because the process doesn't move you to 2 classification. 3 That would be a significant cost-savings in 4 worker's compensation. 5 You mentioned paying weekly or biweekly. 6 We're one of the few states, perhaps the only 7 state, that still has a weekly-pay mandate. 8 It doesn't affect a lot of employers or a lot 9 employees, quite frankly. But for employers who are 10 affected by it, it's one -- another sort of odd-ball 11 thing you have to pay money in for New York State. 12 If you're in a national payroll system, you're 13 cutting, you know, weekly checks for a small 14 portion. 15 When we restructured the UI tax rates in 2013 16 to generate some short-term revenue increases 17 necessary to repay the federal government, we lopped 18 offed the tax rates that reflected the good 19 performance of employers that don't do a lot of 20 layoffs. 21 That was a significant increase in cost to 22 those very employers that we should want to have in 23 New York State. 24 We can put those back in the tax table. They 25 only become in effect when the UI fund is solvent 1 enough. 2 We can do the small-business tax cut that the 3 Governor's proposed. We would tweak it a little 4 bit, but we think it's a great start. 5 There's any number of things like that. 6 There is over a billion dollars a year, 7 most -- if you look at your energy rates, 20 to 8 25 percent of what you pay is paying agency-imposed 9 assessments on energy, supposedly, to support 10 various green energy or efficiency, or whatnot. 11 But it's 20 percent of every utility you pay. 12 Let's look at whether that money is being 13 spent wisely, and whether we should be imposing 14 those types of additional costs on energy-intensive 15 businesses. 16 So there's any number of things we can do. 17 Regardless of what you do with the minimum 18 wage, we think these other things should be -- you 19 know, be under consideration by the Legislature. 20 SENATOR MARTINS: But especially if we're 21 discussing a minimum wage? 22 KEN POKALSKY: Sure. 23 Senator Savino. 24 SENATOR SAVINO: Thank you, Senator Martins. 25 Thank you, Ken, for your testimony. 1 I'm not surprised that the Business Council 2 is opposed to raising minimum wage, and I'm not 3 surprised employers don't want to pay higher costs. 4 Nobody wants to pay higher anything. 5 You know, if we propose raising income taxes, 6 nobody wants to pay it. 7 Nobody ever wants to pay more. 8 But the reality is, employers in this state 9 are facing this issue, or other issues, that are 10 going to require them to pay out more to compensate 11 workers. 12 One of the things I'm curious about, though, 13 is, if you're a business in New York State, how do 14 you determine what the rate of compensation should 15 be? 16 How does someone go about deciding what you 17 should pay an employee? 18 KEN POKALSKY: There's really two factors, 19 two major factors. 20 It is: What is the current labor market? 21 And it is: What's your ability to pay? 22 SENATOR SAVINO: Okay. So, bearing those two 23 points, the current labor market, and, of course, 24 it's like others who are similarly situated right, 25 one of the other factors that I think many of you 1 have to take into consideration if you want to be 2 good employers: How do you recruit and retain 3 employees to continue working for you if there are 4 other places they could work? 5 Oftentimes, it's your benefit packages. 6 What I don't hear coming from employers is, 7 that one of the things that's led to wage 8 depression, or compression, in many of these 9 lower-wage jobs, is if you want to provide any level 10 of benefits for your employees, those costs have 11 gone up, and the Affordable Care Act hasn't actually 12 reduced them that much yet. 13 Do you think there should be a discussion 14 about the cost of health care in this state, to 15 provide private health insurance as a package for 16 employees? 17 KEN POKALSKY: I think we've been having a 18 conversation on the cost of health care in 19 New York State. 20 SENATOR SAVINO: Not loudly. 21 KEN POKALSKY: Oh I, guess I would disagree. 22 I mean, I'm not a health-care guy. 23 We would love to come down and talk with you. 24 We've been talking about it for 20 years. 25 And, setting aside the effect of ACA, 1 New York State, you know, a 20-year-plus track 2 record of making health care, particularly 3 employer-provided health care, extraordinarily 4 expensive. 5 So, if you -- if we can reengage on that, we 6 would love to. 7 SENATOR SAVINO: Well, I think that's -- 8 KEN POKALSKY: And in addition to the direct 9 cost through coverage mandates, I think our -- 10 I think combined HCRA taxes are something in the 11 neighborhood of $5 billion a year, maybe a little 12 bit more than that. 13 SENATOR SAVINO: But it's fair to say that 14 those costs are having an effect on the ability to 15 raise compensation for employees. 16 KEN POKALSKY: And I think it's going to vary 17 dramatically, based on the nature of your business 18 and the nature of your profit margins. 19 Some will be -- some can absorb those costs 20 far better than others. 21 SENATOR SAVINO: Okay. 22 And there's just one other point I want to 23 make, because I know that, you know, during the 24 course of this debate there's going to be a lot of, 25 you know, statistics thrown around by everybody. 1 Those who are in favor of it are going to 2 say, we raised wages in Seattle and not a single 3 person lost their job. 4 And there will be those who will say, again, 5 the sky will fall. 6 You made a reference to the number of 7 manufacturing jobs that we've lost in the state 8 since 1990; and particularly in New York City since 9 the early '90s. 10 But you can't look at it purely through the 11 lens of wages. 12 You have to -- you cannot deny that the 13 effect, particularly in New York City -- and I know, 14 Senator Perkins, he represents part of the city 15 that's more affected than others, I think -- there 16 are -- there was the effect of the gentrification of 17 communities that used to be manufacturing 18 neighborhoods. 19 You cannot look at the garment industry and 20 not see the effect of gentrification, and housing 21 having been built in those neighborhoods, pushing 22 the garment industry out of the west side of 23 Manhattan. 24 The meat-packing district also. The last 25 meat packer has packed his knives and left, you 1 know, the west side of Manhattan. 2 And it had nothing to do with the cost of 3 wages, and it had everything to do with the cost of 4 real estate, and the value to -- you know, of our 5 affordable-housing developers and our luxury and 6 market-rate developments. 7 So that -- making those communities far more 8 popular for residential, and the rezoning, and the 9 gentrification, has really affected our 10 manufacturing industry, especially in the city of 11 New York. 12 Wages was a smaller part of it than anything 13 else. 14 KEN POKALSKY: Absolutely. And you can check 15 the tape, when I was talking about that, I didn't 16 raise wages as a factor. 17 SENATOR SAVINO: Yeah, but you alluded to it. 18 KEN POKALSKY: I didn't. 19 What I said was, these are the types of jobs 20 that we're talking about here. We want good-paying 21 jobs. 22 One of the -- and we did a study, it's a 23 little out-of-date, but, from 2010 to 20 -- I'm 24 sorry, from 2000 to 2010, virtually, all job growth 25 in New York State were in sectors that paid 1 below-average wages. 2 Financial service, professional services, 3 construction and manufacturing, generally, 4 high-paying wages, job loss in every sector. 5 That's not true in the U.S. It's not true 6 among states we compete with. 7 My point was, let's look at why 8 New York State is not generating good-paying jobs, 9 rather than saying, take the jobs and industries 10 that -- whose profit margins don't really allow for 11 higher wages and just mandate their wages go up, 12 thinking that's a sustainable economic-development 13 plan. 14 That was my point when I was talking about 15 the loss of manufacturing jobs. 16 There's no doubt New York State adopted 17 policies: energy, worker's comp, and property taxes, 18 certainly. 19 I think, in New York City, by far, the 20 biggest effect is the -- I think someone -- is the 21 cost of land, cost of rent, was the major death 22 knell for manufacturing there. 23 But all these other -- these other factors, 24 which driven by New York State policy, is one of the 25 reasons why New York State has lost manufacturing 1 jobs at double the national average. 2 We should look at those too. 3 SENATOR SAVINO: We should. 4 KEN POKALSKY: Because those are the jobs we 5 want. 6 SENATOR SAVINO: And we should also be 7 looking at federal policies that have incentivized 8 the transfer of manufacturing jobs to, it's not even 9 third-world countries anymore. I'm not even sure 10 what to categorize them as. 11 SENATOR MARTINS: Outside here. 12 SENATOR PERKINS: Outsourcing. 13 SENATOR MARTINS: Not here. 14 SENATOR SAVINO: Yeah, right. 15 So, thank you, Ken. 16 KEN POKALSKY: My pleasure. 17 SENATOR MARTINS: Senator Perkins. 18 SENATOR PERKINS: So I'm -- $15 an hour, 19 that's not a lot of money, is it? 20 KEN POKALSKY: To some it is, obviously. 21 Obviously, it is to some. 22 SENATOR PERKINS: To some it's just a 23 little -- it's, at best, a wage, you know, at least 24 an opportunity to make a living. Right. 25 KEN POKALSKY: Absolutely. 1 SENATOR PERKINS: So -- now it's kind of 2 hard. That's about $600 a, what, a week? a month? 3 40-hour week? 4 KEN POKALSKY: 40 hours a week, 52 weeks a 5 year, it's $30,000. 6 SENATOR PERKINS: That's -- that's kind of -- 7 that's not much, is it? 8 So what do we do? How do we fix that? 9 KEN POKALSKY: Well, I think you're -- 10 I think there's a false choice being presented here. 11 What I've heard is, for example, 12 fast-food wages are going up, so people in other 13 low -- the only alternative for workers in other 14 low-wage industries is to move from one low-wage 15 industry to another. 16 I think that's got to be the false choice. 17 It can't be the plan for New York State's, 18 you know, economic future, that we merely 19 artificially increase the cost of businesses whose 20 margins don't support. 21 They're not going to be $60,000-a-year jobs, 22 ever. 23 I think we need to look at, what is 24 preventing individuals from moving from entry-level 25 jobs to better jobs? 1 Is it, one, the lack of jobs? 2 The lack of accessibility, things, like, lack 3 of affordable child care, et cetera? 4 I get it. 5 An immediate fix would be, mandate these jobs 6 to pay more. 7 I don't think that's a long-term fix, because 8 you're not -- you got to take it in the overall 9 context. 10 The other thing I'll mention -- 11 SENATOR PERKINS: Well, isn't -- 12 KEN POKALSKY: And the other I'll mention, 13 though, and E.J. McMahon's conversation talked 14 about, the EITC. 15 We generally agree. We think it's a very 16 effective tool. It's a very efficient tool, by 17 definition. 18 It only benefits low-income households, 19 unlike the minimum wage. 20 We, the Business Council, my organization, 21 support it. It was a strong supporter of the 22 initial New York State component to the federal 23 EITC. 24 We haven't taken a position lately; it's not 25 been on the table. 1 But we agree there are other things to be 2 done that support working families, particularly 3 low-income families whose wage -- total wages may be 4 affected by many factors. 5 You could raise the minimum wage, the hourly 6 wage, to $30 an hour. And if there's not hours to 7 be had or positions to be had, it's not going to 8 produce the total family income growth that you're 9 looking for. 10 SENATOR PERKINS: So if it was $15, what 11 would the business community need to make that 12 happen? 13 KEN POKALSKY: Some will be able to absorb 14 it, and some won't. 15 SENATOR PERKINS: And those that won't -- 16 those that won't, what would they need? 17 KEN POKALSKY: Nothing that you can provide. 18 I think that's my answer. 19 SENATOR PERKINS: You're absolutely right 20 about that. 21 KEN POKALSKY: Yeah, but that's my point, 22 that -- 23 SENATOR PERKINS: But my point is that, 24 I'm just -- if -- $15 an hour is not a lot of money, 25 is it? 1 KEN POKALSKY: If I'm a -- here's the point, 2 though: 3 If I'm a small business, if my costs go up, 4 I've got, really, a couple choices. 5 I can reduce my expenses. 6 I can increase my prices. 7 I can reduce my own personal profits. 8 I can invest less in my business. 9 I don't know what other choices you have. 10 So, I don't -- you can -- if you can 11 influence one of those four factors, that's -- 12 SENATOR PERKINS: Which one would you prefer 13 us that we influence? 14 KEN POKALSKY: The one I've talked about -- 15 the one that I've -- 16 SENATOR PERKINS: Not the wage, though. 17 KEN POKALSKY: -- as a practical matter, the 18 only one that the Legislature can affect are the 19 state-imposed costs of doing business. 20 SENATOR PERKINS: All right. Help us 21 understand where those costs might be that we could 22 affect, other than the wage? 23 KEN POKALSKY: Well, I've already covered a 24 couple. 25 You look at what drives real-property taxes. 1 You can look at what drives worker's 2 compensation costs. 3 You can look at what drives energy costs. 4 For commercial customers in New York State, still 5 among the highest in the nation. 6 You can go down the line. 7 How do we structure UI tax tables? 8 SENATOR PERKINS: So give us a proposal. 9 KEN POKALSKY: What's that? 10 SENATOR PERKINS: Get us a proposal so it's 11 affordable. 12 KEN POKALSKY: I'll give you a proposal. 13 I'll give you a proposal to make 14 New York State more economically competitive. 15 SENATOR PERKINS: Does -- is that going 16 include $15 an hour, or a living wage? 17 KEN POKALSKY: If I could -- I could save 18 $15 billion a year. You can repeal property taxes 19 for business. 20 As a practical matter, no, I can't give you a 21 dollar-for-dollar offset. But I can certainly give 22 you what I think are very practical and doable 23 costs-of-doing-business reductions that I would 24 encourage you to consider. 25 SENATOR PERKINS: All right. 1 Let's see it. 2 KEN POKALSKY: Okay. 3 SENATOR MARTINS: I appreciate that. 4 You know, I had a group that prepared a 5 report on this issue, and they said that, you know, 6 they're not against a minimum-wage increase, as long 7 as the State was willing to give a dollar-for-dollar 8 credit to the employer for the increase in minimum 9 wage above its current wage. 10 And, so, it's fair enough to say that we 11 don't have $15.6 billion to give that kind of credit 12 to employers out there. 13 And to the extent that you have any programs 14 that are available, or that you want to advance, 15 that we can consider, I'm sure Senator Perkins and 16 I would be happy to review it. 17 Thank you. 18 KEN POKALSKY: I look forward to it. 19 Thank you. 20 SENATOR MARTINS: We are going go out of 21 order for a moment or two, and call Mike Durant, 22 from the New York State -- excuse me, the National 23 Federation of Independent Businesses. He's the 24 state director. 