New York's Poverty Rate Remains High While the National Poverty Rate Continues to Fall

September 30, 1999. Press release:

The new poverty statistics released today by the United States Census Bureau show that  New York’s poverty rate remained high while the national poverty rate continues to fall. The national poverty rate declined for the fifth consecutive year. This year’s decline was particularly large, from 13.3% to 12.7%. At the same time, however, New York’s poverty rate showed no improvement. Actually New York’s poverty rate increased from 16.5% in 1997 to 16.7% in 1998 but the Census Bureau recommends the use of two-year averages when comparing changes in poverty at the state level to ensure statistically significant comparisons. Using two-year averages New York’s poverty rate has stubbornly stayed at 16.6% for three years.

For the ninth consecutive year, New York’s poverty rate is significantly higher than the poverty rate for the United States as a whole. In 1998 New York’s poverty rate was a full four percentage points higher than the overall United States rate, 16.7% vs. 12.7%.

In 1998 3,068,000 people in New York State lived in poverty. This represents 89,000 more poor New Yorkers than in 1997 when 2,979,000 New Yorkers were classified as living in poverty.

Only six states (New Mexico, Louisiana, Arkansas, Mississippi, West Virginia and Arizona) had higher poverty rates than New York for the 1997-98 period. All of these were states in the South or Southwest with lower costs of living than New York. State-level poverty rates for 1997-98 ranged from 7.8% in Maryland to 20.8% in New Mexico. New York was the only Northeastern state with a poverty rate in excess of the national poverty rate. In fact four of New York’s neighboring states had poverty rates below 10%: Connecticut, Massachusetts, New Jersey and Vermont. New York’s fifth neighbor, Pennsylvania, had a poverty rate of 11.3%, almost one third less than New York’s.

In 1998 a family of three was considered poor if its income fell below $13,003. The average poverty threshold for a family of four was $16,660. Nationally 34.5 million people were found to have incomes below the poverty threshold in 1998.

New York’s Poverty Rate Remains
Significantly Higher than the U.S. Poverty Rate
Year Percent of Population
Living in Poverty
New York U.S.
1989 12.6% 12.8%
1990 14.3% 13.5%
1991 15.3% 14.2%
1992 15.7% 14.8%
1993 16.4% 15.1%
1994 17.0% 14.5%
1995 16.5% 13.8%
1996 16.7% 13.7%
1997 16.5% 13.3%
1998 16.7% 12.7%

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Why the Federal and State Governments Should Both Increase and Index Their Minimum Wages

September 1999.  By Frank J. Mauro.

The first minimum wage at the federal level was signed into law in 1938, after several states including New York had enacted their own minimum wage laws. The U. S. Supreme Court had first invalidated such state laws as violating the liberty of contract and then upheld them as a proper exercise of the states’ power to protect the public health, safety and welfare. From the very beginning, such laws protected responsible employers from the pressures that could be brought to bear by unscrupulous competitors while ensuring that all workers received some minimally acceptable level of compensation. Unfortunately, the level of the minimum wage, particularly in New York State, has been allowed to decline to a level at which it is unable to serve as a meaningful floor under the low wage job market. On economic, social and moral grounds, it is essential that the minimum wage, at both the federal and state levels, be increased and indexed to changes in an objective measure such as the Consumer Price Index or Average Hourly Earnings.

Some workers are covered by both the federal and state minimum wages (and are thus protected by whichever of the two happens to be higher at a particular point in time), while others are covered by one but not the other, and some by neither. The federal minimum wage reached its high point in terms of purchasing power on February 1, 1968 when it and the state minimum wage were both increased to $1.60 per hour.

In July 1999 dollars, this would be the equivalent of a $7.80 per hour. (The New York State minimum wage reached its all time high in purchasing power on July 1, 1970, when it was increased to $1.85 per hour, the equivalent of $7.91 in July 1999 dollars.)

