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By NYC Comptroller Brad Lander
Francesco Brindisi, Executive Deputy Comptroller for Budget and Finance
Krista Olson, Deputy Comptroller for Budget
Andrew McWilliam, Director of Economic Research
No. 69 – September 12th, 2022
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Dear New Yorkers,
As inflation continues to bite into purchasing power for households (though thankfully at a slightly slower rate), this month’s spotlight takes a look at the economic impacts of raising the minimum wage. The minimum wage in New York City rose from $7.25 in 2013 to $15 by 2019. Our analysis compares job, business and wage growth in New York City to cities that did not raise the minimum wage. The findings: the higher minimum wage coincided with a period of strong job growth, higher average wages and reduced poverty.
Regular readers will notice that this month’s “Spotlight” analysis comes in front of our monthly overview of trends in the labor, housing, transit, and city finance data. We are considering other changes to this newsletter to ensure it delivers useful, interesting information to you each month.
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In this month’s spotlight, we look at employment, earnings, and poverty rates for workers in minimum wage-heavy industries, as the minimum wage in New York City was increased by State law from the Federal level of $7.25 in 2013 to $15 for all workers by 2020 (Table S1). The evidence suggests that increases in the minimum wage corresponded with a period of strong job growth, higher wages, and reduced poverty. This analysis provides useful context as policymakers in Albany consider whether today’s minimum wage should be increased to keep pace with inflation.
Following and expanding on academic research published in 2019[1], we use Quarterly Census of Employment and Wages (QCEW) to compare New York City to 12 other cities[2] that did not have minimum wage increases in the 2013 to 2019 period. We compare: (i) job growth; (ii) establishment growth; and (iii) average weekly wages, ending the analysis in 2019 due to the large impact of COVID-19 in 2020. We first look at industry level data for all jobs in New York City regardless of place of residence. Two industries employ the majority of minimum wage workers at the national level: Leisure and Hospitality (about three-fifths of all workers paid at or below the federal minimum wage were employed in this industry, almost entirely in restaurants and other food services[3]) and Retail Trade (one quarter of workers paid at the federal minimum wage were employed in this industry).
The empirical literature on the impact of minimum wage increases on employment is mixed, but recent findings suggest that city-level minimum wage changes do not have a discernible effect on employment.[4] In the case of New York City, between 2013 and 2019 private employment grew by 18.3% (from 3.3 million to 3.9 million), compared to an average of 14.2% in twelve U.S. cities that did not increase the minimum wage (from 9.2 million to 10.5 million), and 11.9% in the U.S. overall (from 113 million to 126 million).[5] Within New York City, employment grew faster in the outer boroughs (23.2%, from 1.3 million to 1.6 million) than it did in Manhattan (15.1%, from 2 million to 2.3 million) (Table S1).
As in the rest of the country, a disproportionate share of minimum wage workers in New York City are employed in Accommodation and Food Services, and Retail Trade. The Accommodation and Food Services industry here employed 304,000 workers in 2013 (9.2% of private employment) and 370,000 workers in 2019 (9.5% of the private employment). The Retail Trade industry in New York City employed 336,000 workers in 2013 (10.2% of private employment) and 344,000 workers in 2019 (8.8% of the private employment).
Accommodation and food services industry employment grew faster in New York City (21.7%) compared to the 12-city average (18.1%) and the nation (15.3%), mostly driven by high growth outside of Manhattan (31.8%) between 2013 and 2019. Nearly half (49%) of New Yorkers working in Accommodation and Food Services reported earning $15 an hour or less in 2019,[6] suggesting minimum wage increases did not have a material impact on employment growth. We also show employment growth in food and drink services, a subcategory of accommodation and food services, and two subcategories of food and drink services: full-service restaurants and limited-service restaurants. The data shows that employment in limited-service restaurants (which include fast food restaurants that had a more rapid phase-in of minimum wage increases) grew faster in New York City (31.2%) and faster in Manhattan (41.6%) than the outer boroughs (23.1%). Overall, New York City growth (31.2%) was much faster than in the 12 comparison cities (20.2%) and the nation (17.8%). Employment in full-service restaurants, on the other hand, where tipped workers are most likely to work (and hence may not be impacted as much by minimum wage growth) grew slightly more slowly by 15.5% in New York City compared to 15.1% in the 12 comparison cities and 11.9% in the nation.