25 Michael, how are you? 1 Happy New Year. 2 MICHAEL DURANT: Happy New Year. 3 Senator Martins and Senator Perkins, how are 4 you? 5 I'm going to do my best, I'm not going to do 6 verbatim. I think that probably some of the 7 questions you asked Mr. Pokalsky and some others, 8 you might have similar for me. 9 I think that what I want to do is, you're 10 right, this issue brings about an awful lot of 11 emotion; emotion from the advocates for increasing 12 the minimum wage. 13 I think, unfortunately, the rhetoric has been 14 amped up to the point where, even on Monday, the 15 Governor pointed fingers at business, and business 16 is starting to feel resentful in a state that has 17 been described as being somewhat antibusiness and 18 has earned its antibusiness reputation. 19 So what I want to do is, do my job, which is 20 be less of a lobbyist and more of an advocate for 21 whom I represent, which is 11,000 small and 22 independent businesses across the state of New York: 23 Mom-and pop businesses. 24 Businesses, the typical NFIB member 25 businesses that have five to seven employees, nets 1 anywhere between four hundred and six hundred fifty 2 thousand dollars a year. 3 So this is where you get your car washed, 4 your pizza on a Friday night, this is where you get 5 your oil changed. 6 Small independent retail, this is what drives 7 the state's economy. 8 The question was asked earlier about, how 9 many small businesses are in the state of New York? 10 That depends on what you define as "small 11 business." 12 And doing a quick search at the 13 Small-Business Association, federal entity, says 14 there's 2 million. 15 And I believe the Governor on Monday used -- 16 or, on Tuesday, when he was nice to business, used 17 that, that there are 2 million small businesses in 18 New York that employ 99 percent of New Yorkers. 19 But this is -- or, 99 percent of the 20 private-sector businesses in New York are small 21 businesses. 22 1 in 5 New Yorker's is employed in a business 23 that has 20 or few employees. 24 So to think that arbitrarily mandating an 25 increase in wages is going to have little to no 1 effect on jobs and on business is short-sighted when 2 looking at this issue. 3 So we have spent time talking to our members 4 and getting their stories. 5 It's hard not to be passionate when you 6 represent small business, because these folks 7 invested what they had, they're pursuing their own 8 piece of the American dream, they're taking a risk. 9 They're doing their best to own and operate a 10 business in New York and take care of the employees 11 that they can afford, because without their 12 employees they don't have a business. 13 Individuals like Joel, who owns a small 14 lumber mill in Castle Creek, which is a community 15 outside of Binghamton, it's a fourth-generation 16 business, it's been operating since 1926, has just a 17 handful of employees. 18 When you factor the competitive nature of 19 their business, the commodity that they sell, the 20 product, the lower costs of doing business, 21 generally, across the border in Pennsylvania, 22 running their numbers, their business would survive 23 two years, at best, and would probably be closed as 24 this was phased in by the time it hit $12 an hour. 25 They wouldn't be able to afford the employees 1 they have. The business owners themselves wouldn't 2 be making a profit. The business would close. 3 We have Stephanie who owns an antique retail 4 store in White Hall, not far from here today. She 5 operates her business on an already fine profit 6 margin. She competes with big-box stores, she 7 competes with bigger -- with chain stores. 8 She specifically referenced, in talking to 9 me, that she is not, in fact, a small business. She 10 is a mom-and-pop business. 11 And that is a badge which many of our members 12 wear with enormous amount of pride. 13 If the minimum wage ultimately reached $15 an 14 hour, she's going to be forced to cut her part-time 15 employees just to keep the business open. 16 Without the part-time employees, she won't be 17 able to grow her business, she won't be able to 18 expand, she won't be able to hire more people, she 19 won't be able to provide anymore additional benefits 20 or compensation for her employees. 21 And that's a difficult decision that she 22 doesn't want to face, but that, again, is a story 23 that's typical for the folks that I represent, and 24 small business, generally. 25 You have Byron who owns an independent market 1 in Schuylerville, which in order to compete with 2 larger stores, operates on a significantly fine 3 margin. 4 He e-mailed me and described that it's not 5 just this issue, as, Senator Perkins, you're 6 alluding. It's rising costs in worker's comp. It's 7 rising costs in health care. 8 This minimum-wage increase, as phased in, 9 eventually will tip them over the side of the cliff 10 because the costs are not reduced anywhere else. 11 I have stories like this all over the place. 12 I even have more in my testimony. 13 But I think that you're seeing the theme that 14 I'm trying to present. 15 And this is regional. 16 I have a manufacturer, in my testimony, from 17 Freeport. I have a small cottage resort; so, a 18 tourist-business owner, in Chautauqua County. 19 These -- this is what's going to happen. 20 See, as we point fingers at McDonald's, and 21 as we do these things, the people, inevitably, that 22 are going to be impacted by this are the people that 23 I represent: the independent business. 24 Those are the ones in the middle. 25 Those are the ones that don't receive the 1 significant state subsidies in investment. 2 They do not receive positive -- substantial 3 positive tax reform like we've seen in other aspects 4 of our economy. 5 And when we put in place public policy, 6 minimum wage, paid leaves, probably going to be 7 something we talk about, when you start adding these 8 things up, the small-business owners are the ones 9 that get squeezed in the middle. 10 So the problem with Albany, and the problem 11 with public policy, generally -- not the two of 12 you -- is that business gets, too often, painted 13 with a broad brush -- 14 I said not the two of you. 15 [Laughter.] 16 MICHAEL DURANT: -- it's that business gets 17 painted with a broad brush. 18 There's a fiscal and economic reality that's 19 very different between big business and Wall Street 20 and Main Street. 21 And I think when we examine this issue, and, 22 frankly, when we examine public-policy issues, 23 moving forward, we need to be mindful of that. 24 The State Farm Bureau has done a tremendous 25 analysis of this proposal, and has concluded that 1 our family farms are looking at $500 million in 2 additional labor costs alone. 3 When you hear argument that this won't 4 increase costs, or, that this $5.7 billion is 5 automatically going to be a stimulus package, and 6 folks are going to take this money and they're going 7 to spend, well, you have to question the purchasing 8 power. 9 Costs will go up. 10 Family milk will go up. Produce will go up. 11 How much is affordable for New Yorkers? 12 How much is affordable for folks to buy milk, 13 to buy produce? 14 When you talk about the non-profit community, 15 which has been brought up today, they're concerned, 16 does the State have the fiscal resources to 17 reimburse if New York moves up towards $15? 18 School districts have estimated the average 19 cost for this is approximately $283,000 per school. 20 Municipalities, even those that have 21 arbitrarily increased their minimum wages, 22 acknowledge there's a cost associated with it. 23 There is, in fact, a taxpayer impact. 24 This is why we're part of the coalition that 25 was mentioned before, the Minimum Wage Reality 1 Check, is to ask not only rhetorical questions, but 2 show that there are emotional stories on the other 3 side. 4 So about -- maybe to preemptively answer some 5 questions that the two of you may have -- phasing in 6 this increase is going to have a predictable result. 7 Every business that I represent is going to 8 have a drop-dead date when escalating labor costs, 9 absent significant and probably fiscally unfeasible 10 measures on the opposite side, is going to push them 11 over. 12 It doesn't matter how long you phase it in. 13 If you're a small business in 14 Upstate New York with a finite consumer-market base, 15 and labor costs are increasing, and we already have 16 high worker's comp, health care, energy, et cetera, 17 costs, even increasing those, you're not -- we're 18 losing population every year in Upstate New York. 19 You're not going to gain more consumers. 20 Plus, the competitive nature of the economy, 21 with who these businesses are competing with, 22 phasing it in isn't really going to have an impact. 23 The tax cut: We've been outspoken this week 24 about this, the idea that you can pair a minimum 25 wage with the tax cut. 1 You have to be realistic for a second. 2 Outside of the pure numbers, tax cuts are not 3 specific -- not necessarily permanent. They're 4 always subject to repeal. 5 I don't think any entity has ever rolled back 6 a minimum-wage increase, or a current level of 7 minimum wage, because the economy went into a 8 negative -- severe negative direction. 9 That's just first. 10 Second, as both Ken Pokalsky and E.J. McMahon 11 have talked about, labor costs, you're talking about 12 business gross expenses. 13 Tax cuts, you're talking about on operating 14 margins. 15 So we don't think this is an equitable trade. 16 Lastly, with this: 17 I understand that this issue is complicated 18 from both a political and a public-policy 19 perspective. 20 Nobody wants to see folks not being able to 21 provide what's necessary for them and their family. 22 But I do think, in the larger context, we do 23 have a skills gap that's growing in the state. 24 We have plenty of small businesses that 25 cannot hire and find the qualified workers that they 1 need. 2 We need to invest more in workforce 3 development. 4 We need to examine and be mindful, 5 public policy-wise, the differences between big 6 business and small business, and what small business 7 needs. 8 We don't want to see, you know, and we are 9 already seeing, iPads and kiosks. 10 Those are jobs, at one point, that have been 11 there. 12 So what I'm going to say is: 13 Our position is going to be "no." 14 Our position is a rigid "no." 15 Our position is a "no," paired with a tax 16 cut. 17 Our position is "no," regardless of how long 18 it's phased. 19 In our position will be "no" if you put a 20 training wage in place. 21 Small businesses in this state are 22 struggling. 23 I'm going to be "no" for our members. 24 I'm going to be "no" for the members that 25 I represented, the ones that have stacks of 1 phone-call messages, transcripts, e-mails, 2 et cetera, on my desk. 3 I just think you need to be mindful of the 4 small business, and what it means for New York, what 5 it means in your specific district, and what it 6 means for our economic present and future. 7 SENATOR MARTINS: Michael, thanks very much 8 for the testimony. 9 I will tell you that, in this discussion we 10 have to be fair. And being fair means looking at 11 all sides. 12 And I appreciate your testimony, and bringing 13 that other side here, because, you know, $15 is a 14 lot of money, it is, in certain parts of this state. 15 And, you know, when I talk to my small 16 businesses in my communities, they tell me the $15 17 is a lot of money. 18 Now, will it impact me personally? No. 19 No. 20 The business that I have, we pay our 21 employees significantly more than that because it's 22 a whole different model. 23 But, I know the impact that it's going to 24 have on small businesses. 25 So we have to be fair across the board, and 1 we can't assume. 2 So, I appreciate that. 3 I appreciate it, because we have to consider 4 all sides here, and not just one to the exclusion of 5 the other. 6 And I know Senator Perkins has a question. 7 SENATOR PERKINS: So, Mr. Chair, I -- you 8 don't mean to say that $15 an hour is a lot of money 9 for a working person? Do you? 10 SENATOR MARTINS: Senator Perkins, I -- 11 SENATOR PERKINS: I'm just asking, in the 12 abstract. 13 SENATOR MARTINS: Senator Perkins -- 14 SENATOR PERKINS: I don't want to necessarily 15 put it in the context of -- 16 SENATOR MARTINS: -- you asked me a question. 17 SENATOR PERKINS: -- because I want to -- 18 SENATOR MARTINS: But you asked me a 19 question. I want to answer it. 20 SENATOR PERKINS: -- because I want you -- 21 I want to put it in the -- you know, I let you go on 22 and on when you're making your representations, so 23 I try to be brief. 24 SENATOR MARTINS: I'm answering the question. 25 You're asking me. 1 SENATOR PERKINS: But I'm just saying, 2 I don't want to put it in the context of his needs. 3 I'm saying, but for a working person, do you 4 think $15 is luxury living? 5 Do you think that's a working person's -- 6 forget the other possible constraints. 7 Just $15 an hour, should a person -- is that 8 a lot of money for a working person? 9 SENATOR MARTINS: Are you done? 10 SENATOR PERKINS: Sure. 11 SENATOR MARTINS: I just don't want to 12 interrupt you again, Bill. 13 Listen -- 14 SENATOR PERKINS: I'm sorry. 15 SENATOR MARTINS: No, no, it's fine. 16 Listen, $15 is not, is absolutely not, a lot 17 of money, in my mind, for a working person. 18 SENATOR PERKINS: Okay. Thank you. 19 SENATOR MARTINS: Absolutely, positively, 20 not. 21 But -- 22 SENATOR PERKINS: Okay. But -- 23 SENATOR MARTINS: But -- no, no, and now I'm 24 going to finish my answer, and we're not going to 25 have this debate between ourselves, because we're 1 here to listen to witnesses. And you and I can have 2 this discussion afterwards. 3 SENATOR PERKINS: No, but I meant to ask 4 him -- 5 SENATOR MARTINS: Let me finish, Bill -- 6 SENATOR PERKINS: -- I meant to ask him as 7 well, because I just want to be clear -- 8 SENATOR MARTINS: -- let me finish and I'll 9 be clear. 10 SENATOR PERKINS: But you editorialized also, 11 when you -- 12 SENATOR MARTINS: No, no, no. Bill, you're 13 going to let me finish issue. 14 I said "absolutely not." 15 But I know, I absolutely know, that when 16 I first started working, I made less than $15 an 17 hour. I started at minimum wage. And I then, 18 and -- I know countless people who did as well. 19 So let's not -- 20 SENATOR PERKINS: Is it minimum wage that's 21 set now? 22 SENATOR MARTINS: No, but it certainly was 23 minimum wage, whatever it was at the time, Bill. 24 So let's -- 25 SENATOR PERKINS: We just now raised it. 1 SENATOR MARTINS: -- but let's not have that 2 discussion at this point. 3 We know that entry-level jobs are entry-level 4 jobs. 5 We know that we want to train and we need to 6 train people in order to be able to do better, 7 higher educated, higher-skilled jobs. 8 And we're not, as a state, providing them 9 with those opportunities. 10 Those are the challenges that we have. 11 We're going to work together, you and I, we 12 are, in making sure that this happens. 13 But it's not just about a $15 minimum wage. 14 It's got to be a much broader discussion than what 15 we're having in this exchange righted now. 16 So, Michael, I apologize for the dialogue 17 here, but, I have no further questions, unless the 18 Senator has any questions for you. 19 SENATOR PERKINS: Thank you. 20 MICHAEL DURANT: We're all good? 21 SENATOR PERKINS: We're all good. 22 SENATOR MARTINS: Thank you. 23 MICHAEL DURANT: Enjoy the rest of the 24 afternoon. 