The

Living Wage
by Phillip Quintero November 26, 2011 The ongoing debate over the Living Wage Act, i Introduced in May of 2010, has gained coverage after the city council meeting of November 22, 2011. Credible news sources pose the debate as one with two clear sides. On the one hand are labor activists and supporters who believe that employees should be paid a legal minimum wage of $10 an hour with benefits, or $11.50 an hour without. On the other are business and labor leaders who believe the bill will stifle economic growth, because businesses will choose to go where wages are lower. In 2002 the city passed a bill requiring this same living wage be paid to employees under city contracts. The new bill would extend that minimum to employees of private development projects that receive more than $1 million in assistance from the New York Economic Development Corporation (EDC). Assistance often comes in the form of tax breaks, tax-free bonds, and grants. In the current revision of the bill, businesses making less than five million in annual revenue, not-for-profit institutions, construction contractors, and projects intended to provide affordable housing are exempt from the higher minimum wage requirement. Current projects receiving EDC funding include renovations of public urban areas, retail centers, skating rinks, theaters, recycling facilities, marine terminals, parks, applied science research facilities, water systems, museums, housing, bike lanes, fire stations, public transportation, and senior living centers.ii Cost-Benefit Proponents of the bill, like New York City Council Member Melissa Mark-Viverito, claim that economic development projects do not help local communities if the jobs they produce are low-paying and without benefits. The bill is intended to counteract the growing number of New York City households that subsist below the poverty line. Opponents, including business and labor leaders as well as Mayor Michael R. Bloomberg, claim that the bill would make up to one-third of current and upcoming development projects financially unfeasible. The city commissioned a study, conducted in May by consulting firm Charles River Associates, which claims to show that the proposed legislation would not raise wages enough, or for enough people, to offset the jobs that would be lost as a result of businesses who would take their investment to nearby cities were the legislation to pass.iii Others contest these claims. A joint analysis by the National Employment Law Project, the Fiscal Policy Institute, and Good Jobs New York find the report contains a series of flaws in assumption and methodology that render the CRA study invalid.iv Supporters cite San

Diego, which has had a similar policy since 2006, as a positive example that the bill can be effective.v The role Mayor Bloomberg and the EDC played in ordering these studies has also been called into question. New York City Comptroller John Liu, for instance, is dubious of the EDCs work as it is.vi The Other Debate While disputes over empirical assessments will require further research, I notice a curious omission from the public discourse on the issue. Most popular media represents the costs and benefits of raising wages as the cornerstone of the bill, but I do not think this is its most contentious aspect. The major deterrent for developers does not, in fact, seem to be the costs associated with paying the higher wages themselves. Raising wages to a higher minimum is a predictable cost with a fixed rate of increase. The greater threat to employers seems to be, rather, accountability itself. Under the new bill, the New York City Comptrollers office is responsible for monitoring and enforcement. The bill gives the Comptroller a great deal of authority to investigate employersincluding access to their books, interviews with employees, and site visits. All of this monitoring poses an added expense and responsibility to the office of the comptroller. Despite this, maintaining compliance presents a real cost for employers as well; they will need to monitor employee wages very carefully to avoid the harsh sanctions imposed for living wage violations. A client receiving assistance from the city who is found to be in violationtwo offences within six monthscan lose the citys financial assistance altogether, which may be scheduled to extend over many years. The bill requires living wage compliance for at least 10 years, and regulates how records are kept and how wages are calculated. It also includes sanctions intended to protect employees who file complaints against employers violating the wage regulation. In addition, the increased oversight means increased liability, as public sanctions do not preclude private lawsuits. This presents a problem for the many industries that depend on the labor of undocumented immigrants, as employment practices will be under higher governmental scrutiny. So far, this issue has not been discussed in the public eye. Developers claim that the bill will make many projects unfeasible, as investors and employers are not willing to take on the associated costs of the additional record keeping and reporting required of them or the sanctions violators will face under the new bill. The picture here is not one where lower profit margins will deter economic growth, but one where investors are unwilling to invest in economic infrastructure, because the new legislation poses a great liability to themselves and the employers they hope to attract with their development projects. Specifically, the argument is that it is a deterrent for the government to make businesses accountable for their employment practices. This argument is, I feel, implicit in the debate and one that both sides would do well to acknowledge.

 i City Council Int. No. 251 and 251-A: http://legistar.council.nyc.gov/LegislationDetail.aspx?ID=664291&GUID=A83A5A5B- 9589-4589-AAD7-5B2C6884610F&Options=&Search= ii NYC EDC: http://www.nycedc.com/PROJECTSOPPORTUNITIES/CURRENTPROJECTS/Pages/Current ProjectsIndex.aspx iii Full CRA study: http://www.nycedc.com/NewsPublications/Studies/Documents/CombinedReportLiving WageImpacts.pdf iv See the joint assessment: http://www.nelp.org/page/- /Justice/2011/AssessmentEDCStudyMay2011.pdf?nocdn=1 v Living Wage NYC: http://www.livingwagenyc.org/pagedetail.php?id=4 vi In official press releases as well as his personal twitter account, Liu calls for the EDC to return money to the City treasury after a recent audit showed that many funds have been allocated for projects but not dispersed: http://comptroller.nyc.gov/press/2011_releases/pr11-09-075.shtm