A bill recently introduced in the New York State Assembly not only proposes raising the state minimum wage in 2013, it also sets the stage for automatic annual increases in the state minimum wage based on inflation. This change would necessitate a shift in budgeting and planning for employers, who haven’t faced a minimum wage increase in more than two years.

The bill, introduced on January 30, 2012 by Assembly Speaker Sheldon Silver and Labor Committee Chair Keith Wright, among others, would take effect on January 1, 2013. The legislation proposes raising the state minimum wage to $8.50 an hour, an increase of $1.25 over the current minimum wage of $7.25, and increasing the minimum wage for food-service workers receiving tips from $4.60 an hour to $5.86. Significantly, this bill proposes that the minimum wage for all employees would increase annually each January 1 by the rate of inflation for the immediately prior twelve-month period starting January 1, 2014. The inflation rate will be calculated using the change in the consumer price index for all urban consumers (CPI-U), and there would be no adjustment for the years having a negative change in the CPI-U.

If the bill is passed, it would represent the first increase in the New York State minimum wage to take effect since July 24, 2009, when the state minimum wage was raised from $7.15 to $7.25 in order to bring the state into equality with a federal minimum wage increase.

In a statement about the proposed legislation, Speaker Silver stated: “It is absurd to expect anyone to afford the cost of living today and be able to invest in their future on a pay rate of $7.25 an hour. That is why it is my top priority this legislative session to repair the ladder to success, to make an investment in our working families and ensure that they can continue to do so as the cost of living continues to rise.”

The bill is almost assured to pass in the assembly, as the number of sponsors on the bill exceeds the 76 votes required to pass legislation in the 150-member body. Republicans currently have a 32-29 edge in the State Senate, and if they remain unified on this issue, the Senate could block adoption of this legislation. Senator Tom Libous, the Deputy Majority Leader for Legislative Operations, questioned the relationship between minimum wage increases and economic growth, stating that “the national minimum wage went up, and in the United States of America the economy’s the worst it’s been since the Great Depression.”

The Business Council of New York State, Inc., the New York State Farm Bureau, and the Unshackle Upstate coalition of businesses have all issued statements opposing the legislation. Governor Cuomo has indicated that he intends to review the economic impact of the bill before taking a position on it.

States are allowed to set a state minimum wage higher than that required by the federal government. The current federal minimum wage is $7.25. Eighteen states and the District of Columbia have higher minimum wage amounts than the federal minimum wage, with the highest state minimum wage being Washington state, at $9.04 an hour. Since January 1, 1978, when the federal government made uniform the minimum wage for all covered, non-exempt employees, New York State’s minimum wage has been higher than the federal minimum wage only between January 1, 2005 and July 24, 2009; at all other times during that period, the federal minimum wage has been equal or higher.

To give an idea of how much an indexed minimum wage might be, the following is a chart of the increase from year to year in the CPI-U since the year 1999-2000:

• 1999-2000         3.4
• 2000-2001         2.8
• 2001-2002         1.6
• 2002-2003         2.3
• 2003-2004         2.7
• 2004-2005         3.4
• 2005-2006         3.2
• 2006-2007         2.8
• 2007-2008         3.8
• 2008-2009         -0.4
• 2009-2010         1.6
• 2010-2011         3.2

The average increase over that time (counting the 2008-2009 year as a zero increase) was slightly less than 2.6 percent per year.  Put another way, if in 2000 when the state raised the minimum wage to $5.15 from $4.25, annual cost of living adjustments had been implemented, the state minimum wage currently would be $6.98, which would be below the federal (and current state) minimum wage of $7.25.

The following links provide helpful resources:

• The full text of the bill, as published on the New York State Assembly website
• A history of the federal minimum wage, published by the U.S. Department of Labor

We will continue to monitor the progress of this statute and keep you updated on its status.

If you have questions about this bill, please contact Sean P. Beiter (716.566.5409; sbeiter@goldbergsegalla.com) or another member of the Goldberg Segalla Labor and Employment Practice Group.