25 SENATOR MARTINS: You as well. 1 SENATOR MARTINS: Dr. Barrington. 2 Dr. Barrington is the executive director for 3 the Institute for Compensation Studies at the 4 ILR School at Cornell University. 5 It's good to see you again. 6 DR. LINDA BARRINGTON: Good to see you. 7 And I will not be insulted if any of you 8 stand up and stretch a minute, because I know we've 9 all been here for a while. 10 SENATOR MARTINS: We've been stretching all 11 day. 12 DR. LINDA BARRINGTON: And, if it's okay with 13 you, I know that time is passing, so, rather than 14 going through my prepared comments, which you have, 15 I just wanted to make a quick half dozen points of 16 things that I thought either were not brought up or 17 not sufficiently addressed. Or, would you rather me 18 go through the comments? 19 Okay. I'll do that, and then I'll answer 20 questions. 21 SENATOR MARTINS: Dr. Barrington, however 22 would you like to proceed. 23 Thank you. 24 DR. LINDA BARRINGTON: Okay. So I guess the 25 first thing that would I like to highlight is that, 1 just reinforce what we do all know, which is, this 2 is absolutely historic in scope, in terms of the 3 size of the increase we're talking about. 4 The point that's not been made, that I think 5 is really important in the context of the economic 6 evidence that people have been talking about, this 7 study or that study, and where economists are at, 8 and so I am an economist by training, so I will 9 speak for my class: I think the reason that you see 10 so many economists not coming out in favor of 15 is 11 the same reason that they're also not coming out 12 opposed to it. 13 There's just a lot of -- people are more 14 agnostic because we don't have the research. 15 So we really are pioneering into unchartered 16 territory, and that's not to necessarily say for or 17 against. 18 It's to say, we need to be -- think very 19 carefully about how we do study the impacts, and how 20 we plan for that, so that when we need to do, or if 21 we need to do, course corrections as we go into this 22 uncharted territory, we're doing it in an 23 evidenced-based way. 24 Because, if and when and how the $15 minimum 25 wage goes forward in New York, we have an 1 opportunity not just to be a leader on that, but to 2 be a leader on evidenced-based policymaking. 3 And so as we look at the municipalities that 4 have been trying to study this, L.A. built a study 5 into theirs, you know, a lot of the cities have, but 6 those are city studies. 7 And so we really don't have a study on a 8 statewide basis that looks at something of this 9 magnitude. 10 A couple other points. 11 I would also be cautious on interpreting any 12 international comparisons on this level and where it 13 fits in the world, because there's just such a long 14 list of other things that make labor markets not 15 comparable, in terms of the labor market 16 regulations, universal health care, differences in 17 taxes. 18 So I think it's more relevant to think about 19 where we sit vis-a-vis other states than where we 20 sit internationally if we go to a $15 minimum wage. 21 One thing economists agree on is that we 22 rarely agree on anything. 23 The one exception to that I would say, is the 24 earned income tax credit. 25 You have heard this brought up over and over, 1 and I -- you know, it is just the thing that you 2 really get almost unanimous agreement, that this is 3 the most effective, most efficient antipoverty 4 program there is. 5 And to hear the business community support 6 for this as well, in terms of how it targets who you 7 want to target in a way that business doesn't have 8 to share in that administrative burden as well, is 9 something that we just -- you know, we really need 10 to fold into this conversation, not just in terms of 11 whether there's threshold adjustments that need to 12 be made, but, are there bigger -- is there a bigger 13 opportunity here to really use that program to 14 target the antipoverty objectives we may have while 15 we deal with whatever objectives the $15 minimum 16 wage is bringing us. 17 Another comment from the sort of 18 business-operations' perspective is the importance 19 of predictability. 20 So, thinking about the indexing question as 21 part of this conversation, and trying to get better 22 response from the business community on how they 23 feel about indexing, because it makes things very 24 predictable. 25 And one of the things that's difficult, 1 especially as a small-business person, would be the 2 unpredictability of knowing when you're going to get 3 a huge jump like this. 4 So, folding into the conversation of, if and 5 when and how the minimum wage is raised, how do we 6 then consider making it a less unpredictable 7 business of when those costs go up? 8 Several people have mentioned the issue of 9 wage compression that you have. 10 This isn't just about those who are currently 11 at or below the $15 per hour, but what about those 12 who are just above it? 13 And so there is some evidence that that 14 compression effect is real. 15 Some economists have said, up to 150 percent 16 of the minimum wage. 17 So, if you increase the minimum wage by $10, 18 you'll see ripple effects up to 15. 19 If you raise it at 15, you're going to have 20 significant ripple effects up to 22. 21 That's a -- that is a reality, or an 22 experience we've had in the past with smaller 23 increases. 24 Dealing with that kind of wage compression, 25 though, is not -- is not a new issue for employers. 1 Employers are constantly dealing with, if 2 I raise this worker's wage, how do I deal with this 3 worker? 4 So I think the compression challenges, while 5 they're real from a budgetary standpoint, that issue 6 of, "how do you deal with the dynamics of your 7 workforce?" is something that folks are used to 8 dealing with, because it happens all the time for 9 different reasons. 10 The one final point that would I make -- 11 And then, you know, we can answer any 12 questions or talk about whatever you want to talk 13 about, either what's in the prepared comments or 14 other. 15 -- is the macroeconomic environment that 16 we're in. 17 And so no one's really talked about whether 18 this is a good or bad economic time to be doing 19 this. 20 And I would say that, first, New York State, 21 as well as, you know, the U.S., has a very resilient 22 economy. We have absorbed increases and changes in 23 labor law multiple times than -- with big changes. 24 And so we are a resilient, adaptable economy. 25 If it were five years ago, I would think this 1 would be a non-starter as the time to be having this 2 conversation. 3 Given we are at a point right now of very low 4 inflation, low energy costs, unemployment is 5 continuing to fall, we're rebounding in employment, 6 from the larger macroeconomic situation, this is not 7 a bad time to be having the conversation. And it's 8 a much better time than five years ago. 9 So just thinking a little bit about the 10 resiliency of the economy, overall, and the larger 11 macroeconomic time that we're in right now, I think 12 is also something we just want to be considering as 13 we think about whether this is something we push for 14 at this time or not. 15 So, are there other questions or comments? 16 SENATOR MARTINS: Thank you. 17 You know, from a micro standpoint, obviously, 18 we're getting various testimony, testimony we had 19 earlier today. 20 Certainly, discussions around minimum wage 21 always revolve around these issues, but we're going, 22 as you said earlier, into unexplored territory. 23 And so do you have a sense, I mean, as an 24 economist, what are our expectations? 25 You know, we have experiences in smaller 1 incremental increases, and, certainly, in a more, 2 I guess, controlled manner, and not that this isn't, 3 but, what are our expectations? 4 Is it fair to expect that if we had a certain 5 expectation of a smaller increase, that a larger 6 increase would lead to a proportionately larger 7 disruption? 8 DR. LINDA BARRINGTON: And I think we don't 9 know, and that's why economists are quiet on this, 10 or the ones who have come out in favor of increases 11 in the past are not willing to make that statement 12 now. 13 Now we don't know if the function is 14 monotonically increasing, if it's a geometric thing. 15 When you -- when we think about the impacts, 16 a lot of the conversation gets focused on employment 17 and whether we're going to have employment impacts. 18 For the smaller increases we've seen, I might 19 be on a little different part of the spectrum than 20 earlier speakers, to say that I think the evidence 21 is the unemployment -- there hasn't been the 22 significant impacts that have always been warned of. 23 But, again, those are smaller increases, and 24 we don't know on this large of a scale. 25 I think what we do know is that, employing -- 1 the number of hours you employ workers is not the 2 only channel by which you can react to the higher 3 wages. And, so, employers do react through 4 increasing the efficiency of their operations. 5 So there have been studies that say, if you 6 raise the minimum wage, then a lot of employers find 7 it costly to lay off workers or to pull back, or 8 they can't -- as people have said earlier, you can't 9 do business if you don't have employees. 10 So what you need to do is get smarter in how 11 you work. 12 We have seen evidence on the positive sides 13 of minimum-wage increases, of increases in -- 14 reductions in tenure, that-- I'm sorry, reductions 15 in turnover. 16 That, in the case of San Francisco Airport, 17 which is one of the microstudies that's been done, 18 there was much higher retention rates, or reduction 19 in turnover rates, of employees within the airport. 20 So we know that if you increase wages 21 X amount, it does impact; it reduces turnover costs 22 for employers. 23 So that's another way that they absorb the 24 higher cost, is they have lower costs to dealing 25 with turnover. 1 We don't know is, if it's a 50 percent, or a 2 100 percent, increase in the minimum wage, what does 3 that mean vis-a-vis a 10 percent? 4 And that's the uncharted part of this. 5 SENATOR MARTINS: And, so, what do you 6 suggest? 7 And that's really the point. 8 We're heading into areas that we've never 9 seen, and we don't have any models to be able to go 10 back and say, well, it happened this way here, other 11 than speculation. 12 DR. LINDA BARRINGTON: Right. 13 And I think we do have windows of 14 opportunity. Right? 15 So being able to look at -- right now we see 16 changes being rolled in already, right, by executive 17 order. 18 How quickly can we gear up to understand, for 19 the different regions in the state, for the 20 different employers, for the non-profits versus 21 for-profits, how they're reacting to any of these? 22 What is the impact in a -- typically, when we 23 talk about turnover rates, you'd look at a yearly 24 cycle. 25 So, we should know within 12 months of a new 1 increase coming in, how quickly turnaround changed 2 or didn't change, as a starting point. 3 So I would say we want to be ramping up and 4 intensifying the study and understanding, on a 5 faster pace, with the little bits of experience that 6 we do have, as things start to go one place or 7 another, so that you have then, information, so you 8 can start thinking about course correction, or 9 either ramping up steeper or making things more 10 gradual. 11 SENATOR MARTINS: No, I understand, and 12 I appreciate it. 13 One of the examples that is sometimes given 14 is that, you know, obviously, the business is going 15 to have to absorb the increase, and not necessarily 16 going to immediately start laying people off, but 17 they will immediately start looking for those 18 efficiencies. 19 DR. LINDA BARRINGTON: Yes. 20 SENATOR MARTINS: So whether it's replacing a 21 person with a kiosk or an iPad, or whether it's some 22 other means of cutting costs, the business will 23 eventually readjust to absorb those additional 24 costs. But the initial reaction, obviously, is that 25 they're going to absorb it, typically. 1 Is that fair? 2 DR. LINDA BARRINGTON: Yes. 3 And in two different -- in the case of 4 non-profits, where you'd -- or, businesses where you 5 don't have a price you can increase, you have to 6 absorb it all. Right? 7 In the case of being a business or an 8 employer where you have a product or service to 9 sell, you can pass some along into price increases. 10 So, again, there's a -- where we see 11 increases in the minimum wage of being rolled into 12 for-profit businesses, where prices can be 13 increased, we can start to see how quickly prices 14 may be changing, and how much is being passed on to 15 consumers, and how much is being absorbed internal. 16 SENATOR MARTINS: And that's a real concern. 17 You know, we'll have, some representatives 18 from not-for-profits will be testifying, hopefully, 19 shortly. 20 And one of the concerns is, if you don't have 21 the ability to absorb it, if you don't have 22 reserves, you don't have the ability to pass those 23 costs on to someone else, there is only one 24 alternative. And that's a very difficult thing, and 25 it's a conversation that we're going to have to 1 have. 2 DR. LINDA BARRINGTON: I think, as 3 businesses -- so there's also how you stagger the -- 4 what you expect from your employees as you grow is 5 another slight tweak on that. Right? 6 So as you double your business, if you figure 7 out how to get your workers to be more productive, 8 you don't have to double your workforce. Right? 9 So, it's not that you're necessarily going to 10 lay off workers or replace them with computers. 11 You can -- and there's an interesting study 12 in Florida of some restaurant owners, looking at 13 impacts of minimum wage, where the expectations they 14 have of their workers went up. 15 So they expect them: If I'm paying you $15, 16 then, you know what? I don't need to stay here 17 myself and close down the store, because you -- I'm 18 now expecting you to do that. 19 So there's channels of increasing their, you 20 know -- the performance expectations, redesigning 21 the way the business runs, and then there's also, 22 perhaps, using technology to increase efficiency. 23 So it's not automatic that workers will be 24 replaced with machines to come up with efficiencies. 25 You can reorganize operations and improve 1 training, and other things. 2 So I think a very important point that has 3 come up a couple times is, how does workforce 4 development and training need to come in tandem with 5 this? 6 Because if you improve the talent and the 7 skills of those workers, the $15 an hour is less of 8 a burden, so to speak. Right? 9 It's less regulatory if the natural market 10 wage is closer to that, and it's closer to that if 11 we can build up the skill set. 12 SENATOR MARTINS: Thank you, Doctor. 13 SENATOR SAVINO: Thank you. 14 Just one interesting question. 15 I wasn't here for your testimony, but I read 16 it quickly. 17 You raised a point in my thinking, in terms 18 of the efficiency of the workforce. 19 Obviously, you're going to want to get more 20 out of your workers. Right? 