Wage hike would affect poor workers, companies

Phil Schmitt, president of Philip A. Schmitt &

Phil Schmitt, president of Philip A. Schmitt & Son Inc., stands in a field on his Riverhead farm with workers picking spinach. (April 20, 2012) Photo Credit: Heather Walsh

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Raising the minimum wage in New York State is a matter of economic survival for low-wage workers as well as some small-business owners on Long Island.

An increase would bolster those who earn far less than the cost of basic necessities, economists said. It also could push tiny employers, grappling with the region's high costs and sluggish economy, over a financial precipice.

Lawmakers in the state Capitol are debating whether to boost the hourly minimum from $7.25 to $8.50 beginning Jan. 1, and then tying future raises to inflation. Votes on the legislation could come in the next eight weeks.

Leaders of the Legislature's majority conferences are at loggerheads.

Assembly Speaker Sheldon Silver (D-Manhattan) said if his bill becomes law it "is a stimulus to business. People who get a higher minimum wage . . . will turn it around and put it right back into the economy."

State Senate Majority Leader Dean Skelos (R-Rockville Centre) called the measure "a job killer" in a down economy. "This is just the wrong time to do it," he said.

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Gov. Andrew M. Cuomo said he supports an increase "philosophically" and believes, if done right, it could create jobs. He has not endorsed the bill.

A key issue is the cost of living. On Long Island, a family of four requires $76,619 a year for housing, food, transportation and other staples, according to the Economic Policy Institute, a Washington think-tank, which cites federal data.

A full-time worker earning the $7.25-per-hour minimum makes $15,080 annually before taxes; a family of four, with everyone employed full time, would earn $60,320 -- not enough to cover living expenses here.

 

LI: High-cost area

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"We are a high-cost area," said Pearl Kamer, chief economist at the Long Island Association business group. "So most employers are paying more than the minimum wage to get the people they need." The LIA opposes the 17-percent wage hike, saying improvements to the state's business climate are needed.

An estimated 140,000 Long Islanders, primarily adults, earned less than the proposed rate of $8.50 an hour last year. That's 10 percent of the 1.4 million local residents with jobs, according to an analysis by the Fiscal Policy Institute, a statewide think-tank that supports raising the wage.

Roughly 32,000 local residents were paid the current $7.25 minimum or less last year -- 2.3 percent of those employed -- based on ratios in statewide data calculated by Newsday. The number equals the population of Oceanside. (Service industry workers earning tips can legally be paid less than the minimum.)

Putting another $2,600 a year in these people's pockets, said Michael Zweig, director of Stony Brook University's Center for Study of Working Class Life, would serve as a tonic for the economy.

He and others predicted low-wage employees would spend all the additional earnings on basic items such as food, clothes and medicine. (Some workers are paid in cash, so they and their employer avoid mandated payroll taxes.)

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"The minimum-wage worker is desperately poor; just trying to get by even though they work full time," Zweig said. "We're talking about a standard of living which is very, very acute in its restrictions."

 

Struggling to get by

Francisco Vargas, 52, has been cleaning a catering hall in Island Park for 18 hours a day, seven days a week for the past five months. He shows up even when he's sick because he fears losing the position, which pays $7.50 an hour plus overtime.

Vargas and his wife, who works at a dry cleaner, have little left after paying for groceries, clothes, rent of $1,500 per month and sending money to family in Guatemala. The couple doesn't own a car.

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"We cannot save anything," he said in Spanish through a translator.

For 6 ½ years, Vargas was a kitchen helper at a Nassau County restaurant. The owner allegedly refused to pay Vargas overtime for a workweek that typically totaled 90 hours over six days. With help from The Workplace Project, an immigrant rights group in Hempstead Village, Vargas is trying to get the money he said he is owed.

"It's very important they [lawmakers] raise the wage," Vargas said. "A lot of people would be helped."

Phil Schmitt, a fourth-generation vegetable farmer in Riverhead, won't be among them.

Higher payroll costs, he said, could finish off his struggling business and cause him to convert it to a tourist attraction with hayrides and farm-life exhibits.

The farm lost money last year and has "just been getting by" since 2002. Schmitt, 55, said his income hasn't kept up with inflation; he now only buys secondhand equipment.

Labor is the biggest expense for Philip A. Schmitt & Son Farm Inc., representing 50 percent to 60 percent of sales, which total between $600,000 and $1.2 million depending on the year.

Of the 25 seasonal workers, mostly from Central and South America, 17 or so earn the minimum wage and receive free housing. Bonuses, from 25 cents to $2 an hour, are paid if the season is profitable.

"It's hard work for not a lot of money," said Schmitt, "but I'm fair with them."

The last time New York State raised its minimum wage above the federal level, from $5.15 to $7.15 per hour in 2005-07, Schmitt reduced his workforce by 10 people to 25. (Of the federal and state wage rates, the higher applies.) State leaders "keep beating us over the head with regulations," he said. "They don't understand how difficult it is to keep farming."

 

Difference of opinion

Economist Joseph J. Sabia found employment among 16- to 29-year-olds without a high school diploma in New York fell 20 percent in 2005-06 compared with similar groups in three neighboring states that didn't raise their minimum wages.

Besides a new wave of layoffs, he predicted that upping the rate to $8.50 an hour would undermine the economic recovery and send jobs to states such as New Jersey and Pennsylvania that have lower minimums. Eighteen states and the District of Columbia have wage rates that are higher than the federal $7.25 per hour.

"A far more effective strategy for helping the poor is to expand the federal and state Earned Income Tax Credits" because they put more money into the wallets of low-wage workers, said Sabia, who grew up in South Setauket and teaches at San Diego State University in California.

Another study from the union-backed Fiscal Policy Institute found raising the minimum wage to $8.50 an hour would increase the earnings of those now paid $9 to $10; workers and employers, it said, want to keep the wage differential. James A. Parrott, the institute's chief economist, estimated 7,500 jobs would be created; 1,200 locally.

Albany politicians and lobbyists said if the minimum wage were raised, it would be through a compromise before the regular legislative session ends June 21. In one scenario, the wage rate would increase gradually and would not be linked to inflation; small businesses would receive a state tax break to help offset their larger payroll expense.

Low-wage workers such as Horlin Bonilla are hoping for action.

The 22-year-old earns $6 per hour as a car-wash attendant in Nassau County for nine hours, five days a week. He can scarcely afford the room he shares with a friend.

Bonilla, who immigrated from Honduras, is looking for a second job, preferably at a restaurant because meals and a uniform are provided. Through a translator, he said, "I barely have enough money to live."

EARNING THE MINIMUM

 


Workers earning less in 2011 than the proposed NYS minimum wage of $8.50 per hour:


New York State:


880,100 out of total employed workforce of 8.7 million


Long Island:


140,000 out of total employed workforce of 1.4 million


SOURCE: Fiscal Policy Institute estimates based on 2011 Current Population Survey from the U.S. Census Bureau and Bureau of Labor Statistics


Minimum wage through the years:


NYS; U.S.

2002: $5.15 per hour; $5.15 per hour

2003: $5.15; $5.15

2004: $5.15; $5.15

2005: $6; $5.15

2006: $6.75; $5.15

2007: $7.15; $5.85 as of July 24

2008: $7.15; $6.55 as of July 24

2009: $7.25 as of July 24; $7.25 as of July 24

2010: $7.25; $7.25

2011: $7.25; $7.25

Note: Higher of the state and federal rates applies

SOURCE: U.S. Department of Labor

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