September 5, 2000. FPI’s Zofia Nowakowski testified:

Good evening.

My name is Zofia Nowakowski and I am a research analyst from the Fiscal Policy Institute. We are a nonpartisan, non-profit organization that undertakes research and education on tax, budget, and economic issues affecting low and middle-income New Yorkers. We have two offices, one in Albany under the direction of our Executive Director Frank Mauro, who was previously secretary of the Ways and Means Committee of the New York State Assembly. Our other office is in New York City, and run by our Chief Economist Dr. James A. Parrott, who was the former chief economist for State Comptroller Carl McCall.

At the Fiscal Policy Institute we regularly conduct analyses of the New York State and New York City economies and how developments in those economies are affecting workers and residents. Last year we published an extensive analysis of the New York State economy entitled The State of Working New York, The Illusion of Prosperity: New York in the New Economy. This report details the character of economic growth and compensation trends for the state as a whole as well its regions over the last decade. For Labor Day of this year we followed up with an update on the major economic trends in New York, on which I will comment here. When discussing the impact of any legislation designed to influence compensation such as the living wage proposal for Rockland County, it is critical to know the context in which it is being proposed. In particular, we must be aware of what the economic and labor market trends are within the region. Trends we can measure include wage and compensation levels, employment indicators, and income statistics.

When we looked at the economy of the state over the most recent full economic cycle, that is, from 1989 to 1999, we found somewhat disturbing labor market trends. First of all, we found that the inflation-adjusted median wage, or the wage of the middle-earning New Yorker in New York State, declined by 4.2% over this period, although nationally, the US economy helped workers increase their wages by 2.4%. We might be surprised to hear this, since the average wage of New Yorkers shot up over the same period by 10.9%. But the reality is that the wage gains indicated by this jump in average wages have been highly concentrated at the top of the earnings scale, and most New Yorkers have not shared in that wage increase.

It is trends in wages for the low wage workers in the state that are most pertinent to this discussion, since it is workers earning near the bottom of the scale that the proposed bill will cover. Wages for the low-wage worker, or the worker earning wages at the 20th percentile, also declined over this period, by 5.4%. This again stands in stark contrast with trends nationwide, where low-wage workers gained 5.6% in their wages. Overall, New York State ranked in the last 4 to 6 states in terms of how wages changed for its middle and low-earning workers across the decade. Among the 10 northern industrial states that are comparable to New York in their economic history and structure, median and low wage changes in our state ranked last or second to last.

We also found that in 1999, the percentage of workers in New York State who are earning poverty-level wages was 25.6%. Therefore, one-quarter of our workers are earning wages that would not bring them out of poverty while working full-time. This is a conservative estimate, since the federal poverty standard does not adjust for regional cost of living differences, which are significantly higher in downstate New York than elsewhere in the country.

Trends in health insurance are no more optimistic. The proportion of uninsured individuals in New York State climbed over the decade, from 15.3% 1989 to 19.7% in 1998. This can be linked to declines in employer-based health insurance in New York State. While 67.1% of New Yorkers were covered by employer-provided insurance in 1989, just 61.7% had coverage from their employer in 1998.

Given these trends, perhaps then we would not be surprised to hear that the middle-earning 4-person family in New York did not see any gains in their income over the decade, even as such families did gain income nationally. The poverty rate is now 16.6%, more than 3 points higher than the nation’s rate. Poverty also grew faster in New York than almost other state since the late 1980s, at 3.3%. These trends rank New York nearly last in the nation and among comparable states. As a result of the earnings boost for a very small group of New Yorkers and losses for the large majority of others, the ratio of income inequality between the top-earning and bottom-earning New Yorkers was 14, the highest in the nation.

Why these negative trends? We can identify some concrete and illustrative changes in the industry and job mix of the state and county over the decade. In our 1998 report, we determined that the 15 industries with the largest employment increases in the 1990s had an average wage of $34,000, $3,000 less than state’s $37,000. Meanwhile, those jobs that were declining, primarily in depository institutions and insurance, manufacturing, and utilities, had an average wage of $57,000, or $20,000 more than the state’s average wage.

Can we be certain that Rockland County is experiencing more of the same trends? Much of this data is not accessible at the county level, but a look at the change in job mix does indicate more of the same. Those two industries that lost the most jobs over the decade in Rockland County, manufacturing and construction, had an annual average wage of $50,000 and $40,000 respectively, significantly higher than the average wage in the county of $35,000. On the other hand, the industries that were responsible for by far the largest share of job growth in the county, services and retail, had average wages lower than the county average.

These trends point to the need for measures that will shore up the quality of compensation for workers in the economy of the new millennium, from smart economic development policies that bring the most “buck” to workers for the subsidy “bang”, to labor market policies that encourage wage and insurance compensation that permit a self-sufficient living standard.

For families to attain self-sufficiency, or the income needed for a family of a given composition in a given location to adequately meet its basic needs without public or private assistance, much still remains to be done even with the passage of the proposed bill. A living wage pegged at $8.25 an hour without health insurance would still place a family of four below the federal poverty level in the year 2000, if the worker was employed for 37.5 hours a week, 52 weeks a year. One week from now, the New York State Self-Sufficiency Standard Steering Committee will release a report that details county-by-county and family-by-family what a basic needs budget would be, and will show that while the $8.25 hourly wage is an important step, it is only the first in a series that would be needed to be made for families to attain self-sufficiency in Rockland County.

We also should remember that the living wage has a successful history in this state. Section 220 and 230 of the New York State Labor Law establish strong prevailing wage and supplemental benefits standards in the construction and building service industries. New York City also has a rich history in this area, beginning with Mayor Robert Wagner’s 1961 legislation, which required contract workers to be compensated at a value equal to city workers. Under this legislation, in 1970, City contract workers were paid a wage of $2.50, which would be equivalent to $11 today, higher than $10.50, the wage level the Rockland County living wage bill targets for 2002. New York City also became one of the pioneers of the recent wave of living wage laws that are being enacted across the country, when its prevailing wage bill was passed in 1996. Recently, other parts of the state, including Tompkins County and Buffalo City have followed by passing their own living wage ordinances. For the reasons identified above, Rockland County has good reason to follow in this tradition today.

Thank you.