21 So you want them to be more productive, so, 22 this way, you don't have to hire someone else. 23 Is there -- have you seen, or has any 24 research been done, on whether or not employers 25 might shift them into the salaried or 1 independent-contractor status or the managerial 2 title, so to avoid the payment of overtime as the 3 wage rate goes up. 4 Take me out of the standard wage-an-hour 5 division and move me to, I'm a manager now. So now 6 I work a 40-hour week, and I'm capped, and I don't 7 earn any overtime, or, I don't work a 40-hour, 8 I work whatever you tell me have I to work. 9 Have you seen that happening? 10 DR. LINDA BARRINGTON: I would have to look 11 to see if anyone's looked at that. 12 I know that, from the employer perspective 13 and the compensation perspective, you have all of 14 those federal guidelines changing as well. 15 And so one question is, whether the $15 an 16 hour is as high as it would have been if we 17 haven't -- hadn't just jacked-up all the regulations 18 on the salary versus the hourly pay. Right? 19 So because now we've raised the bar for 20 making someone a manager, and avoiding hourly, it's 21 sort of like, that cost's already gone up. 22 And so if you think of where the minimum wage 23 sits vis-a-vis that, you know, again, this isn't a 24 bad time to be considering this increase because we 25 are making all these other adjustments that are 1 making some of those loopholes, perhaps, more 2 difficult because we're raising the standard have 3 you to meet in order to move someone off hourly. 4 Does that make sense? 5 SENATOR SAVINO: Yes, it does. 6 Thank you. 7 SENATOR MARTINS: Senator Perkins. 8 SENATOR PERKINS: Oh, no. Thank you. 9 SENATOR MARTINS: Doctor, thank you. 10 Thank you very much. 11 DR. LINDA BARRINGTON: Thank you. 12 SENATOR MARTINS: And thank you for your 13 patience. 14 DR. LINDA BARRINGTON: No worries. 15 SENATOR MARTINS: Next up we have 16 Ted Potrikus, president and CEO of the 17 Retail Council for the state of New York. 18 Good afternoon, Ted. 19 TED POTRIKUS: Good afternoon. 20 SENATOR MARTINS: Let me start by apologizing 21 for -- 22 TED POTRIKUS: That's okay. 23 SENATOR MARTINS: No, no, let me start by 24 apologizing for, you know, the shuffling of the 25 order. 1 I know that you have been waiting patiently, 2 but I was trying to get every perspective here, and 3 certainly didn't mean to -- 4 TED POTRIKUS: I understand. 5 No, and I understand, too, that we have a bit 6 of a -- I'm not sure that it's, I don't want to say 7 unpredictable anymore. 8 I think people can pretty much predict where 9 we are going to end up on this issue. 10 So I do appreciate the opportunity that 11 you're giving us today to talk about the 12 retail-industry's position. 13 It's been called "nuanced." 14 You have our written testimony. 15 I could treat you to a word-for-word slow 16 reading of it, but I won't. 17 It's my New Year's resolution. 18 SENATOR MARTINS: You're a good man. Thank 19 you. 20 TED POTRIKUS: I'm just going to wing it. 21 But, Senator, you said something at the 22 outset of the hearing today that I found very 23 interesting, and I think really represents the way 24 that the retail industry in New York -- and I really 25 can speak only for the retailers in New York -- 1 I know that there's concern that the position that 2 we take on this issue here in New York is something 3 that would be translated to go into other states, 4 and that's just not the case. 5 I speak only for the Retail Council of 6 New York State. 7 But what you said was, "the need to take a 8 half step back and take a broader view," which 9 really is the position that the council, on behalf 10 of its members, and as instructed by its members, 11 large and small, has taken on this issue, really, 12 for more than a decade. 13 So, how do we look at this? 14 I think we agree with many of the concerns, 15 if not all the concerns, that some of our colleagues 16 on the business side have expressed, in that a 17 too-precipitous increase, if it's done in one fell 18 swoop, or in three or four smaller swoops, that a 19 minimum-wage increase to $15 an hour is something 20 that we just can't sustain. 21 And the factors that render that so, I mean, 22 just today, what you'll hear when you leave here, 23 the news came out today that Macy's is closing 24 five stores in New York, because Christmas sales for 25 brick-and-mortar retail this year, particularly in 1 the northeast, where the weather wasn't particularly 2 Christmassy, were horrible. They were down a 3 significant percentage. 4 Unless you're amazon.com, I don't think you 5 did as well as you might have wanted to do this 6 year. 7 On the other hand, we also recognize the call 8 from the proponents for an increase in the minimum 9 wage, about their needs and wants. And these are 10 the folks who shop in our stores, and who we want to 11 shop in our stores. 12 And we think that there is some merit in the 13 studies that have come out to say, that if people 14 earn more in the minimum wage, the first thing 15 they're going to do is spend it on the things that 16 they need and the things that they want. 17 So we do have to look at this from both 18 perspectives, as an employer, as a business entity 19 in the state of New York, but also as somebody who 20 is serving the public: the general public, the 21 shopping public. 22 And what I'm pleased, is that Governor Cuomo 23 last week asked me, in my role at the Retail 24 Council, to be part of the Governor Mario Cuomo 25 Campaign for Economic Justice, which we accepted, 1 not to endorse anything specifically, but to endorse 2 and to show appreciation for participation in the 3 conversation, as we appreciate the ability to do 4 this today with you and with your colleagues. 5 So I think, going forward in this legislative 6 session, I do not envy you and your colleagues in 7 the Legislature, because, you know, on this side of 8 the desk, as you mentioned a few minutes ago, you're 9 going to have the stack of studies that says "no"; 10 and you're going to have a similar stack on this 11 side that says "yes." 12 How do you choose? 13 I don't know. 14 And, I think what we're here to do is, 15 really, try to work with you, with your colleagues 16 in the Assembly, with the Executive, and with our 17 members, to try to figure out a way that follows -- 18 actually, what I should say, one last thought, is, 19 last year, as you know, we endorsed the executive 20 budget proposal that the Governor put forward for an 21 increase in the minimum wage. And I think it would 22 have taken us to 10.50, and 11.50. 23 And we saw a lot of sense in that, because it 24 was something that we thought, over that two-year 25 period, was something that businesses could plan for 1 and something that we could sustain. 2 I think it's that spirit that we hope to go 3 into this year with, and I think that's why the 4 Governor asked us to be a part of the campaign that 5 you've heard about. 6 And where that leads us, I think is, you 7 know, there are many roads to yes, and I do hope 8 that we can a part of that. 9 SENATOR MARTINS: I certainly appreciate 10 that. 11 Your role with the foundation, is it to be 12 part of the -- I guess, the deliberative, I guess, 13 or deliberate and recommend? Is there a report that 14 will be produced? 15 TED POTRIKUS: I don't think so. 16 I think it's more, at least based on my 17 experience on Monday, which was something I had 18 never attended, which was the rally to kick it off, 19 you know, it seems, you know, a push. A "Fight for 20 15," is what the hashtag is, you know, and is the 21 one that has caught flame all over the country. 22 I think what our role, the way that I see it 23 as, is the ability to take, at least from the 24 retail-industry's perspective, some of the concerns 25 that our small and large members, because the 1 Retail Council does represent, we represent the 2 whole gamut of the industry, from the largest 3 stores, right down to the mom-and-pops. 4 Those stores are represented on the board of 5 directors to whom I answer. 6 And it's been very interesting talking with 7 them, because, yeah, you do hear the concerns of 8 small business, but, a number of the small retailers 9 that are members of the Retail Council have said, 10 Well, if this is done correctly, you know, if -- 11 again, if that curve, to whatever that end number 12 is, isn't too steep, if it's something we can 13 sustain, then let's have that conversation. 14 And I think that's what my role is. 15 SENATOR MARTINS: No, I appreciate it. 16 But is that end number, 15, or is it 17 something else? 18 TED POTRIKUS: Well, like you've said several 19 times this morning, we haven't seen that proposal 20 yet. 21 Let's assume it's 15. 22 Let's assume it's 15, and let's assume it 23 mirrors that that the Fast-Food Wage Board approved. 24 That's an interesting part of that, too, 25 because, you know, in some of our stores, there are 1 fast-food establishments inside the store. So 2 you're looking at the potential for a bifurcated 3 wage scale inside a building, you know, where you're 4 sitting there, going, God, here I am at the 5 register. I sure do wish I was over there, you 6 know, doing whatever is happening in the fast-food 7 place, because I may be making more. 8 That's kind of hard to get through. 9 So -- 10 SENATOR MARTINS: Or the register in the 11 fast-food portion making more than the register in 12 the retail portion. 13 TED POTRIKUS: Exactly. 14 SENATOR MARTINS: Same job -- 15 TED POTRIKUS: Same job. 16 SENATOR MARTINS: -- two different scales. 17 TED POTRIKUS: Two different scales. 18 SENATOR MARTINS: But, again, you mentioned 19 that, you know, part of your -- part of your -- 20 hopefully, your role in being part of this 21 initiative is to help steer how this will be 22 implemented. 23 How would you like to see it implemented? 24 How would the Retail Council like to see this 25 implemented? 1 And if it is going to be implemented, how 2 would you suggest? 3 TED POTRIKUS: I think there's a couple keys 4 to that, and it's a great question, Senator. 5 And if this were to be implemented, "slow and 6 steady," which is reflective of what we supported in 7 2011, and again last year, both of the things. 8 I think it was 2006 when it was done, I lose 9 track of time now, because I've been here for so -- 10 30 years, and I'm starting to lose the dates. 11 But, slow and steady, and, something that we 12 can manage. 13 Simply because, so many New Yorkers of all 14 age come to retail for that first job experience, 15 for the part-time work, for the job training that we 16 hope they stay with us and use, but they may move on 17 and go elsewhere. 18 So we still need to be able to provide those 19 jobs. 20 We still need to be able to provide goods and 21 services to people in a competitive way. 22 Because, as I mentioned with these store 23 closings, and it won't just be this one brand, you 24 know, competition is world right now. 25 We can't just raise prices, but you can build 1 in. 2 So how do you build that in? Slow and 3 steady. 4 I do think that there's always room for a 5 training wage. 6 I know that's something that's fallen off the 7 table in years past, but, if a retailer is going to 8 take -- particularly, a small business, that's where 9 I got my start. 10 We were talking about where people get their 11 start. 12 I learned how to mix paint in Cooperstown. 13 And, you know, that's how I learned how to run a 14 cash register. And, not make the green paint, sold 15 as the black paint. 16 It's -- you know, that's where you learn the 17 skills that translate into, well, this. 18 SENATOR MARTINS: Slow and steady. 19 TED POTRIKUS: Yes. 20 SENATOR MARTINS: What is that? 21 Because, we have, obviously, some proposals 22 that are out there; although, not the proposal for a 23 statewide or a city wage increase. 24 TED POTRIKUS: Yes, sir. 25 SENATOR MARTINS: So taking, past, and 1 assuming it's prologue, taking what was done for 2 state workers, what was done for SUNY workers, what 3 was done for the fast-food workers, if we were to 4 use that same model, does that fall within your 5 definition of "slow and steady"? 6 TED POTRIKUS: No, actually; and I thank you 7 for putting it that way. 8 There are a number of our member stores who 9 are very concerned that even that is too precipitous 10 a climb to sustain. 11 You know, that there comes a point -- and I'm 12 not an economist either. I'm a paint-mixer and 13 lobbyist. 14 So, I'm not quite sure how to do the math, 15 but there's a point where the wages, under the model 16 that we're talking about now, actually surpass what 17 a company would be able to sustain. 18 Now, there may be some, and there are 19 retailers who are saying, Well, wait minute. I know 20 have to worry about competing for -- in the same job 21 market with the fast-food marketplace where people 22 may go, and I might lose some of my good workers 23 over to there. 24 There are -- the other phrase that I've heard 25 today is, this is a multidimensional issue. 1 And the longer I talk here, the more 2 dimensions I'm adding to it myself, because these 3 are the things that retailers worry about. And they 4 look at this and they think, Okay. How do we 5 respond to what the public is asking for? 6 I mean, the same public-opinion polls that 7 put this issue at the top, and it's very popular, 8 they're the same folks who shop in our stores. And 9 we're running those polls every day: 10 Who's in, who's not? 11 How are our sales? 12 What's going on? 13 We need to respond to them in a constructive 14 way. 15 And I think doing that, and responding to the 16 call for an increase in a minimum wage, like I've 17 said, I do think it can be done, as long as it's a 18 way that the retailers can sustain it. 19 And I think as we see the proposals come out, 20 and let's assume it comes out next week, then we'll 21 be able to comment a little more directly on the 22 impact as it will relate to the stores, small and 23 large, who we represent. 24 SENATOR MARTINS: So closer to what was done 25 in the past, this one seems to be more precipitous? 1 TED POTRIKUS: There are a couple of steps in 2 it, where it's -- I believe it's a dollar a year. 3 And that's a little steeper than we've done. 4 You know, in the past it's been at that 5 75-cents-an-hour range. 6 And in an industry, and we have close to a 7 million employees, you know. And when you're 8 talking about stores, small or large, trying to 9 really absorb that quickly, that money's got to come 10 from somewhere. Those prices have to go up, and 11 then, suddenly, we're all back to "whatever.com," 12 and we're not shopping in the stores in New York 13 because the prices went up too fast. 14 SENATOR MARTINS: So even for large 15 retailers, there is a point where that increase is 16 going to affect their ability to be competitive, or 17 even to stay open? 18 TED POTRIKUS: Indeed. Yes. 19 SENATOR MARTINS: I appreciate it. 20 Senator Savino. 21 SENATOR SAVINO: Thank you. 22 Thank you, Ted -- 23 TED POTRIKUS: It's a pleasure. 24 SENATOR SAVINO: -- for your testimony on 25 this, and for your support on the overall issue. 1 You know, there's -- most of the 2 representatives of the business community generally 3 come out against it. 4 But as you pointed out, it's a very 5 multidimensional, complicated issue, for employers 6 as well. 7 I've heard today several times, the question 8 is, "why $15?" 