Proposed legislation in the New York state legislature would ensure that low-wage workers in New York are protected from rising prices and benefit from improvements in the broader economy. Senate bill S3062C and assembly bill A7503B would schedule annual increases to the minimum wage that would be linked (or “indexed”) to the combination of the consumer price index (CPI) and a measure of labor productivity. We estimate that the resulting increases in the state minimum wage would lift wages for more than 2 million New Yorkers through 2026.

New York’s minimum wage law sets separate minimum wages for three different regions of the state: New York City, the suburban counties of Nassau, Suffolk, and Westchester, and the remainder of upstate New York. Under current projections1 for inflation and labor productivity, as shown in Table 1, indexing the minimum wage to changes in prices and productivity would increase New York City’s minimum wage from $15.00 where it is now to $21.25 by 2026. Nassau, Suffolk, and Westchester counties’ minimum wage would rise from $15.00 to $18.65 by 2026, and the rest of the state would increase from $13.20 to $16.35.

Since New York state law sets the minimum wage for tipped workers (also known as the “tipped minimum wage”) at two-thirds of the regular minimum wage, these changes would also lead to a rising tipped minimum wage and pay increases for the state’s tipped workers. As discussed more below, indexing the minimum wage in this way would protect the buying power of millions of low-wage workers’ paychecks and, in particular, improve the economic security of predominantly women, Black, and Latinx workers.

Effect on New York workers

Through 2026, four years into the policy’s implementation, the rising minimum wage would lift wages for more than 2 million workers, or 22.7% of the state’s workforce (see Table 2 at the end of this post). The majority of impacted workers would be in New York City, where 1.24 million workers (28.7% of the city’s workforce) would receive a wage increase. In Nassau, Suffolk, and Westchester counties, 349,100 workers would be affected, or 23.3% of these counties’ workers. In the rest of the state, 421,100 workers—13.9% of the upstate workforce—would get a raise. These figures include workers directly impacted by the wage increase—those whose wages would otherwise be below the new minimum wage—as well as workers just above the new minimum wage who would benefit indirectly as their employers adjust wage ladders to reflect the new minimum.

Because of the state’s three separate minimum wages, the resulting changes would lead to wage increases of varying magnitudes across the state. Overall, workers would gain $4.37 billion in higher wages. Statewide, the average worker affected by the rising minimum wage through 2026 would see their hourly wage increase by $1.24 in “real” teams—i.e., after accounting for inflation—or an 8.5% increase in percentage terms. For a full-time, year-round worker, this increase amounts to $2,163 in additional pay each year. Affected workers in New York City would see their annual wages increase by $2,934 a year, while workers in the suburban counties and upstate New York would see increases of $1,108 and $725, respectively.

The typical worker who would be affected by the minimum wage increases is an adult woman of color working full time. Of the workers who would benefit from the minimum wage proposal, 27% have children and 59% work full time. Broken down by age, 93% of workers who would benefit are over the age of 20 and 72% are age 25 or older. In every region of the state, a large share of impacted workers are prime-age adults. In New York City, almost two-thirds (64.1%) of workers affected by the increases are between the ages of 25 and 54 (Table 3), while 51.2% of workers in suburban counties (Table 4) and 39.9% of workers in the upstate region are prime-age workers (Table 5).

Longstanding occupational segregation, discrimination, and other labor market disparities cause women, Black, and Hispanic workers to be more likely to hold low-wage jobs. As a result, the proposed minimum wage increases would be a force for equity, disproportionately benefiting these workers, and reducing both gender and racial wage gaps. The increase would affect 25.5% of women workers in the state compared with 20.1% of working men. Almost a third (32.1%) of women workers in NYC would see wage increases compared with 25.7% of women workers in Nassau, Suffolk, and Westchester counties, and 16.4% in the rest of the state.

Through 2026, 41.8% of Latinx New York workers would see wage increases, while 32.3% of Black, 25.6% of AAPI, and 26.2% of multiracial or Native American workers would be impacted by the increases. In New York City, 85% of the workers receiving raises from minimum wage increase would be people of color, compared with 63.5% of impacted workers in Nassau, Suffolk, and Westchester, and 33.8% of impacted workers in the remainder of the state.

These additional pay raises will be invaluable to households throughout New York. According to EPI’s Family Budget Calculator, a family of two adults and two children in the New York metro area needs $134,938 a year in 2022 to achieve a modest, but adequate standard of living. For comparison, two adults working full time earning the projected 2026 New York City minimum wage of $21.25 per hour would only earn $88,400—significantly closer to the Family Budget Calculator’s threshold than under the current city minimum ($62,400), but still short of real economic security.

In the Albany metro area, a two-adult, two-child family needs $104,998 a year to cover necessities as of 2022, per the Family Budget Calculator. After the proposed increases, two adults paid the projected upstate minimum wage of $16.35 per hour would earn $68,016 a year in 2026. Again, the higher minimum wage would bring working families much closer to economic security, but many may still need additional supports beyond what they’re earning at work.

The rising minimum wage would be particularly helpful for workers below the poverty line. Around two-thirds (66.1%) of New York workers earning below the poverty line would receive a wage increase from the policy. Workers in poverty who work full time, year-round would increase their annual wages by $3,613 in New York City, $1,275 in the suburban counties, and $767 in the rest of the state. Minimum wage increases have been shown to meaningfully reduce the poverty rate, helping workers achieve greater economic security and reducing inequality.

An innovative approach to indexing

New York’s proposed legislation is particularly notable for linking future increases in the minimum wage to both prices and labor productivity. EPI’s minimum wage tracker shows that there are 18 states with automatic annual adjustments to their minimum wages, all linked to changes in prices. New York would be the first state to index to both price changes and the economy’s overall ability to produce income.

Over the last 50 years, the amount of goods and services that our economy can produce and provide from each hour of work—i.e., labor productivity—has more than doubled. Rising productivity represents the potential for higher living standards, but only if the gains are passed on to workers. As EPI has long documented, productivity has steadily increased since the 1970s while wages have remained largely flat.

As Figure A shows, if the minimum wage had kept pace with national labor productivity growth since 1968, the minimum wage in New York would have been $21.46 in 2020. Projected for 2026 this value increases to $23.27. The proposed New York minimum wages in S3062C and A7503B are an acknowledgement that businesses today can afford to pay the lowest-paid workers in the economy substantially more than 50 years ago. Adjusting the minimum wage for labor productivity going forward will mean low-wage workers will have a rising standard of living as the economy grows over time. Rising inflation over the past year makes raising the wage floor and locking in automatic protection against future price increases even more critical.

Notes

1. Labor productivity based on Bureau of Labor Statistics data available as of April 12, 2022. Inflation projections WSJ Economic Forecasting Survey as of April 11, 2022. Further adjustments made to moderate the first-year increases and smooth out increases.