August 6, 2019
By Jennifer Tiedemann
“There’s absolutely no benefit to being a retail business in New York.”
These strong words come from no other than, well, the owner of a retail business in New York. Sarah McNally is the owner of the four-location McNally Jackson Books, and her story is one of several featured in a new piece from the Wall Street Journal looking at the impact of the city’s mandated $15 minimum wage on Big Apple business owners, which went into effect at the very end of last year. McNally says she’s always paid her employees at least $5 above minimum wage, but the latest minimum wage increase has made it impossible to do that. “With raising minimum wage to living wage, it feels now like we’re at the bottom of the pay spectrum,” she tells the paper.
Susannah Koteen, who owns Lido Restaurant in Harlem, has a similar story. After the minimum wage law took effect, she cut back employee shifts, and she set aside her plan to move her restaurant to a bigger location, because that would have required her to hire more staff. That would have been too risky, she says, because if the business hit a rough patch in the midst of such expansion, “you would just have no choice but to cut people at the bottom.”
And in the outer boroughs, less affluent than Manhattan, things are even worse for small businesses. For example, Thomas Grech, president of the Queens Chamber of Commerce, points to the minimum wage increase as the reason behind a rise in small-business closures in the borough in 2019.
Yet despite countless stories and significant amounts of data showing its negative effects, there is a national push to make a $15 minimum wage the law of the land. Last month, the U.S. House passed legislation that would mandate a $15 federal minimum wage by 2024 (the Goldwater Institute was one of many groups that signed on to a letter urging members of Congress to oppose its implementation). Upon the House’s passage of the bill, economist David Neumark of the University of California at Irvine told the New York Times that the push for a federal $15 minimum wage had experienced “a remarkable an unexpected political success…Does it make sense? Call me skeptical.”
It’s not too hard to see why Neumark might be skeptical: If New York City businesses are struggling to deal with the minimum wage increase, what would the same mandate mean for businesses in parts of the country in lower-pay areas? The current federal minimum wage stands at $7.25 per hour, so a $15 per hour mandate would more than double that. While supporters of the increase argue that it would put more disposable income in the hands of many consumers, the impact on many small business owners would be devastating. Based on what we’ve seen in New York City, many of these owners will choose to cut hours for workers and even cut jobs. And a higher minimum wage doesn’t matter when you’re not taking home a paycheck at all.
That reality doesn’t seem to matter to the members of the House who passed the federal minimum wage bill, though, or to the presidential candidates who have voiced support for the “Fight for $15” minimum wage campaign. All of them should take a look at what’s going on in New York City before deciding that that mandated minimum wage law would work well in other regions of the country.
Jennifer Tiedemann is the Deputy Director of Communications at the Goldwater Institute.