9 I think the ship has sailed on that. 10 TED POTRIKUS: I would agree with that. 11 SENATOR SAVINO: I don't think we should be 12 debating it anymore, because once the $15 per hour 13 was established for the fast-food industry, which is 14 a subsection of the low-wage workforce, it makes it 15 very difficult to walk it back for any other set of 16 the -- part of the low-wage or entry-level 17 workforce. 18 I can't imagine that we would end this year 19 with someone delivering a pizza for a fast-food 20 chain, earning $15 an hour, and someone delivering 21 child care earning something less. 22 Do you think that's a possibility? 23 TED POTRIKUS: I would have to agree, 24 Senator, that the 15, and our members have said, you 25 know, where did the "15" come from? 1 Well, it was an effectively meted-out 2 campaign to make that the number that stuck. 3 You could wish it away. 4 I wish the Mets had won the World Series last 5 year, you know? 6 SENATOR SAVINO: Right. 7 So I think we all established that whatever 8 we do going forward, $15 an hour is the start. And, 9 certainly, we're not going to roll it back to $13 10 or, you know, some other thing, with the peg to 11 inflation. 12 I think we should all start wrapping our 13 heads around the idea that $15 is going to be what 14 the minimum wage will be, if we adopt it. 15 You know, that's assuming we can come to some 16 agreement, and the Governor gives us a proposal that 17 we can all get behind. 18 But, on the retail side, you made an 19 interesting point that you guys are kind of betwixt 20 and between. 21 TED POTRIKUS: Yes. 22 SENATOR PERKINS: Because, while you have to 23 absorb the increased cost, you benefit the most out 24 of the increase, because people then turn around and 25 spend that money, and Macy's or CVS or Dwayne Reed 1 or whatever the merger is today. 2 I don't know, it's Dwayne Reed, Walgreen's, 3 CVS, (unintelligible). 4 But you actually will benefit from it as 5 well, so it puts you in an interesting position. 6 Are there any other sectors of the business 7 community that you think are similarly affected that 8 way? 9 TED POTRIKUS: Well, that's a question 10 that -- that I've thought a lot about over the years 11 whenever we've had this conversation about the 12 minimum wage. 13 Really, about any issue that affects the 14 workforce. 15 The people who not just work in our stores; 16 the people who we seek to employ and want to be able 17 to employ. 18 But the people who work elsewhere, and then 19 we want them to come in and shop, you know, we've 20 got to be very careful about that, because I think, 21 I would say, retail, and all its, manifestations 22 whether it's just the clothing merchants and the 23 hardware stores, car dealers, whatever, let's think 24 of anything retail, restaurants, we're the -- we are 25 the face of the metamorphosis thing called "the 1 business community." 2 You know who the retailer is. 3 And I think that that's why we do have to 4 really kind of sail the boat down -- I've been told 5 a couple of times over the past couple of years that 6 our position on this issue is very nuanced. 7 Like that's a bad thing, you know? 8 And perhaps nuance is bad, but I think -- 9 Mr. Chairman, I think your point, that we have to 10 take a step back and really look at this from a 11 broader angle, is the angle that the Retail Council 12 Has chosen to take a look at this, and it's a tricky 13 place. 14 SENATOR PERKINS: Yes, it is. 15 TED POTRIKUS: But people -- you know, it's 16 the middle of the road, but, boy, stand in the 17 middle of a thru-way, there's trucks in both 18 directions. 19 SENATOR PERKINS: Thank you. 20 TED POTRIKUS: Thank you, Senator. 21 SENATOR PERKINS: I'm fine. Thank you. 22 SENATOR MARTINS: Ted, thank you. 23 Thank you very much. 24 TED POTRIKUS: Mr. Chairman, thank you. 25 SENATOR MARTINS: Good to see you. 1 And thanks for participating. 2 TED POTRIKUS: Great to see you. 3 Happy New Year. 4 SENATOR MARTINS: You as well. 5 Thank you. 6 Next we have, James Parrott, deputy director 7 and chief economist, Fiscal Policy Institute, and, 8 Paul Sonn, general counsel and program director, 9 National Employment Law Project. 10 Gentlemen, welcome. 11 JAMES PARROTT: Good afternoon. 12 SENATOR MARTINS: Thank you for your 13 patience. 14 Happy New Year. 15 Paul, good to see you again. 16 PAUL SONN: Great. Likewise, Senator. 17 Thank you. 18 JAMES PARROTT: Thanks for your patience. 19 Good afternoon, Senators. 20 So, there's no point in sticking to my 21 testimony. Hopefully, you have a copy of that. 22 SENATOR MARTINS: We sure do. 23 JAMES PARROTT: I would much rather talk 24 about the some of the interesting things that you've 25 been talking about, and address some of that. 1 So, I do want to cover a couple of things 2 that I did speak to in my prepared remarks, and then 3 I want to address some of the questions that have 4 come up. 5 So I do have some numbers in the prepared 6 testimony on the erosion in household income levels 7 and wage levels in recent years. 8 There's clearly been a stagnation taking 9 place over -- you know, since the recession began, 10 and going back further than that. 11 That same sort of stagnation has not 12 characterized the path of business profits in 13 New York State. 14 Early last month, we put out a little data 15 brief that, using U.S. Commerce Department data, 16 noted that business profits per worker in New York 17 have increased, since 2001, almost twice as fast as 18 the level of compensation per worker. 19 And that's much -- and the "compensation 20 increased per worker" includes highly-paid 21 executives. 22 So if you look at the median-wage worker, the 23 gap between their -- the nominal growth in their 24 wages and profits is even greater. 25 So we should keep that in mind. 1 We also have a graph in there on the sky-high 2 child poverty rate in New York State. 3 And, you know, we're here talking about 4 raising the minimum wage, because a lot of these 5 children living in poverty have a working parent who 6 just doesn't earn enough to raise the family above 7 even the, admittedly, very low federal poverty 8 level. 9 Earlier this week the Economic Policy 10 Institute, a nationally prominent economic-policy 11 research group, probably the most prominent that's 12 worked for the last couple of decades on the 13 minimum-wage issue, prepared for New York a detailed 14 analysis of the prospective worker impact of 15 raising, over a phased-in period, the minimum wage 16 in New York State to $15. 17 So it's worth reciting some of the highlights 18 of that report so that we have a good baseline 19 understanding of what, sort of, the best analysis in 20 thinking, in terms of who's affected by this. 21 So, 3,200,000 New York workers are estimated 22 to be affected by this. This is 37 percent of the 23 state's wage and salaried workforce. 24 The analysis separated New York City from the 25 rest of the state, as the Wage Board -- the 1 Fast-Food Wage Board minimum-wage increase did. 2 And our thinking is, that that's what the 3 Governor will incorporate into his proposal. 4 So in New York City, 1,400,000 workers would 5 be affected; 35 percent of the workforce. 6 Outside of the city, 1.7 million workers; 7 38 percent of the workforce. 8 Three-fourths of these workers are 25 and 9 older, so we're not mainly talking about teenagers 10 here, and where that hasn't been the case for a long 11 time; and, yet, a lot of the debate is sort of stuck 12 in a rut of, 20 years ago, talking about how this 13 mainly affects teenage workers. 14 That's not the case. 15 SENATOR MARTINS: Let me ask you: Just on 16 that point, does that include restaurant 17 workers/tipped workers as well in that? 18 JAMES PARROTT: Yes. 19 SENATOR MARTINS: Okay. Thank you. 20 JAMES PARROTT: Yes, we've included all of 21 the wage and salary workers in that. 22 Two-thirds of these workers work full-time, 23 and more than half have some college experience, 24 either a four-year college degree, two-year college 25 degree, or at least have attended college. 1 A third have children, and 45 percent of 2 female single parents would benefit from this 3 increase. 4 So, you know, this increase, while it's not 5 limited to affecting workers from low-income 6 families, it really does a very effective job of 7 helping the incomes of workers in low-income 8 families, and, you know, it benefits a lot of 9 single-parent families. 10 Roughly, half of the workers affected 11 statewide are persons of color. 12 And more than half of all Latino workers in 13 the state, more than half, would benefit from this 14 increase, and 40 percent of African-American workers 15 in the state would benefit from this. 16 Low-income households disproportionately 17 benefit. More than a third of the affected workers 18 are from families either in poverty or near poverty, 19 and over three-fourths of all workers in or near 20 poverty would get a raise from this. 21 Three sectors sort of stand out in terms of 22 the number of workers affected, and we've talked 23 about two of these. 24 I want to focus on a third one. 25 So retail, obviously, is the largest sector 1 affected by this. 2 Restaurant sector, not surprisingly, is the 3 second largest. 4 The sector that comes right behind the 5 restaurant sector, though, is the sort of a broad 6 look at the human-services sector. 7 Everything from home health-care workers to 8 nursing home, residential-care workers, workers 9 providing services to the developmentally disabled, 10 social-assistance workers, child-care workers, and 11 so on. 12 So this -- about 420,000 human-service 13 workers, taking this broad approach, would benefit 14 from a $15 minimum wage. This is almost half of all 15 workers in this sector. 16 Now, this sector is unique, in that most 17 employers are non-profit employers in this sector. 18 Most are working under government contracts, 19 many under state-government contracts, or, 20 they're -- they provide services that are reimbursed 21 under Medicaid. And the State, you know, sets the 22 Medicaid reimbursement rate. 23 So the State is in a position to adjust the 24 funding streams that go to these non-profits, to 25 enable these organizations to pay higher wages. 1 And we would strongly urge that the State 2 look carefully at doing that. 3 We think that it's fiscally smart do that, 4 and, in effect, you don't have a choice either, 5 because you can't leave these workers out; raise the 6 wages for all other workers in the state, and not 7 provide that increase. 8 So these workers who -- you know, when you 9 think about, this workforce is 80 percent female, 10 and, disproportionately, women of color. 11 Their wages are low, because the kind of 12 services they provide have -- the kind of 13 occupations they have, have typically been 14 considered female-dominated, and have been underpaid 15 and undervalued, for that reason. 16 So, you know, in terms of gender-pay equity, 17 and racial-pay equity, the State has to step up to 18 the plate and do something about this workforce. 19 We've tried to estimate the cost of doing 20 this for a subset of this workforce. 21 We haven't looked at the home health-care 22 side, because we know that the 1199 folks are doing 23 that. 24 We haven't looked at the other part of 25 Medicaid-reimbursable services, like developmental 1 disabilities. 2 I think you'll hear from other witnesses on 3 that point today. They've done their own estimates. 4 We've looked at the human -- the sort of 5 narrow look at the human-services sector, which is 6 social assistance and child-care workers funded 7 under state-government contracts. 8 Looking at the state comptroller's website, 9 it looks like there are about a billion and a half 10 dollars in contracts on an annual basis. 11 And, so, looking at the number of workers who 12 are employed under those contracts, and trying to 13 estimate what a phased-in increase would be, our 14 best sense at this point is, that it would cost 15 60 to 75 million dollars in the first year to cover 16 the two increases, if the first increase took place 17 April 1st and the second increase took place 18 December 31, 2016. 19 And that when it's fully phased in, it would 20 cost 200 million -- it would cost 250 to 300 million 21 dollars a year. 22 And this would provide not only funding 23 increases to raise all workers to 15, but, also, it 24 would provide for some spillover increase, because 25 you'd have a lot of social workers, for example, who 1 might have a master's of social work degree. 2 They're making more than 15, but, their work has 3 also been, historically, undervalued. So, you want 4 to provide some wage adjustment to those workers. 5 So we tried to factor that in. 6 Let me say a little bit more about child-care 7 workers. 8 It was interesting that E.J. McMahon talks 9 so much about child-care workers. 10 I'm glad to know that he's concerned about 11 the abysmally low-wages in the sector. 12 So, you know, we think there are things that 13 the State can do. 14 So two things come to mind, in addition to 15 sort of covering in human-service contracts that go 16 to child-care services, you know, increased funding. 17 So, a lot of low-income workers depend upon 18 child-care subsidies. 19 If you can raise the wages of the workers 20 providing the child-care services, you're going to 21 have to adjust the amount of the subsidies. 22 For those moderate-income families who are -- 23 you're making a little bit above the eligibility 24 level for child-care subsidies, the State could 25 target an increase in the child- and dependent-care 1 tax credit so that those families would be able to 2 reduce their net costs that they're having to pay, 3 because they're going to have to pay higher rates, 4 higher fees, in order to accommodate the increased 5 wages that child-care workers need to receive. 6 Now, to offset these additional costs on the 7 part of government, we need to think about the 8 fiscal dividend that goes along with this increase 9 in the minimum wage. 10 The Urban Institute did a study earlier -- in 11 early 2015, looking at, in modeling different 12 approaches to reducing poverty in New York City, and 13 what they found was, one of the policies they 14 modeled was an increase to $15. 15 You know, if you look at that report and 16 analyzed what they're saying, they're basically 17 saying that there's a 43 percent fiscal dividend; 18 that is, for every aggregate dollar of increase in 19 minimum wages in the total amount paid out, 20 government, at all levels, not just the state or 21 New York City, but all levels of government, and a 22 lot of this, admittedly, is at the federal level, 23 would benefit by 43 cents, both in terms of savings 24 in reduced cost of public assistance, and, the 25 increased tax payments that these low-wage workers 1 would be paying. 2 So, they're going to pay more in income 3 taxes. They're going to pay more in sales taxes as 4 their consumer spending goes up. 5 So, in part, the state would be, you know, 6 seeing some of this fiscal dividend that could be 7 used to help offset some of the higher costs that 8 we're talking about. 