Minimum-wage bump is good for all; Even businesses in low-paying industries will benefit

December 11, 2016. This op-ed by Lorelei Salas and James Parrott appeared on crainsnewyork.com and in the December 12, 2016 print edition of Crain’s New York Business.

When the state’s minimum wage rises to $11 an hour from $9 on Dec. 31, workers at New York City businesses with more than 10 employees will see the largest percentage minimum-wage increase in 60 years. It will be a welcome and much-needed addition to paychecks for more than 800,000 low-wage workers struggling to make ends meet in our city.

According to the Economic Policy Institute, more than a third of these workers are raising at least one child, and the wage hike will help almost 75% of people living below 200% of the federal poverty line.

Benefits from the increase are not limited to low-wage workers; neighborhoods will be helped, too. Local businesses that rely on their neighbors to stay afloat should see sales rise—and more local spending means more local stability. Government also can gain, as an increase in the minimum wage means fewer residents on public assistance.

A recent New York state-focused University of California study concluded that businesses will be able to adapt to the higher wage floor without profits falling. They will save money on turnover and operations as workers stay on the job longer and improve their performances. Increased consumer spending will boost demand, which should be able to absorb modest price increases that would allow businesses to stay competitive. The overall result will be more-efficient businesses and no net reduction in jobs.

Several large employers around the country, including Target, T.J. Maxx, Marshalls, Ikea and the Gap, have already started raising wages to better recruit and retain workers, and to improve customer service. According to The Economist, even Wal-Mart now says that “higher wages come before price cuts,” as the company knows it needs to better motivate its workers to boost productivity and morale.

Higher wages can also benefit smaller or lower-margin businesses in sectors such as retail and food service, which can grow even while paying decent wages. Take, for example, Café Grumpy, a New York coffee shop chain that pays most of its employees at least $14 an hour. In January, it is set to open its eighth location, up from just one in 2005. Shaak Shatursun, who oversees the company’s retail operations, reported that offering decent wages has helped attract and keep better talent, and also represents the company’s commitment to helping its employees manage the city’s high cost of living—all while it has continued to expand.

This is the type of growth that our workers need to feed their families and that our city needs to thrive. As Shatursun can tell you, there’s no reason to be grumpy about higher wages.

Lorelei Salas is the commissioner of the New York City Department of Consumer Affairs, which houses the Office of Labor Policy and Standards. James Parrott is the chief economist of the Fiscal Policy Institute.