A job at those wage levels made it possible for a worker to get his or her feet on the ground, to support a family and to lay the foundation for a better future. In the 1960s and 1970s, the earnings of a full-time, year-round worker receiving the minimum wage were enough to lift a family of three above the poverty line. That is no longer true. Despite the increase of the federal minimum wage to $5.15 per hour on September 1, 1997, a person working full-time, year-round at that level will earn only 72% of the poverty line for a family of three, and have less than two-thirds of the purchasing power of a similar worker in 1968.

At the state level the situation is even more egregious, where New York’s minimum wage is $4.25, more than 17.5% below the federal minimum. Ever since New York moved to a single minimum wage in 1960, our state’s governors and legislatures have almost always moved to increase the state minimum wage in tandem with changes in the federal minimum wage. Yet, for some unexplained reason, New York has not conformed with the 1996 (to $4.75) and 1997 (to the current $5.15) increases at the federal level. This is, by far, the longest period of time that New York has ever gone with a minimum wage below the federal minimum. In fact, over the course of the last 25 years, New York has on only one other occasion (in 1978, for nine months) lagged behind the federal government in increasing the minimum wage. In fact, during two periods in the late 1960s and early 1970s (the first lasting 13 months and the second almost four years), New York maintained a minimum wage above that of the federal government.

This situation is even more difficult to explain when one compares New York to other high wage states. Of the ten states with average weekly wages above the national average, New York is the only state with a minimum wage below the federal minimum. Four of the other high wage states (Illinois, Maryland, Michigan and New Jersey) have minimum wages that equal the federal $5.15, and five have higher minimums (Alaska, $5.65; California, $5.75; Connecticut, currently $5.65 and going to $6.15 on January 1, 2000; Delaware, currently $5.65 and going to $6.15 on October 1, 2000; Massachusetts, currently $5.25, and going to $6.00 on January 1, 2000, and $6.75 on January 1, 2001). The state minimum wage is also higher than the federal in Oregon ($6.50), Vermont (currently $5.25 and going to $5.75 on October 1, 1999) and Washington (currently $5.70, going to $6.50 on January 1, 2000, and being adjusted for inflation based on the CPI on January 1, 2001 and annually thereafter.)

Contrary to the conventional wisdom, most minimum wage workers are adults working full-time, and increasing the minimum wage by reasonable amounts (such as the four most recent increases that were all in the 40 to 50 cent range) neither reduced employment nor fueled inflation. The 1999 Economic Report of the President noted that, based on the many studies that have examined the issue, the “weight of the evidence suggests that modest increases in the minimum wage have had very little or no effect on employment”. Evidence of recent years, particularly the studies by economists David Card and Alan Krueger, also refutes the claim that state level minimum wage increases above the federal standard reduce employment.

The “flow of funds” criticism of a minimum wage increase – that businesses will only be able to comply with increases in the minimum wage by increasing prices or reducing employment – ignores two other key variables: corporate profits and executive compensation. It also ignores the very reality that make the need for restoring the value of the minimum wage so important at the present time: Our economy is experiencing substantial productivity-driven increases in total income but the resulting gains in prosperity are not being broadly shared.

Both the federal government and New York State should increase their minimum wages to levels that will ensure that these wage floors can do their job. Restoring the purchasing power of the minimum wage to its late-1960s level would require a higher minimum wage (something in the range of $7.65 per hour) than the Congress or the State Legislature is going to implement overnight. On the other hand, if legislation were enacted to increase the minimum wage to that level in several “reasonable” steps, its value would be eroded by inflation by the time it was implemented. An attractive alternative would be to establish a target minimum wage of $7.65 an hour, to adjust that target annually for inflation, to increase the actual minimum wage by a fixed amount, say fifty cents per year, until it reaches that moving target, and thereafter to have the actual minimum wage equal the target. Consideration should also be given to the possibility of indexing the target minimum wage to changes in average hourly earnings rather than to a measure of inflation such as the Consumer Price Index. Such an approach would have the advantage of ensuring that low wage workers share in the overall income growth being generated by productivity improvements. Indexing on the basis of changes in the Consumer Price Index, on the other hand, has the advantage of familiarity since it is used in many state and federal laws.

