Gotham Gazette

The Place for New York Policy and politics

Topics

Topics

The Living Wage After Kingsbridge


A fast food worker makes fries

 

First came Kingsbridge: A highly unusual vote at the City Council, which shattered an approximately $300 million proposal from the Related Companies to morph a Bronx armory into a mall.

Then came the Queens Center Mall: A call to beef up wages at one of the city's largest shopping centers.

Now, City Council members, armed with support from some of the largest unions, are eyeing an even bigger challenge: Requiring living wages at all developments, organizations or corporations that receive some sort of city subsidy or assistance.

"The way we've been doing business in the city of New York has at the end of the day not benefited people in low income communities," said Councilmember Annabel Palma, one of the main sponsors of the proposal, which will be introduced at the council soon. "The least we can do is make sure we can protect the workforce and make it viable for people to stay in their community."

But despite the recent "victory" in the Bronx and the momentum some officials say it brings, a poll by Gotham Gazette found only 21 council members are ready to officially sign onto such a sweeping proposal. In order for a bill to pass, it needs 26 votes. To override a veto, which looms for this legislation, the council would need 34 votes.

To see where your member stands, go here.

Even though the City Council overwhelmingly defeated the Kingsbridge Armory project, many members say any further movement on the living wage issue is far from a fait accompli.

Kingsbridge Revisited

In December, the council delivered an unprecedented defeat to the Bloomberg administration. The disapproval of the Kingsbridge Armory project, which supporters say would have brought 2,200 jobs to the northern Bronx, not only set the Bloomberg administration's economic development agenda back, but it also assured some of the city's progressive circles that the council was ready to take up a broader living wage policy.

In Kingsbridge, the council, developer and administration debated a requirement to compel mall tenants -- from Cinnabon to Lane Bryant -- to pay workers a living wage. In the Bronx, the average annual wage for a worker in clothing and accessories stores was $17,313 in 2008 -- or $8.32 an hour based on a 40 hour work week, according to the Drum Major Institute. A living wage in New York is $10 an hour plus benefits, according to the city. Without benefits, it's $11.50 an hour.

The project would have received at least $18 million in tax breaks if it had been approved, say supporters of a living wage. Those breaks were in addition to an approximately 75 percent discount the city agreed to give Related to purchase the armory. Given all this taxpayer money, opponents of the development argued the community and its workforce deserved some benefits.

And they convinced the City Council.

And now the council is preparing to deal with the wage issue again -- but on a much grander scale. The bill slated for introduction this session would require any company, organization or developer who receives more than $10,000 annually of "city assistance," which can cover tax breaks, financing, grants and energy cost allocations, to pay a living wage to all employees on the property. As originally drafted, the bill would apply to recipients of the council's discretionary dollars as well as developers getting million dollar tax breaks for gargantuan, mixed use developments.

The legislation could effectively catch the vast majority of those entities that contract with the city, including arts organizations, developers and social service providers. Most importantly, say supporters, the legislation would go beyond the workers employed by a developer to include all those who work for the developer's tenants.

Councilmember Oliver Koppell, the proposal's prime sponsor, said supporters are still studying which entities and what kind of city assistance would be included in the final version of the legislation. But, he said, he wants to ensure those that directly and indirectly benefit from city subsidies are included.

"There is no question we are going to introduce a bill that will go as far as we can possibly go," said Koppell.

In a supporter's view, if a group is willing to take assistance from the city, it should be willing to pay for it.

"We can no longer ignore the needs of low wage workers in this city," said Stuart Appelbaum, the president of the Retail, Wholesale and Department Store Union, the most vocal labor group on living wages. "What's important now is there be a real debate on whether or not development creates jobs that are good, or if it's going to create jobs that keep people in poverty."

Detractors point to a floundering economy and sickly job market, arguing it's the worst time to put more restrictions on economic development.

In this Economy?

Any job is a good job, say council members who oppose the proposal.

"There is a minimum wage for a reason," said Republican Councilmember Dan Halloran of Queens. "We have a free market economy for a reason... (The proposal) puts so much restrictions on our entrepreneurial spirit."

Even beyond the state of the economy, business leaders question whether the city should be meddling in private industries.

