Blog Post: NYC Living Wage Debate Boils Over, Into the Streets and before City Council

It’s budget season in New York City, when community groups and labor unions usually take to the streets to protest proposed budgets and this year proposals including teacher layoffs and social service cuts was a serious call to action. But marchers also had an added demand: a living wage at subsidized companies.  May 12 was planned as a day of action; it also was the day the New York City Council Committee on Contracts held a public hearing on the proposed “Fair Wages for New Yorkers Act”. The bill would require firms that receive certain economic development subsidies to pay a “Living Wage” of $10.00 an hour or $11.50 an hour if no benefits are provided.

Mayor Michael Bloomberg opposes the bill and the Speaker of the City Council Christine Quinn is undecided but the momentum is building with 30 co-sponsors (out of 51 members). The bill excludes many small businesses and only covers some subsidy programs.  Despite the bill’s modest coverage and requirements, the Bloomberg Administration and other opponents deployed heavy artillery. The city released a summary (but only a summary, Bloomberg officials report that hundreds of pages and supporting tables won’t be released until the summer) of an impact study it had commissioned. The $1 million study, written by Charles River Associates (CRA) and funded by the New York City Economic Development Corporation, concludes that the law would prevent the creation of at least 33,000 jobs over 20 years.

The Fiscal Policy Institute, the National Employment Law Project and Good Jobs New York analyzed the summary and raised numerous questions about its scope and methodology. They issued a public statement, joined by seven academic economists, that cited “a series of fundamental errors in methodology and analysis” that “render the study fundamentally flawed.”

Among the concerns:

• The study mainly focuses on NYC’s most costly and a commonly used   subsidy program, the Industrial Development Abatement Program—but ICAP is state-regulated and would not be covered under the proposed bill!

• The lead author of the report, Dr. David Neumark, has a history of writing reports that surmise Living Wage policies are ineffective, and his methodology was rebutted last year by a group of economists.

• The Charles River Associates team failed to interview economic development officials or employers in dozens of cities with economic development Job Quality Standards. Instead, they interviewed industry leaders in real estate development and at financial institutions anonymously, who obviously have a self-interest in existing subsidy programs

Read the full critique of the CRA study.