Retail Trade employment only grew by 2.5% in New York City, compared to a 12-city average of 5.3% and national average of 3.5%. However, Retail Trade employment in the boroughs outside of Manhattan Retail Trade employment grew by 8.5%, faster than the 12-city average (5.3%) and the nation (3.5%), even though retail employers in the outer boroughs faced the same minimum wage increases. This suggests that the slower growth overall cannot necessarily be attributed to the increase in the minimum wage, but may be due to other factors such as higher rents and the rise in on-line shopping.[7]
Between 2013 and 2019, the total number of private establishments (private businesses with employees on payroll) grew 7.8% in New York City between 2013 and 2019, slower than the 12 comparison cities (13.5%) and the U.S. (11.4%).[8] Manhattan businesses grew more slowly (3.2%) than the outer boroughs (12.2%) and the nation (13.5%). Yet growth of establishments in Accommodation and Food Services, where minimum wage work is concentrated, was higher in New York City (20.1%) compared to the 12 cities (17.9%) and the U.S. (11.6%). Once again, the outer boroughs had higher growth (26.8%) than Manhattan (12.1%). Sub-industries of Accommodation and Food Services show similar patterns, with establishment growth higher in outer boroughs than in the 12 comparison cities and in the U.S. overall. The number of Retail Trade establishments was stagnant in New York City (grew by 0.2%) due to declines in Manhattan (-8.5%). The other boroughs had growth in line with the comparison cities (5.0% vs. 5.3% respectively), and growth higher than the nation (0.8%).
Increasing the minimum wage will generally have a positive impact on overall wages earned, but these gains may be partially offset by employers reducing the average working hours of their employees.[9] Table 4 shows that weekly earnings in minimum wage intensive industries grew significantly faster in New York City than in comparison cities. Overall private sector average weekly wages in New York City grew by 16.6% (from $1,611 to $1,879) similar to the growth rate in comparison cities (15.7%, from $811 to $950) and just below the national average of 19% (from $956 to $1,138). The difference was larger and more visible in Accommodation and Food Services, where wages grew by 27.6% citywide (from $583 to $744) but only 18% in comparison cities (from $368 to $435) and 23.7% in the U.S. (from $350 to $433). Most of the increase is concentrated in limited-service restaurants, where average weekly wages increased by 48.4% in New York City (from $330 to $489) compared to only 14.3% (from $297 to $339) in comparison cities (that is more than triple growth) and 25.5% nationally (from $263 to $330). Wages in retail trade in New York City grew by 23.8% from $723 to $896), faster than comparison cities (17.3%, from $572 to $671) and the nation (19.9% from $539 to $646). The growth of wages in Retail Trade was faster in the outer boroughs (29.2%, from $533 to $689) than in Manhattan (23.6%, from $572 to $646).
In this section we focus on income for households where at least one household head worked in an occupation more likely to be paid minimum wage within the Accommodation and Food Services, and Retail Trade industries. We refer to these households as “minimum-wage” households. These occupations are food preparation and serving occupations,[10] first-line supervisors, cashiers, counter and rental clerks, and salespersons. We compare the median incomes of these minimum-wage households with the median incomes of households working in other industries both in New York City and in the U.S. overall, using data from the annual sample of the American Community Survey for 2013-2019.
Median household incomes increased faster in minimum-wage households, from $42,000 to $63,000 (by 50%) in New York City compared to others in NYC (by 30% from $70,000 to $91,000) and the rest of the nation in minimum-wage industries (by 24% from $46,800 to $58,000) showing the positive impact of minimum-wage increases on household finances between 2013 and 2019 (Chart S1).
As household incomes rose (and rose disproportionately for minimum-wage households), the share of households in poverty or near poverty (defined as 150% of the Federal poverty threshold) declined between 2013 and 2019 (Chart S2). The decline was faster among minimum-wage households in New York City than among minimum-wage households in the rest of the country, and faster than the decline in poverty in households in other occupations in New York City. The poverty rate among minimum-wage households declined from 21% in 2013 to 14% in 2019 – a 7 percentage point decline. The percentage of minimum-wage households in near poverty declined from 16% in 2013 to 13% in 2019 – a 3 percentage point decline. By comparison, the share of minimum-wage households in poverty in the rest of the country declined by 4 percentage points (from 19% to 15%) and the share of these households in near poverty declined by 1 percentage point (from 12% to 11%).
Poverty declined more modestly in households with workers in other occupations. In New York City, the share of households with workers in non-minimum-wage occupations in poverty declined by 4 percentage points (from 11% to 7%) and the share in near poverty declined by 1 percentage point (from 7% to 6%). The faster decline in poverty and near poverty among New York City households in minimum-wage occupations, compared to similar households in the rest of the country, as well as New York City households in non-minimum wage occupations, suggests that minimum-wage increases helped reduce poverty and near-poverty rates.
Minimum-wage households (again, defined as households with workers in minimum-wage-heavy occupations) in New York City also saw a modest decline in their rent burdens. The share of rent-burdened minimum-wage households (defined by spending more than 30% or more of household income on rent and shown as sum of orange and blue areas) declined from 58% to 53%, with the decline driven by the severely-rent-burdened households (who spent more than 50% or more of their income on rent) (Chart S3). While this 5% decline was modest, it was still greater than the decline in rent burdens for minimum-wage households in the rest of the country (2 percentage points decline), and households in non-minimum-wage occupations in New York City (2 percentage points decline).
Between 2013 and 2019, as the minimum wage increased from $7.25 to $15 an hour in New York City, economic growth in industries reliant on minimum wage workers outpaced that of other U.S. cities where the minimum wage did not increase, and that of the U.S. overall.
