Despite growing evidence of the potentially devastating consequences of big minimum wage hikes, Democrats are forging ahead, with Empire State Governor Andrew Cuomo becoming the latest to hop on the bandwagon. The Wall Street Journal reports that Cuomo is proposing a $15 minimum statewide, a move that would destroy what's left of New York's upstate economy. More:
The push by Mr. Cuomo, a Democrat, comes after he moved earlier this year to boost the minimum wage for fast-food workers in the state. The state’s minimum hourly wage across all industries is now $8.75 and is set to increase to $9 at year’s end.
Several U.S. cities, including Los Angeles, San Francisco and Seattle, have passed measures to raise their minimum wages to $15 an hour, though they won’t reach that level for years. Lawmakers in Oregon and California also are contemplating setting their statewide hourly level as high as $15. The highest current statewide hourly wage is $9.47, in Washington state.
A $15 minimum wage is tough enough in New York City, where many low-skill workers are unemployable at that level, but at least the Big Apple has pockets of vitality like the hotel industry where $15 an hour jobs would survive. Cities like Rochester and Buffalo—to say nothing of rural areas—don't have that kind of cushion. Manufacturing jobs in New York State (Albany has a burgeoning semiconductor industry that Cuomo purports to support) are likely to be hit especially hard because these industries are highly mobile.
Meanwhile, smart investors should probably dump New York bonds and buy stock in robotic companies and tech firms. With the state economy facing this headwind, and state expenses likely to rise if Albany has to bear these higher labor costs across its huge and poorly funded networks of medical programs, New York state and local bonds will become less attractive unless interest rates rise to offset the risks. But, on the other hand, putting this floor under wages guarantees that firms who employ low-skilled workers will look to automate those jobs as quickly as possible.
The message to business from a $15 minimum wage is clear: Sell New York bonds, stop hiring poor people, and see what you can do to move your company to a more welcoming location. This message will be heard and acted on. When the effects start to be felt, New York Democrats will complain about the sudden run of bad luck, and campaign for tax increases to pay for the state's growing welfare and unemployment costs.