"What's not rational is suggesting somehow that every business tenant of a publicly subsidized project would be subject to an arbitrary wage requirement that they weren't party to negotiate. You would cripple the projects we are trying to do to stimulate the economy," said Kathryn Wylde, the president and chief executive officer of the Partnership for New York City. "I don't think the living wage requirement belongs in municipal legislation. Our focus should be picking projects we want to subsidize that bring good jobs."

During the Kingsbridge debate, Mayor Michael Bloomberg struck a similar note, saying it was best to let the market set wages. "I know the desire people have, but the reality is that the city is not in the business of guaranteeing people's wages, and in private development, we shouldn't be," the mayor said.

Back in 2002, Bloomberg signed legislation to require a living wage for all home health care and childcare workers that contract with the city. At the time, officials and organizations balked at expanding it to other city contractors -- the same ones this latest bill would affect -- because many nonprofit groups said they couldn't afford it.

Efforts to go further into the private marketplace are likely to erode more support among council members and the administration.

At least 19 council members remain undecided on the most recent proposal. Many of them said they support living wages in principle, but have yet to take a close look at the bill. Others are torn between creating good jobs or possibly stifling them altogether.

"I am kind of concerned that we will ultimately kill jobs," said Councilmember Lewis Fidler, who hasn't taken a position on the proposal. "Would you support jobs that may not be good paying, but that wouldn't exist otherwise?"

Experts differ on whether living wage laws stifle economic development. Kristen Eastlick, senior economic analyst at the Employment Policies Institute in Washington, D.C., said tax credit programs are more of an economic engine than living wage policies. Living wages, she said, only displace employees who have lower-wage jobs, which become more appealing for more qualified workers and, thus, more competitive.

Others, like Paul Sonn, the legal co-director of the National Employment Law Project, disagree. In New York City, Sonn said, it has become an industry standard to pay building service operators at large development projects a living wage.

"Is it more realistic for building services and not for retail? I think the answer is the city's living wage is set at a pretty moderate level," said Sonn. "You're going to have to pick and choose what sort of tenants you are bringing in. They understand that in L.A. That's what is expected of developers now."

Beyond New York

At the beginning of Bloomberg's tenure in City Hall, a living wage movement was sweeping across the country.

Now that he is in his final term (presumably) that movement is picking up again, but the more recent proposals are targeted specifically to economic development. In the last month, both Pittsburgh and Chicago have attempted to adopt some living wage law aimed at developers that receive city subsidies.

About 200 cities have adopted some sort of living wage ordinance. Many target certain workers, like home health care aides.

In Pittsburgh, the City Council approved a bill that would have guaranteed all hotel, cafeteria and building maintenance employees at city subsidized projects a prevailing wage -- the standard wage for the industry.

Pittsburgh's mayor vetoed that bill on New Years Eve.

Meanwhile, the Chicago City Council and its mayor are heatedly debating an ordinance that would require living wages for stores with more than 50 employees that receive city subsidies.

Elsewhere, some point to Los Angeles as a leader on setting wage standards in economic development. Alex Paxton, the special assistant to the deputy chief of operations at the Community Redevelopment Agency, the city's economic development arm, said Los Angeles requires any developer and its tenants on city owned property to pay a living wage.

Paxton said the agency has recently considered holding on to more of its land, so it can have more of a say on what wages are paid at what projects. Many California airports also have picked up living wage practices, said Sonn.

To some, New York is already behind other major metropolitan areas in setting higher wage standards. San Francisco and Santa Fe have gone beyond state limits and set their own minimum wage. Workers in San Francisco make $9.79 an hour no matter what work they do.

Correction: When first published this story said tenants of developers with projects on land owned by the Community Redevelopment Agency in Los Angeles did not have to pay a living wage. In fact, those tenants do have to pay a living wage. The text has been corrected.

Job Creation Bills to be on Washington's Agenda in 2010


Hopeful visitors at a university career fair. Graduates are facing the longest economic downturn since the Great Depression.

This month marks the second anniversary of the onset of the Great Recession -- the steepest and longest downturn since the Great Depression of the 1930s. Although the recession started later in New York City -- August 2008 was the peak employment month here -- the number of city residents unemployed has doubled since early last year to over 400,000, and the local unemployment rate in November was 10 percent (it declined from 10.3 percent in October only because 12,500 people dropped out of the labor force.)