Over the same period, weekly earnings and household income of New Yorkers working in minimum wage occupations grew faster, and poverty rates and rent burdens fell faster than for those in similar occupations elsewhere.
While further research on other demographic and economic trends would undoubtedly be useful to understanding this pattern of economic growth, minimum wage increases in New York City appear to have worked as intended to improve the lives of hard-working New Yorkers and been a net positive for the City’s economy.
Spotlight Prepared by:  Selçuk Eren, Senior Economist.
[1] See Moe L. Parrott J., Lathrop Y. (2019) New York City’s $15 Minimum Wage and Restaurant Employment and Earnings, http://www.nelp.org/publication/new-york-city-15-minimum-wage-restaurant-employment-earnings/. The 12 cities are Atlanta, Charlotte, Dallas, Houston, Indianapolis, Louisville, Memphis, Milwaukee, Nashville, Oklahoma City, Philadelphia, and San Antonio.
[2] Comparison cities include Atlanta, Charlotte, Dallas, Houston, Indianapolis, Louisville, Memphis, Milwaukee, Nashville, Oklahoma City, Philadelphia, and San Antonio.
[3] Source: Bureau of Labor Statistics
https://www.bls.gov/opub/reports/minimum-wage/2019/home.htm#:~:text=The%20industry%20with%20the%20highest,hospitality%20(about%2010%20percent).
[4] See Dube and Lindner (2021) for a detailed review and findings of recent empirical studies. Authors note that out of the eleven recent estimates that look at city-level minimum wage increases, seven have positive estimates (that is minimum wage increases led to employment increases) whereas four have negative sign for employment. Overall, authors suggest that employment elasticity estimates with respect to minimum wage changes center around zero. Source: City Limits: What Do Local-Area Minimum Wages Do? (aeaweb.org).
[5] Population, on the other hand, grew slower in New York City between 2010 and 2020 (7.7%) compared to 12 city average (14%). We chose population growth between 2010 and 2020 because of well documented discrepancies between the yearly Census population estimates and the 2020 enumeration. The yearly Census estimates show a net population decline in NYC between 2013 and 2019. See NYC Department of City Planning (2022) Understanding NYC’s Population Trends, https://www1.nyc.gov/assets/planning/download/pdf/planning-level/nyc-population/population-estimates/understanding-current-population-trends-in-nyc.pdf.
[6] Source: Comptroller’s estimates from American Community Survey, 2019. IPUMS USA, University of Minnesota, www.ipums.org.
[7] Source: Retail Vacancy in New York City Trends and Causes, 2007-2017, https://comptroller.nyc.gov/reports/retail-vacancy-in-new-york-city/#growth-of-internet-shopping-has-changed-the-usage-of-retail-space
[8] July’s spotlight looks at changes in establishment count in more detail from historic perspective and recent changes. Establishment count in accommodation and food services declined from 2019 levels. Source: New York by the Numbers: Monthly Economic and Fiscal Outlook No. 67 – July 11th, 2022 : Office of the New York City Comptroller Brad Lander (nyc.gov)
[9] The change in hours worked in New York City appears small. Weekly hours in accommodation and food services and retail trade industries declined by approximately one hour between 2013 and 2019. Source: Comptroller’s estimates from American Community Survey. IPUMS USA, University of Minnesota, www.ipums.org.
[10] Food preparation and serving occupations include cooks, food preparation workers, bartenders, combined food preparation and serving workers (including fast food), counter attendant (cafeteria, food concession, and coffee shop), waiters and waitresses, food servers (nonrestaurant), miscellaneous food preparation and serving related workers including dining room and cafeteria attendants and bartender helpers, dishwasters, host and hostesses (restaurant, lounge, and coffee shop)
[1] See https://www.reuters.com/markets/europe/europe-heading-recession-cost-living-crisis-deepens-2022-09-05/
[2] See https://fortune.com/2022/09/07/us-dollar-price-wreaking-havoc-across-pretty-much-every-country/
[3] See https://www.cnn.com/2022/09/05/china/china-covid-lockdown-74-cities-intl-hnk/index.html
[4] See https://comptroller.nyc.gov/newsroom/new-york-by-the-numbers-monthly-economic-and-fiscal-outlook-no-68-august-8th-2022/
[5] See https://www.cnbc.com/2022/09/08/fed-chair-powell-vows-to-raise-rates-to-fight-inflation-until-the-job-is-done.html
Sincerely,
Brad Lander Signature
Brad Lander
The Comptroller thanks the following members of the Bureau of Budget for their contributions to this newsletter: Eng-Kai Tan, Bureau Chief – Budget; Steven Giachetti, Director of Revenues; Irina Livshits, Chief, Fiscal Analysis Division; Tammy Gamerman, Director of Budget Research; Manny Kwan, Assistant Budget Chief; Steve Corson, Senior Research Analyst; Selçuk Eren, Senior Economist; Marcia Murphy, Senior Economist; Orlando Vasquez, Economist.
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