Economists’ Statement on the Minimum Wage

June 8, 2001. The pdf version of this letter, which was sent to state senators, includes the list of signers.

We 80+ economists from throughout New York support an increase in the state minimum wage to $6.75 an hour. The Assembly has already passed a bill to this effect, and we urge you to join in this bipartisan effort to make work pay in New York State.

Increasing the minimum wage to $6.75 in 2002 and tying further increases to the regional Consumer Price Index will significantly raise income for over 1 million New York workers. Most of the beneficiaries are adults, most are female, and the vast majority are members of low-income working families. This increase is certainly affordable in light of the fact that in 1968 the minimum wage was equivalent to well over $7.00 an hour expressed in current dollars, compared to $5.15 an hour now.

By increasing its minimum wage, New York would join a growing list of states where voters and political leaders have chosen to take control over wage policy rather than wait for Congress to act at the federal level. There are now ten states plus the District of Columbia with minimum wage levels above the current $5.15 federal level, including four neighbors: Vermont ($6.25), Massachusetts ($6.75), Connecticut ($6.70 as of 2002), and Rhode Island ($6.15). These states hold in common a high level of average income and a high cost of living, two factors that favor a state minimum higher than the inadequate national floor.

In its 1999 Economic Report of the President, the Council of Economic Advisors remarked that “the weight of the evidence suggests that modest increases in the minimum wage have had very little or no effect on employment.” While controversy about the precise employment effects of the minimum wage continues, there is no reason to doubt that a modest increase in the minimum wage will achieve the intended goal of improving the well being of low-wage workers.

A Giveaway to Landlords

June 8, 2001. An op ed by Moshe Adler and James Parrott, published in the New York Daily News.

With commercial rents skyrocketing, Mayor Giuliani and the City Council have decided to step in. Hold on to your wallet. Ostensibly to help commercial tenants, the mayor and the Council have decided to transfer $25 million a year from the pockets of taxpayers to the pockets of landlords.

Here is how it will work.

The city taxes commercial rents when they exceed $150,000 a year. In the budget deal that they wrapped up Wednesday, the mayor and Council agreed that, in effect, this rent tax burden should be reduced to give commercial tenants a break.

The only problem with this argument is that it is landlords who pay this tax, not commercial tenants.

To a business, the breakdown between rent and tax is irrelevant. What the business is concerned about is its total cost for real estate, meaning rent and taxes combined.

Thus, if building owners push rents up as the commercial rent tax comes down, tenants won’t know the difference, since their real estate costs will stay the same.

Those who have fought for a reduction in the commercial rent tax will tell you that New York is the only city in the country that has this levy.

They argue that because it is unique to New York, it induces businesses to move to New Jersey, Connecticut and elsewhere.

This is simply not true.

The commercial rent tax is nothing but a property tax. The only way in which New York City is unique is that its property tax is divided into two parts, each with a separate name.

Rents on prime commercial property have increased 27% in the last year alone.

If it is high rents that spur development, landlords already have all the incentive they can possibly need to create space for  commercial tenants.

The loss to the city from the reduction of the commercial rent tax will be $25 million annually. This money could have helped put the public hospital system on a sound financial footing or funded some other vital public service that ordinary New Yorkers need.

The landlords don’t need or deserve this tax break, and New York City cannot afford it.

Adler and Parrott are economists for the Fiscal Policy Institute.