9 So, let me quickly address a couple of things 10 that have come up earlier on your exercise in 11 looking at going on the Labor Department website and 12 adjusting the minimum wage, so that, you know, if 13 you adjust it for inflation, you know, it would be 14 $11.50 an hour, or something like that. 15 What that calculator doesn't factor in is the 16 fact that there's been significant growth in 17 productivity in the economy over time, so that if 18 you adjusted the 1970 minimum wage, which was -- 19 that's when it reached a peak in terms of the CPI 20 level for New York State, if you adjusted it for 21 productivity growth, the minimum wage today would be 22 $18 -- over $18. And by 2021, it would be $21 an 23 hour. 24 SENATOR MARTINS: No argument. 25 We weren't discussing the productivity, 1 though. 2 We were discussing solely the issue of 3 tagging it to CPI. 4 JAMES PARROTT: Yeah, yeah, no. 5 And what that calculation also doesn't factor 6 in is the higher cost of living. 7 So if you adjusted the New York's 1970 8 minimum wage, for the higher cost of living in 9 New York State overall, and for the CPI, you would 10 get a minimum wage of $15 in 2015, actually. 11 It would be a little higher, going forward. 12 The second thing I want to talk about is, how 13 would businesses accommodate this $15 billion 14 increase in wages, which, coincidentally, the EPI 15 analysis of the effect of the -- on the -- you know, 16 looking at the worker impact, also says that this 17 would result in an aggregate increase in wages of 18 $15 billion. 19 Maybe that's where the Governor got his -- 20 his figure from. 21 I'm not sure. 22 What we haven't really focused on a lot is 23 the fact that, of course, this is phased in over 24 time, and that businesses -- many businesses can 25 adapt by, you know, very slight changes in prices. 1 Paul Sonn's going to talk a little bit more 2 about this Los Angeles study that looked at how 3 businesses would accommodate that. 4 And, so, very modest price increases. 5 And the Cornell professor very appropriately 6 pointed out that this is probably a fortuitous 7 macroeconomic period to be talking about doing 8 something like this, because inflation is very low, 9 unemployment's come down, and so on. 10 And because inflation is very low, actually, 11 you know, the Federal Reserve would like to see 12 inflation a little bit higher than what it is right 13 now. They would consider that a good macroeconomic 14 result if it's a little bit higher that it is. 15 So there's clearly some room there for 16 businesses. 17 And, again if this is done across the board 18 in New York State, then no individual business is at 19 a competitive disadvantage by raising their prices. 20 So part of the -- 21 SENATOR MARTINS: With respect to other 22 companies in New York? 23 JAMES PARROTT: Pardon? 24 SENATOR MARTINS: With respect to other 25 businesses in New York? 1 JAMES PARROTT: Well, right. 2 But most of the workers in low-wage sectors 3 are serving a local market, so a lot of them are 4 service-oriented. Retailing, basically, is local 5 market-oriented, and so on. 6 So, they're not competing, you know, on a 7 global basis, necessarily. A lot of their 8 competitors are within New York. 9 But, you know, we're not talking about huge 10 price increases. 11 We're talking about, you know, slight price 12 increases, on the order of 1 to 3 percent a year. 13 So, we should keep that in mind. 14 I should probably stop at that point. 15 SENATOR MARTINS: That's entirely up to you. 16 You're good? 17 JAMES PARROTT: Yep. 18 PAUL SONN: Mr. Sonn. 19 SENATOR MARTINS: Mr. Parrott, thank you. 20 JAMES PARROTT: Sure. 21 PAUL SONN: Thank you, Senators. 22 Well, you have my written testimony as well. 23 I'll just hit some of the points that have 24 come up in the conversation. 25 One thing that I think is really significant 1 to communicate is that the growth -- the significant 2 and growing business-community support for the 3 Governor's proposal. 4 And this hearing was called on, not lots of 5 advanced notice, and so there's -- we were -- 6 appreciated hearing the nuance position of the 7 Retail Council. 8 But there -- actually, in addition to them, 9 there is a growing list of both trade associations 10 and individual businesses that are backing the 11 Governor's proposal, as proposed, with the 5-year 12 phase-in. 13 I believe written testimony from eight of 14 them have been submitted for this hearing, from 15 businesses and trade associations across the state, 16 including Rochester's New Shelves Publishing, the 17 owner, Amy Collins; from Ithaca, retail-store owner 18 Jan Rhodes of Silk Oak Retail; also, the Ben and 19 Jerry's board chair from Ithaca; two Long Island 20 businesses; and one trade association, the Long 21 Island African-American Chamber of Commerce; 22 Spectronics Corporation in Westbury; 23 (unintelligible) in West Babylon; and Hudson Valley 24 Business -- 25 SENATOR MARTINS: Mr. Sonn, if we have 1 received them, they'll be part of the record. 2 PAUL SONN: Great. 3 SENATOR MARTINS: And I'll make sure that 4 everybody on the Committee receives a copy of them. 5 PAUL SONN: Terrific. Thank you. 6 And we would welcome, for future hearings, 7 the opportunity to have some of the trade 8 associations and individual businesses be able to 9 speak in person, if possible. 10 SENATOR MARTINS: I appreciate your request 11 on their behalf. 12 Thank you, Mr. Sonn. 13 PAUL SONN: Thank you. 14 And, also, I think in my written testimony, 15 there's -- you know, there's been increasing media 16 coverage of responses by employers in low-wage 17 sectors, such as restaurants and retail, to the 18 $15 minimum wage. 19 And there are -- while the Business Council 20 and the Empire Center have opposed -- you know, you 21 can count on them to oppose any proposal increase of 22 the minimum wage, large or small, it's striking that 23 there are more business voices saying this is 24 manageable if phased in. 25 And I can direct you to my written testimony 1 Section 2, there's a Rochester area business owner, 2 also happens to teach at The University of Rochester 3 Business School; a noted Harlem restaurateur, and 4 then the CEO of Popeye's, have all said that, you 5 know, there's really been too much of a big deal 6 made about the $15. That if phased in properly, it 7 really is manageable for businesses to adjust. 8 On the point of where the "$15" figure came 9 from, you know, it's -- as I think has been 10 discussed, in one level, it came from workers 11 themselves. This was sort of their demand. 12 But, in terms of cost of living, it really -- 13 you know, the economic case for why workers need 14 15 everywhere really starts with living costs. 15 And the Economic Policy Institute report has 16 stats on that. 17 We also have a similar report coming out next 18 week that shows, even in the lowest-cost parts of 19 the state, in Rochester, Buffalo, Syracuse, the 20 North Country, a single worker needs -- by 2021, 21 will need over $31,000 a year, which translates to 22 $15 an hour, just to, you know, cover a basic 23 budget: to rent an apartment, to cover housing, 24 food, and living costs. 25 It is true that there are varying economies 1 and living costs in the state, but $15 is really the 2 floor. And then those costs go up downstate, on 3 Long Island and Westchester and New York City, 4 where, arguably, an individual worker actually needs 5 more than $15. 6 But -- so the Governor's proposal is really 7 pegged to what workers reasonably need, a single 8 worker, in the least expensive parts of the state. 9 SENATOR MARTINS: To that end, what's the 10 model that you're looking at? 11 Are you considering this as a parent, 12 two-income household, with two children? 13 What is the model that you are basing that 14 statement on? 15 Is it a single parent with two kids? 16 Is it two parents, or two workers, working at 17 minimum wage with -- you know, where do we -- how do 18 we draw that? 19 PAUL SONN: No, that's a good question. 20 I'm sorry that I wasn't clear. 21 That's the single worker with no dependent, 22 but a basic budget, using the family-budget 23 calculator. 24 The numbers just go up from there if you have 25 single workers or a pair of low-wage workers 1 supporting children. 2 So it's -- it's "15" is the baseline that a 3 single worker in the least expensive parts of the 4 state needs -- will need by 2021 to cover the 5 basics. 6 Then workers with dependents, upstate, and 7 even single workers, downstate, would need, 8 arguably, more. 9 But, you know, 15 is, obviously, a huge 10 advance, it would be a very significant increase in 11 the minimum wage, for everyone. 12 And, again, we have a report, sort of 13 breaking down by the family type and region of the 14 state, that will be coming out in the next week or 15 two, detailing that. 16 I guess, on the -- generally, the economic 17 literature on the minimum wage, I think 18 Professor Barrington, really, her characterization 19 of it, I think, is exactly right, that the bulk of 20 the credible research on minimum-wage increases in 21 the United States over the past 20 years shows very, 22 very small adverse effects on wages. 23 And that's -- in our written testimony, there 24 are these metastudies that present this visually 25 through funnel graphs, and you can see that the bulk 1 of the studies are clustered around the finding of 2 close, very small adverse effects on jobs. 3 And I think, instinctively, you all know that 4 you voted for a series of minimum wage -- you know, 5 modest minimum-wage increases in the past few years. 6 I think this Legislature, Republicans and 7 Democrats, concluded that they were unlikely to 8 significantly hurt the state's economy. And the 9 business press, and, you know, the media have 10 confirmed that conclusion, that there's been no 11 evidence that the past increases you approved have 12 hurt the state's economy. 13 The studies that my friend E.J. has cited 14 are, really, he has a modeling exercise with the 15 American Action Forum. 16 They are really all outliers that don't 17 represent the bulk of the research. 18 The written testimony explains, he used two 19 individual -- he has three different models, two 20 of -- one of them is the Mere and West study, which 21 has been discredited by other economists. 22 It claims that small minimum-wage increases 23 result in big job losses in industries that don't 24 even have many low-wage workers. 25 It's, really, truly an outlier. 1 Same with the Clemens and Withers study he 2 mentioned. 3 He actually mentioned another study in the 4 Cornell "ILR Review" from 2012, by a guy named 5 Joseph Sabia, that he said -- that purported to 6 confine that the 6.75 minimum-wage increase that 7 New York phased in from 2004 to 2006, that it killed 8 a lot of jobs in the state. 9 I think E.J. maybe hasn't caught up on his 10 back issues of the "ILR Review," or maybe his 11 subscription has lapsed. 12 But if you look in last September -- 13 SENATOR MARTINS: We don't need to go there. 14 We don't need to go there. 15 PAUL SONN: But with respect, there's a study 16 that re-runs those numbers. 17 The Sabia study used just a subset of the 18 available federal government dataset. 19 The latest Cornell ILR study re-runs the 20 numbers, and shows that those surprising adverse 21 effects from past minimum-wage increases in New York 22 disappear. 23 So, the bulk of the research shows that 24 recent minimum-wage increases studied have had very 25 small adverse effects on jobs. 1 But that brings you to the question of these 2 $15 proposals, which as -- are on a larger scale 3 than the United States has experience with. 4 And so the state-of-the-art research modeling 5 that impact is what University of California 6 economists did under contract for the City of 7 Los Angeles, and which was published there. 8 And it's -- I think we've summarized it in 9 our materials, but it really, actually, is -- it's, 10 you know, a very sophisticated model that, you know, 11 many economists have helped to develop and weigh in 12 on, but it really identifies two major impacts that 13 a big minimum-wage increase has on employers and 14 labor markets. 15 The first is a large impact on labor costs. 16 And so -- and the literature suggests that, 17 you know, it's absorbed, generally, through three 18 channels. 19 There's a -- there's some, actually, 20 efficiency savings, as workers stay on the job 21 longer, and, you know, that may amount for up to -- 22 offset up to a quarter of the cost. 23 There's some trimmed profit margins, but a 24 big chunk of it comes out of prices. You know, 25 probably half, or more, there are, you know, price 1 adjustments. 2 So, the first big effect that the L.A. 3 modeling shows is, when you raise the minimum wage 4 to 15, employers' labor costs will go up, they'll 5 adjust prices. That's sort of a negative on 6 business because, then, consumers can afford to buy 7 less. 8 So that's a negative on business sales. 9 That is one effect. 10 However, then the second part of the modeling 11 identifies the second big effect that you get from a 12 $15 minimum-wage increase, which is a large 13 expansion of employee wages and consumer spending 14 power, which, in turn, creates new sales at 15 businesses where workers spend their wages. 16 And the L.A. modeling shows that those two 17 effects are on, roughly, comparable orders of 18 magnitude; that they largely offset each other. 19 And they predicted a very small net job loss 20 that will be experienced in L.A. over the, you know, 21 5-year phase-in period. 22 So -- and I think that's sort of instructive 23 of the way, you know, New York, and there should 24 be -- similar modeling should be done for New York 25 for the Governor's proposal, to take a close look at 1 its likely impact. But, I think you will likely 2 find a -- that these two effects largely offset each 3 other. 4 There may be some small adverse impact on 5 jobs, which, you know, largely, taking the form of 6 slightly slow job growth. But the benefits for 7 workers are really -- as Professor Barrington said, 8 really historic and far-reaching. 9 I mean, the impact numbers more than 10 3 million New Yorker getting a raise, on an average, 11 of $4800 a year. These are for workers making 12 around, say, $20,000. 13 You know, that really is the first 14 public-policy step that the Legislature has been 15 asked to take in the last, you know, decades that 16 would really, you know, readjust -- rebalance the 17 kind of wage-growth patterns in the state, and 18 restore prosperity and a shot at a middle-class 19 existence for, you know, more than 3 million 20 New Yorkers. 21 On just other last points -- 22 SENATOR MARTINS: The minimum-wage increase 23 that we voted on a couple of years ago doesn't 24 count; right? 25 PAUL SONN: No, no, it's very significant. 1 Really, you know, an important step forward. 2 One issue that has not been addressed I think 3 very much to date, is the question of how the 4 Legislature will approach tipped workers with this 5 proposal, which is, you know, a very significant 6 issue. 7 The State has made real strides. It has had 8 a very low-tipped wage, historically, for a long 9 time. 10 Last year, the Albany -- you know, through 11 the Governor and the Labor Department, raised the 12 tipped wage to $7.50, which raises it, that's 13 83 percent of our new $9 minimum wage. 14 So it's a -- they went a good distance of the 15 way towards bringing it up to the full minimum-wage 16 level. 