Budget Savings from a Minimum Wage Increase

March 27, 2015. As negotiations over New York State’s budget draw to a close, Governor Cuomo and the legislature are trying to hammer out an agreement to raise the state’s minimum wage, which is currently just $8.75 and is currently scheduled to top out at $9.00 at the end of this year. Both Governor Cuomo and the Assembly have proposed measures to raise New York State’s minimum wage, including a higher minimum wage level for New York City in the Governor’s bill, or, in the case of the Assembly bill, for New York City and the large downstate suburban counties (those with populations in excess of 900,000, i.e., Nassau, Suffolk and Westchester counties).

This policy brief details how, beyond significant benefits for New York’s workers, an increase in New York’s minimum wage will entail significant budget savings for New York State and other levels of government – savings well in excess of $1 billion, depending on the amount of the wage increase. The savings come from reduced costs for public assistance to low-wage workers—in effect a taxpayer subsidy to large low-wage employers—and increased tax payments by workers benefiting from the wage hike. The families of minimum wage workers will be much better off as a result, better able to move toward self-support, and the economy will benefit from increased consumer spending.