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Living Wage Bill Would Kill New York City Jobs, Study Says

May 10, 2011

A controversial city-funded study released May 9 shows that a bill to mandate higher wages at city-subsidized projects would stifle development, particularly in the outer boroughs, resulting in a loss of tens of thousands of jobs during the next 20 years.

If the bill, which would compel employers at projects that receive $100,000 or more in city subsidies to pay wages of at least $10 an hour, plus benefits, becomes law, some 33 percent of retail projects in the outer boroughs would not proceed and 24 percent of office projects in Manhattan would be grounded, the study contends. It estimates the loss of those projects would cost 33,000 jobs and $7 billion in private investment over the next 20 years.

A separate analysis in the study found that between 6,000 and 13,000 low-skilled jobs would be lost as a result of employers cutting back on labor because of the wage mandates.

Overall, the study found that income losses for low-skilled workers resulting from a decline in jobs offset the income gains to other low-skilled workers from higher wages.

“The study is clear: The legislation would result in major job losses at all income levels and particularly among low-income New Yorkers,” said a spokesman for Mayor Michael Bloomberg. “The biggest job losses would occur in the areas with the highest unemployment at a time when too many New Yorkers are without jobs as it is.”

The mayor has been an outspoken opponent of wage mandates, arguing that they would quash development. The $1 million study came under fire from proponents of the bill as soon as it was announced, arguing that its outcome would be predetermined.

The city’s Economic Development Corp. selected Charles River Associates to conduct the study, angering the proponents, who contended the firm’s experts were predisposed to findings against wage mandates. They were particularly suspicious of David Neumark, a University of California at Irvine economics professor who has argued against wage mandates.

As details of the study emerged, living wage proponents hit back.

“It is unfortunate that the EDC study failed to look at well-known factors such as the cost of public subsidies received by low-wage workers, or the positive productivity effects of better wages, in assessing how city policies can improve the living standards of low-wage workers,” said James Parrott, deputy director and chief economist at the Fiscal Policy Institute, a liberal think tank.

Proponents pointed to a November study by the liberal Center for American Progress that showed 15 cities with living wage laws tied to subsidies had the same levels of employment and business growth as a comparable group of 16 control cities that did not have such laws. They said the flaw in the Charles River study was that it examined labor market data and not the impact of specific projects built with wage mandates.

“Based on initial reports, the EDC’s study appears to be based on David Neumark’s past research that claims living wage policies kill jobs, even though that research is flawed and has been roundly discredited by a wealth of research,” said Paul Sonn, legal co-director of the National Employment Law Project.  

Filed by Daniel Massey of Crain’s New York Business, a sister publication of Workforce Management. To comment, email editors@workforce.com.

 

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