17 So we would urge that the Legislature and the 18 Governor to really fit -- to continue that trend, 19 and, gradually, very incrementally over time, slowly 20 phase out the tipped sub-minimum wage as part of the 21 package that you the hammer out around the full 22 minimum wage. 23 And the reasons for that, I think there are 24 several. 25 The first is, you know, many of the tipped 1 industries are really notorious sweatshop industries 2 where workers are barely getting by. 3 These are nail salons that have been the 4 subject of so much exposure -- you know, media 5 coverage. Car washes. Pizza-delivery people. The 6 personal-assistance workers at the airports. 7 And they -- you know, they surely should be 8 getting the full minimum wage, and any tips on top 9 of that. 10 The second reason is, it's widely recognized 11 by enforcement officials that the tipped wage -- the 12 complicated tip-wage system, where employers are 13 supposed to track tips, and net-up workers if their 14 total compensation doesn't meet the minimum wage, is 15 very difficult to enforce. And it's the single 16 aspect of the wage-and-hour laws that accounts for 17 the largest number of violations in the restaurant 18 industry. 19 And, you know, phasing it out eliminates the 20 serious enforcement problem. 21 Three, it's a huge working-women's issue. 22 Tipped workers, overwhelmingly women, and 23 it's one of those factors contributing to their more 24 than -- to the fact that tipped workers have more 25 than double the poverty rate of New York's workforce 1 as a whole. 2 Fourth, it's really -- there's no serious 3 case that it's not -- that it's economically 4 necessary. 5 We know that, because there are eight states 6 that have eliminated the tipped minimum wage. And 7 many of them are -- they include Minnesota, 8 California, Nevada, Washington, Oregon, Alaska, a 9 variety of states, many of them have topped-growth 10 restaurant markets there. 11 And, in fact, these high minimum-wage cities, 12 Los Angeles, San Francisco, Seattle, are all in 13 states where there's no lower tipped minimum wage. 14 So, you know -- and the restaurant industry pays the 15 full-tip minimum wage, and then -- the full minimum 16 wage, and tips on top of that. And it's booming in 17 those cities. 18 I think the counterargument, though, the 19 concern that's always been raised has been focused 20 on a -- has been the argument that tipped workers 21 actually earn significant amounts in tips and really 22 don't need a higher-based wage. 23 And that is true for a small segment of the 24 restaurant industry, especially in Manhattan at 25 higher-end restaurants. 1 But, first, that's not representative of 2 tipped workers in the state. 3 The median wage for tipped workers, even 4 after counting tips, this was from two years ago, 5 was about $9.30 or so. 6 So just more than the minimum wage, but still 7 very, very low. 8 So it's -- and then the other -- so it's -- 9 you know, tipped workers are -- you know, really are 10 not -- are -- are low-wage workers who really 11 deserve a raise. 12 And then on the issue of the high-end 13 restaurants, in fact, you know, many -- in the past, 14 many of them said: That we can't get rid of 15 tipping. Consumers really want the tipping system. 16 And it's really distorting our pay scales. Or the 17 wait-staff end up being very, very highly 18 compensated. 19 Well, we're now seeing this trend where, 20 actually, many of those high-end restaurants are 21 starting to eliminate tipping. There's a growing 22 number. 23 Danny Meyer (ph.) has eliminated it. 24 Joe's Crab Shack, the first national chain to 25 do it. 1 So it shows that, actually, for the high-end 2 restaurants, if -- you know, there's an alternative 3 solution. 4 And, in fact, if restaurants are getting rid 5 of tipping, though, it's really all the more 6 important to have a very high base minimum wage, 7 like, you know, the Governor's proposed $15 minimum 8 wage. 9 And the last point, the earned income tax 10 credit, that there's been discussion about, it is, 11 you know, an excellent policy. 12 And New York's earned income tax credit 13 really should be expanded significantly. But that 14 goes -- it's not a substitute for raising the 15 minimum wage. They go hand-in-hand. 16 And if you actually were serious and wanted 17 to deliver a comparable increase, through an 18 expansion of the earned income tax credit, you would 19 have to almost triple the size of New York's earned 20 income tax credit. You would also have to expand it 21 more generously to single workers. 22 It would surely cost several -- you know, 23 billions of dollars. 24 And, so, you know, the only reason earned 25 income tax credit expansions in the past have been 1 relatively less expensive, is because they've been 2 very small. 3 So it's not a substitute, but it really -- a 4 strong earned income tax credit, together with a 5 strong minimum wage, go hand-in-hand in being able 6 to lift workers up to a decent level. 7 Thank you. I appreciate it. 8 SENATOR MARTINS: Thank you very much. 9 Just a couple of questions, and I was going 10 to touch on the tipped workers, because, you know, 11 in my experience, when we have considered the 12 possibility of increasing tipped workers' pay to a 13 minimum of the standard minimum wage, the pushback 14 from the industry has been rather quick, and they 15 have opposed it quite, you know, strenuously. 16 So, I get it. I understand what you're 17 trying to say. 18 But I would suggest that perhaps the industry 19 itself hasn't necessarily coalesced around what they 20 want, just yet, but we'll go back and check. 21 PAUL SONN: I'm sure the industry in New York 22 continues to be opposed because, you know, it's a 23 cost-savings for them. So they would prefer -- so 24 I'm not -- 25 SENATOR MARTINS: No, no, no -- 1 PAUL SONN: -- I wasn't suggesting the 2 restaurant industry -- 3 SENATOR MARTINS: -- no, no. Not the 4 restaurant industry. 5 PAUL SONN: Oh. 6 SENATOR MARTINS: The tipped workers. 7 PAUL SONN: Oh, the tipped workers. 8 SENATOR MARTINS: The tipped workers 9 themselves, they have their own association. 10 They came in and said, Don't touch it. Do 11 not touch this. We do not want you to touch this, 12 leave it alone. 13 And, so, I understand. 14 We will revisit. 15 PAUL SONN: With respect, I think they may be 16 ambivalent about eliminating tipping, but -- 17 SENATOR MARTINS: Mr. Sonn, it's not an 18 argument. I'm just telling you, that's what 19 happened. 20 But to the extent that, you know, we have 21 discussed, you know, various economists, there are 22 economists out there, and I would hope, you know, 23 that you would acknowledge, that have significant 24 concerns about the prospects of going to $15 an hour 25 in a state, like ours. And, you know, these are not 1 outliers, these are not fringe elements, these are 2 not reports or economists to be discounted. 3 These are among the most well-regarded 4 economists in this country, who have written 5 reports -- I've got copies of them right here -- who 6 have said, you know, we have to be very careful here 7 because we may not -- we may not get the result that 8 we want if we have such a large increase. 9 I mean, I have to understand, and I assume 10 that you have -- are familiar with these reports, 11 what would you respond to that? 12 JAMES PARROTT: Yeah, so I would say that 13 mainly what that derives from is the fact that 14 there's not sort of a well-established academic 15 literature that's looked at, the sort of increase 16 that we're talking about to something like $15. 17 There are reports, though, and these 18 economists who say that they have reservations about 19 going to 15 because they -- you know, they haven't 20 seen good studies on this, I don't know that they've 21 issued sort of detailed, analytical, 22 empirically-based reports that they're making -- 23 SENATOR MARTINS: Based on what? 24 JAMES PARROTT: -- so it -- just -- it's 25 their impression now. 1 If you look at the reports, like the 2 Los Angeles study, which is very detailed. It's a 3 micro and macro combination. It looks at it sector 4 by sector, it looks at the effect of higher wages, 5 phased in, on operating costs of businesses, which 6 are different in every industry of the economy, and 7 then it sort of builds up the overall conclusion 8 from that. 9 And Paul very appropriately summarized that 10 as, you know, there are going to be -- you know, as 11 we've heard, there are going to be some savings 12 related to reduced turnover, and those are 13 significant. 14 It doesn't go all the way, in terms of 15 covering the increased costs, but it's pretty 16 significant. 17 And, you know, it's difficult to measure 18 because that's one of the things that we don't have 19 a lot of experience with, is what the impact on 20 morale is going to be when a worker goes from $9 to 21 $10 to $15. 22 It's clearly, you know, when we think about 23 the impact on workers, it's going to be 24 life-changing for many of these workers. 25 That will have an effect in the workplace. 1 And, hopefully, employers will see some 2 benefit of that, in terms of, they can sort of go 3 home at night or go home early, sort of, you know, 4 confident that their, you know, more dedicated 5 workforce is going to, you know, keep good control 6 of the business in their absence. 7 So it -- and then on the other side, if you 8 look at the positive effect of the increase, the 9 spending of the increased wages, and what that does, 10 you know, it sort of offsets. 11 And, you know, since the wage structure is a 12 little higher to begin with in New York, overall, 13 than it is in Los Angeles, you know, it could be 14 that the -- you know, very slight adverse employment 15 effects are not even present in New York when you do 16 the balance on that. 17 So, these studies, or this team of 18 economists, at University of California at Berkeley 19 have, you know, an exemplary track record in terms 20 of the credibility of their past minimum-wage 21 research, looking at the sort of the smaller 22 incremental increases in the minimum wage, so that 23 they certainly, you know, note, they have a lot of 24 credibility in terms of their analytic skills in 25 doing that. 1 So they're bringing that experience to bear, 2 and looking at a phased-in $15 increase, taking this 3 sort of new approach of looking at it sector by 4 sector in the economy. 5 And I think that, over time, as these more 6 prominent, respected labor economists become 7 familiar with those studies, I think their 8 reservations will be addressed. 9 Now, Krugman, for example, you know, who's 10 very on top of -- he's on top of a lot of 11 literatures, because he's -- there's a lot of 12 pressure to sort of come in on the issues of the 13 day, at a CUNY forum on October 1st, I was there, 14 I heard the man say it, you know, he was very 15 impressed with the empirical literature, the sort of 16 research from the Berkeley team, and he's thought 17 about the impact of New York going to $15, and he 18 says he sees no problem in that. 19 You know, he's a Nobel laureate economist. 20 SENATOR MARTINS: For New York City. For the 21 metro area. 22 JAMES PARROTT: No, no, for New York. He was 23 talking in terms of New York State. 24 SENATOR MARTINS: I'll have to go back and 25 look. 1 JAMES PARROTT: I can send you the link to 2 the tape. It's actually in my testimony. 3 SENATOR MARTINS: Well, then, I will find it 4 myself. 5 You know, it's a -- you mentioned that, 6 again, going back to the $15 as a current rate based 7 on past minimum wage in 1970, adjusted for 8 inflation, and then, cost of living. 9 Cost of living, where? 10 JAMES PARROTT: So the cost of living in 11 New York State, overall. 12 SENATOR MARTINS: In -- 13 JAMES PARROTT: You know, in 2015 -- 14 SENATOR MARTINS: As opposed to 1970? 15 JAMES PARROTT: Right. 16 -- if you adjust it, took the 1970 peak 17 minimum wage in New York State, and adjusted it for 18 the consumer price index, and for the higher cost of 19 living, reflecting the change in the cost of living 20 in New York since then, not just the consumer price 21 index -- 22 SENATOR MARTINS: No, I understand. 23 JAMES PARROTT: -- but a higher cost of 24 living -- 25 SENATOR MARTINS: But the cost of living in 1 Binghamton, in Buffalo, or in Manhattan? 2 Because I would assume that the cost of 3 living has shifted differently in different parts of 4 the state. 5 JAMES PARROTT: Right. 6 So this was a statewide number. 7 But when we -- but that was for 2015 also. 8 SENATOR MARTINS: I understand. 9 JAMES PARROTT: So, you know, by 2021, even 10 if it was less than 15 in Binghamton, by 2021 it's 11 very likely going to be at $15 or $16 level. 12 SENATOR MARTINS: All right. I appreciate 13 that. 14 I will look the for that link. I appreciate 15 you providing that as well in your testimony. 16 So, thank you. 17 Thank you both. 18 SENATOR SAVINO: I'm good. 19 SENATOR PERKINS: I'd just -- thank you for 20 your testimony. It was kind of refreshing. 21 I'm sorry that I came so late, because it 22 would have been nice to have interspersed, so to 23 speak, with regard to some of the other testimony, 24 because then it would be some sort of balance in 25 terms of being able to use some of what you had to 1 say, to ask some of those other folks that had a 2 different point of view, and get some more -- sort 3 of a different kind of dialogue. 4 And so -- but I think that -- you know, 5 I want to thank you for being able to provide us 6 with another point of view. 7 I would assume, if it can happen in Harlem, 8 it can happen in other places as well, because the 9 cost of living is -- you know, it's a challenge in 10 there as well. 11 So -- and this is -- so thank you so much for 12 your being patient, and providing us with such an 13 insightful report. 14 SENATOR SAVINO: As always. 15 SENATOR PERKINS: As always. 16 SENATOR MARTINS: Gentlemen, thank you. 17 JAMES PARROTT: Thank you. 18 PAUL SONN: Thank you, Senator. 19 SENATOR MARTINS: We next have 20 Michael Seereiter, president and CEO of the 21 New York State Rehabilitation Association, and, 22 Ann Hardiman, executive director for the 23 New York State Association of Community and 24 Residential Agencies. 25 Thank you both for your patience. 1 Thank you for being here. 2 MICHAEL SEEREITER: Thank you. 3 SENATOR MARTINS: And thank you for coming 4 and representing such a critically important element 5 of this discussion that oftentimes goes overlooked. 6 So, thank you. 7 MICHAEL SEEREITER: Thank you. 8 ANN HARDIMAN: Thank you. 9 I'm going to start, if you don't mind. 10 SENATOR MARTINS: Of course. 11 ANN HARDIMAN: And thanks for having us. 12 As organizations -- and NYSACRA represents 13 agencies -- not-for-profit agencies all around the 14 state, as does NYSRA. 15 MICHAEL SEEREITER: Correct. 16 ANN HARDIMAN: We've long advocated for 17 increased funding for paid individuals that support 18 people with disabilities, and we're really pleased 19 that this discussion is happening. 20 It's been very interesting today. 