 

State of Working New York 1999: The Illusion of Prosperity

September 1, 1999. Prosperity bypasses most New Yorkers. Wages fall, the upstate economy falters, and the ranks of the working poor rise over the 1990s. Press release below.

Prosperity Bypasses Most New Yorkers

Wages Fall, Upstate Economy Falters and Ranks of Working Poor Rise in 1990s

On this Labor Day, most New Yorkers find themselves less economically secure than a decade ago, according to a new report from the Fiscal Policy Institute, a New York State economic think tank.

Using a wide range of government data, The State of Working New York, The Illusion of Prosperity: New York in the New Economy paints a grim statistical portrait of New York State. The Institute finds that economic reality for most New Yorkers is out of sync with the positive news coming from Wall Street. “The Dow may be up, but family incomes and wages are down for most New Yorkers except the very well off,” said James Parrott, the report’s primary author and the Fiscal Policy Institute’s Deputy Director and Chief Economist.

Three broad trends are identified in the report:

  • Wages and incomes for most workers and families are declining in relation to the cost of living;
  • The state generally has been losing high paying jobs and gaining low paying jobs and the quality of individual jobs is also deteriorating; and
  • New York’s economic growth has been slow and uneven throughout the 1990s, with upstate lagging and downstate heavily dependent on Wall Street.

Some of the report’s major findings are as follows:

  • Middle income families have seen their incomes decline by 8% since the late 1980s while incomes for those in the bottom 40% of families have fallen by 13-15%. The richest 20% have had average income gains of nearly 30% over the decade.
  • As a result, the gap between rich and poor and between the rich and those in the middle is greater in New York than in any other state. The number of New Yorkers in poverty increased by one-third since 1989 to 3 million. Twenty-five percent of the state’s children, and 40% in NYC are growing up in poverty. New York’s poverty rate is now 16.5%, exceeding the nation’s, which  declined in the 1990s.
  • The median hourly wage fell 6.3% in the 1990s despite a 7.9% increase in productivity per worker. For Black and Hispanic men and women, median wages fell at least one-and-a-half times as much as they did for men and women overall.
  • New York has a higher percentage of people without health insurance than the U.S., and fewer New Yorkers have employer health and pension coverage than 20 years ago.
  • According to the 3 major economic indicators–job, income and output growth–the performance of New York’s economy has trailed the nation’s since 1992, and has lagged most of the 8 comparable industrial states of the Northeast and Midwest.

In New York City, the number of working poor families has jumped by 84% in the 1990s, more than three times greater than the U.S. increase. Income and wage declines in NYC since the late 1980s have been steeper than for the state, with incomes falling by almost
20%, on average, for all but the top 40% of families. The benefits of the Wall Street bull market have been highly concentrated among the well off, with the top 7% of New York households receiving 85% of all capital gains, most of which stem from the sale of stocks.

Since 1989, upstate regions have lost 175,000 high-paying manufacturing jobs, the core of the upstate economic base, and gained low-paying service jobs. Sluggish job and income growth in the 1990s has resulted in outmigration and net population declines. The report profiles each of the state’s 10 regions in detail.

To redress the state’s economic failures, the report makes recommendations in three areas: restoring wages to a decent level; investing in people and productive capacity, and redirecting state and local economic development policies. Four of the report’s specific recommendations are:

  • Increase and index the minimum wage to its 1968 level (approximately $7.65 in current dollars) in several reasonable steps, as part of a broader strategy to restore wages to a decent level and create an environment in which businessesthat pay a living wage are not undercut in the market place.
  • Strengthen the state’s educational system: ensure that all children receive a sound basic education; provide the resources necessary for all students to meet the new academic standards; and restore the State’s commitment to high quality andaccessible higher education.
  • Build an effective workforce development system utilizing the strengths of community and labor organizations to eliminate barriers to employment and guarantee that jobs pay a livable wage with benefits and offer opportunities for careeradvancement.
  • Develop and implement a comprehensive revitalization plan for the upstate cities that fosters collaboration between business, labor and community organizations to fully exploit each region’s technological and entrepreneurial potential and enhance the quality of life for area residents.

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