21 I just want to say, though, that we feel 22 direct-support professionals, people that work with 23 people with disabilities, have been underpaid for 24 some time. 25 And it really is representative in their 1 wages, in the respect that that job sort of entails. 2 They love -- mostly, they love their work; 3 often, have to leave to get a better job, to get 4 paid better, and to make a living for their 5 families. 6 But all of those wages are directly linked to 7 public funding, to Medicaid. And, you know, it's -- 8 in order for them to keep pace as the minimum wage 9 perhaps goes up, we're going to have to have -- call 10 on public funds to increase as well. 11 New York State law, Mental Hygiene Law, 12 assigns the responsibility for those supports to 13 individuals to New York State. 14 New York State contracts, or licenses, 15 not-for-profit agencies. The bulk of services are 16 with not-for-profit agencies, so the revenue is 17 almost totally from those public sources. 18 We have a report that we attached and will 19 leave if you don't have one at hand, but, over 20 90 percent of DD providers are funded by Medicaid. 21 So the challenges already exist. 22 Many of our members are already experiencing 23 15 to 20 percent recruitment and retention 24 vacancies. As the economy improves, we're often 25 challenged to hire enough workers, so we're already 1 a bit in a disadvantaged place. 2 The workers, when there's vacancies, 3 1 in 5 people missing in a vacancy, there's either a 4 person working overtime, or, a vacancy, and 5 somebody's working harder. It's a very stressed 6 workforce. 7 So, I think one of the other points I wanted 8 to make, and I think that you brought it up, 9 Senator, was that this is human beings. We can't 10 automate as perhaps the fast-food industry can. 11 We really are talking about needing those 12 workers. 13 I guess the other thing -- point I wanted to 14 make is, that about 80 percent of the funding to any 15 one not-for-profit agency goes to the direct-support 16 professional staff. 17 And, as the fast-food -- we're already 18 competing with that settled fast-food increase. We 19 compete with that workforce. 20 So, we're experiencing that disadvantage. 21 And if the minimum wage goes up, which we 22 would be happy to have it go up, if we were 23 compensated by government. 24 And I'll let my co make his points. 25 MICHAEL SEEREITER: Thank you. 1 We've done some estimates on the costs 2 associated with an increase in the minimum wage, 3 according to what we've been talking about today, of 4 the scale of the process that has been laid out by 5 the Governor for fast-food workers and state 6 workers, and now university workers. 7 That estimate is $1.7 billion for this field 8 alone, the developmental-disabilities field. 9 That is a federal and state share of 10 Medicaid. 11 That would be, one-half of that would be the 12 State's responsibility, and the State would need to 13 request, essentially, from the federal government, 14 participation in the program at that level, going 15 forward. 16 That -- 17 SENATOR MARTINS: Or pick it up itself. 18 ANN HARDIMAN: That's correct, or pick it up 19 itself entirely. 20 The -- that estimate is based on two primary 21 areas, one of which is, that we can't afford to lose 22 any ground with regard to a minimum wage, as it 23 either stands now or as it increases. 24 As Ann was talking about before, we have, 25 now, unsustainable levels of staff recruitment and 1 retention challenges that place these organizations 2 in an extremely compromised position to maintain 3 quality services. 4 The starting wage for individuals in the 5 developmental-disabilities field, ranges from 6 $9.62 an hour to $10.78 an hour, depending on where 7 you are throughout the state. 8 We, frankly, can't afford to lose any more -- 9 any ground when it comes to that, given those issues 10 associated with remaining competitive and attracting 11 high-quality individuals to do the work. 12 The second issue has already been discussed 13 by several people today, this issue of compression. 14 We have several layers of -- or, at least a 15 couple of layers of management, if you will, that 16 would be above those people who provide 17 direct-support services. 18 Many of those individuals are not at $15 19 either. 20 Or, if they are at $15, we then need to be 21 thinking about what takes place for those 22 individuals, because it's simply unrealistic, from a 23 management perspective, to expect people to do the 24 same job, or to do different jobs, for the same rate 25 of pay. 1 SENATOR MARTINS: The "$1.7 billion" figure, 2 does it take into account the compression as well? 3 MICHAEL SEEREITER: Yes, it does. 4 SENATOR MARTINS: So it's direct salaries, as 5 well as that factor? 6 MICHAEL SEEREITER: Correct. 7 SENATOR MARTINS: Okay. 8 ANN HARDIMAN: It's a commensurate increase. 9 MICHAEL SEEREITER: Correct. That would be 10 over the course of an implementation period to get 11 to a full $15. 12 SENATOR SAVINO: Michael, not to -- I don't 13 mean to interrupt you, but has there been any 14 discussion with the Division of Budget about what 15 the effect of the $15 minimum wage would be on your 16 agencies? 17 MICHAEL SEEREITER: Yes, we've been having 18 extensive conversations with the administration 19 around this, sharing the numbers that we've gotten, 20 the estimates that they've been able to put 21 together, about the estimated additional costs. 22 Because, as Ann was talking about before, 23 these services are almost exclusively funded through 24 Medicaid. 25 SENATOR SAVINO: Right. 1 MICHAEL SEEREITER: And without a requisite 2 increase in that Medicaid rate, it simply becomes a 3 major problem for these organizations that are so 4 dependent on Medicaid as that primary source of 5 revenue. There's no ability to go to a different 6 source of revenue, to any significant degree, and 7 offset that. 8 If it's insignificant, it very quickly gets 9 to crisis situations. 10 SENATOR SAVINO: So what has been the 11 response from the Division of Budget when you tell 12 them that they need to put some more money on the 13 table? 14 MICHAEL SEEREITER: We've been continuing to 15 advocate for that. You know, they're going through 16 that process. 17 ANN HARDIMAN: They're not sure where they'll 18 get the money. 19 MICHAEL SEEREITER: Yeah, they're going 20 through that process, to identify what they believe 21 are those numbers. 22 We believe that that has been part of that 23 conversation. 24 We hope it has. 25 We've certainly been advocating for that 1 (unintelligible) nine months. 2 SENATOR MARTINS: Have you gotten a 3 commitment? 4 MICHAEL SEEREITER: Pardon? 5 SENATOR MARTINS: Have you gotten a 6 commitment? 7 MICHAEL SEEREITER: We've not gotten a 8 commitment at this point, no. 9 SENATOR SAVINO: Very interesting. 10 MICHAEL SEEREITER: The situation that we 11 have right now is one where we are unable to compete 12 with the fast-food workers and others, and including 13 the State of New York as it hires employees to do 14 the same jobs, essentially -- 15 SENATOR SAVINO: Yes. 16 MICHAEL SEEREITER: -- for a smaller portion 17 of individuals with developmental disabilities. 18 SENATOR SAVINO: I looked up the difference 19 between the salaries from the non-profit sector to 20 the government side. 21 It's a significant difference in salary. 22 ANN HARDIMAN: 45 percent -- 23 SENATOR SAVINO: Yes. 24 ANN HARDIMAN: -- or higher. 25 MICHAEL SEEREITER: Yes. 1 You're looking at costs, generally, that are 2 about 1.5 times for the State of New York to provide 3 those services, as compared to the community-based 4 not-for-profit organizations that -- like we 5 represent. 6 SENATOR SAVINO: Well, we like the higher 7 salary rate. 8 ANN HARDIMAN: We do too. 9 SENATOR SAVINO: But -- and -- you know, 10 I don't want to jump in on this, but I shared with 11 Senator Martins yesterday -- I think it was 12 yesterday, it seems like yesterday -- I started out 13 as a caseworker 25 years ago, in working for the 14 City and HRA and the Child Welfare Administration. 15 Now, a caseworker is a slightly higher 16 position than, you know, home -- what do they call 17 them now? 18 ANN HARDIMAN: Direct-support professionals. 19 MICHAEL SEEREITER: And 20 developmental-disability (unintelligible). 21 SENATOR SAVINO: They change the titles all 22 the time. 23 It's slightly higher, because you have to 24 have a bachelor's degree as a minimum requirement 25 for the job. 1 But I started out then, my initial annual 2 salary was $24,676, which breaks down to, a 35-hour 3 work week, $15.77 an hour. 4 The private, or the non-profit, 5 social-service agencies that did the same thing -- 6 Catholic Charity, Federation, Protestant Board -- 7 they were always about $4,000 behind us. 8 And, generally, as the City would hire, you 9 would get people who got training in the non-profit 10 sector, and then they would seek a position working 11 for the government agency because they got better 12 pay and better benefits. 13 That gap has grown -- 14 MICHAEL SEEREITER: Correct. 15 ANN HARDIMAN: Yes. 16 SENATOR SAVINO: -- to an extraordinary gap 17 over the past 25 years. 18 MICHAEL SEEREITER: Correct. 19 SENATOR SAVINO: So, I think, and I'm going 20 to end where I started this morning: We cannot have 21 this conversation about raising the minimum wage 22 across entire sectors, but then not acknowledging 23 that we have underfunded and undervalued social 24 services in this state for a very long time. 25 That has to be part of this discussion 1 because, if not, we're going to saddle you with 2 unsustainable costs, and you won't be able to meet 3 your mandate, which is to provide services to people 4 in need. 5 MICHAEL SEEREITER: I respectfully -- 6 I agree; however, it's less our mandate, and it is 7 more the State Of New York's mandate, (a) -- 8 SENATOR MARTINS: Right. 9 ANN HARDIMAN: -- (b) we won't be here. 10 SENATOR SAVINO: Right. 11 MICHAEL SEEREITER: Quite frankly, we will 12 not be in business in a very short period of time. 13 These organizations will go bankrupt very 14 quickly if a mandated minimum wage does not come 15 along with the requisite increases in State funding 16 in Medicaid rates. 17 This is one of the most paramount threats 18 that I believe that this field, at least, has faced 19 directly in a number of years. 20 And as a family member of an individual with 21 a developmental disability, I am, frankly, feeling 22 directly threatened by this, in terms of the welfare 23 of my own -- my own brother. 24 ANN HARDIMAN: So I don't think those 25 agencies will walk away very easily, though, because 1 they're very committed. They will try, you know, 2 they -- but it will be a slow, painful death to 3 those agencies. 4 SENATOR MARTINS: No, no. Or a -- 5 ANN HARDIMAN: Or a quick -- 6 SENATOR MARTINS: -- or a valiant effort, and 7 then a quick demise. 8 ANN HARDIMAN: Correct. 9 MICHAEL SEEREITER: Correct. 10 SENATOR MARTINS: Mr. Seereiter, have you 11 calculated where along the increase, you know, we 12 reach critical mass? 13 Because, frankly, I'm just assuming, but I -- 14 again, I have to assume that the phase-in will be 15 similar to what the Governor has proposed for other 16 areas. 17 And, so, I'm assuming that you would -- also 18 had the opportunity to review that phase-in. And, 19 you know, it's not going to 15 immediately. 20 Is there a point in that first year? 21 Do you make it through the first year; do you 22 get to the second year? 23 I mean, where is it? 24 MICHAEL SEEREITER: You're asking the same 25 questions that Ann and I have been asking of our own 1 members, anecdotally, now for a number of months, 2 saying, How long are you going to be able to survive 3 if "$15" is the number, and there's no money? How 4 long? How long can we do that? 5 My guess, it's going to be -- it's going to 6 vary -- obviously, vary from organization to 7 organization. 8 Many of them were much more financially 9 stable than they were -- than they are now, even 10 just as a result of some of the activities we've 11 been through for the past couple of years. 12 I think that we're in a very shaky place 13 already. 14 Some will be able to sustain much longer. 15 Some will be able not to be able to sustain 16 much longer. 17 My guess is, that the -- the -- if I had to 18 put a number on it, off the top of my head, a hunch, 19 I would guess we're in the -- within one year to 20 start seeing that process, and it ramps up very 21 quickly from there, in a second, in a third year, or 22 two, unsustainable levels that -- I don't know 23 how -- how we would continue to maintain our 24 commitment to -- for the welfare of those 25 individuals. 1 ANN HARDIMAN: But were you also asking where 2 in the five-year, if we use that same period, the 3 bulk of workers -- well, anyway, you know, the first 4 year is not as significant a year of increases. But 5 I think, by the third year, it's pretty all-in. 6 And we can share some of the numbers that 7 we -- 8 SENATOR MARTINS: My concern is this, and 9 we've seen it, you know, in many ways, but certainly 10 through group homes, and the ability to retain 11 qualified individuals to be there. And, you know, 12 the turnover rate is something that is 13 unsustainable. 14 MICHAEL SEEREITER: Completely. 15 SENATOR MARTINS: Just as you train somebody 16 to be able to do the job, and to be able to -- 17 frankly, because we're not dealing with robots, 18 we're dealing with individuals and human beings, and 19 each one has their own personality, and each one has 20 a different nature to their disability, they're 21 gone. 22 For what? 23 To get an extra couple of bucks, working 24 somewhere else in retail or somewhere else, because 25 the pay is just not there. 1 And we've heard it time and time again. 2 So we have that facet of it. 3 And then we have the pressure. 4 And my concern is, because of the nature of 5 your industries, that as you get squeezed by this 6 mandate, that you will do as best you can, but that 7 comes at the expense of -- 8 ANN HARDIMAN: To the people and the 9 families. 10 SENATOR MARTINS: -- the people and families 11 who are being supervised -- 12 ANN HARDIMAN: The quality will not -- 13 SENATOR MARTINS: -- because you're going to 14 hold on as long as you can, which means the 15 supervision, then, will suffer as well. 16 So, we get it. 17 MICHAEL SEEREITER: Thank you. 18 SENATOR MARTINS: It is critically important 19 that this be discussed, because it isn't just about 20 businesses, and it isn't just about workers. 21 It's about this element of this discussion. 22 And, frankly, I can't thank you both enough 23 for being here. 24 It really is -- 25 ANN HARDIMAN: Thank you for including us. 1 We really appreciate it. 2 MICHAEL SEEREITER: Thank you. 3 SENATOR MARTINS: Thank you. 4 Thank you both. 5 And with that, that is our hearing for today. 6 For everyone who's here, thank you very much. 7 You can now clap. 8 [Applause.] 9 SENATOR MARTINS: Yes, thank you very much. 10 That's great. 11 Thank you. 12 It was very informative. 13 And, as the Governor rolls out his proposal, 14 which I expect will happen next week, we will be 15 back. 16 Thank you. 17 (Whereupon, at approximately 3:30 p.m., 18 the public hearing held before the New York State 19 Senate Standing Committee on Labor concluded, and 20 adjourned.) 21 22 ---oOo--- 23 24 25