Wall Street profits and bonuses may be recovering, thanks to the unprecedented financial bailout, but the local job market is about as comforting as a Lower East Side cold water flat in the dead of an 1890s winter. Job losses have hit hardest in the city’s minority and low-, moderate-, and middle-income neighborhoods. Long-term unemployment -- reflecting jobless spells lasting more than six months -- is even higher in New York City than the record-high national figure. Foreclosures and personal and business bankruptcies are all rising as the prospects for an economic rebound recede further into the distance.

The dire condition of the local unemployment crisis is repeated around the country. Nationally, 27 million Americans are unemployed, underemployed, discouraged or otherwise only marginally attached to the labor force. Fourteen states have double digit unemployment.

At the beginning of this year, great hope was placed in a big and bold federal stimulus program. The recovery act -- formally known as the American Recovery and Reinvestment Act -- succeeded in pulling the teetering economy back from the brink, but the headwinds were too fierce to keep the national unemployment rate from moving into double digits for the first time since the early 1980s. Technically, economic growth resumed in the second half of this year, but most economists fear that underlying conditions will prevent the act's stimulus from translating into a sustainable recovery.

To a degree never seen in the post-World War II era, the housing market remains paralyzed by the foreclosure epidemic, and households burdened by debt and worried about the bleak job outlook are holding back consumer spending. As long as consumer spending remains anemic, businesses won't hire back workers, not to mention invest in expansion. It now seems that while the recovery act was the right medicine for the ailing economy, the dosage was not sufficient to provide the cure.

The purpose of federal stimulus is to inject spending into the economy -- whether through state and local governments, brick and mortar infrastructure projects, or aid or tax cuts to individuals -- when the economy lacks necessary spending impulses of its own. To do that, the deficit must rise. Otherwise, overall spending remains too shallow for a self-reinforcing cycle of spending and job growth to get into gear.

As the recession begins its third year, Washington is again turning attention to measures to curtail job losses and boost job growth. Before adjourning for the holidays, the House of Representatives approved legislation that reprised three elements of the recovery act: state fiscal relief, aid to the unemployed, and infrastructure. Each of these three areas would receive roughly $50 billion.

State Fiscal Relief: Because the downturn was more severe than anticipated at the beginning of the year, many states, like New York, found themselves with mid-year budget problems when tax collections faltered. The Center on Budget and Policy Priorities reports that we are seeing the steepest decline in state tax receipts on record . Collections from New York’s personal income tax – the state’s largest tax source – are projected to fall by nearly 15 percent in 2009, before factoring in a temporary surcharge. Next year, combined state budget gaps are expected to exceed $180 billion. Economists at Goldman Sachs have projected that state government budget cuts and tax increases would reduce national economic growth by about two-thirds of a percent from mid-2009 through mid-2010.

Since it now appears that much of the recovery act's state fiscal relief will run out before state tax collections recover, there is concern that without further relief states will have to cut spending further, creating an even greater drag on any potential recovery. The new House measure provides $23.5 billion to continue a temporary increase in the federal share of Medicaid expenses, $23 billion to retain 250,000 teachers and repair school buildings, $1.2 billion to pay for 5,500 police officers, and $1.8 billion for fire fighters, AmeriCorps workers, summer youth jobs, and College Work Study jobs. Because New York's share of the recovery act's state fiscal relief was roughly 10 percent, the Empire State could receive $4 billion to $5 billion in new federal aid should the House bill become law.

Photo (cc) mjames1408

Aid to the Unemployed: Since state unemployment benefits run out after 26 weeks, the federal government usually steps in during severe downturns to pay for benefits when workers remain jobless for more than six months. To further extend federally funded long-term benefits and to continue for another six months providing health care subsidies for the jobless, the House package would provide $53.3 billion. New York received about 6.7 percent of similar aid under the recovery act, suggesting that the new authorization would provide about $3.5 billion to unemployed New Yorkers.

Infrastructure Spending: Construction has been one of the hardest hit sectors during the downturn, and there is interest in Washington in providing additional aid for government infrastructure that increases long-term productive capacity. Of the $37 billion in transportation and infrastructure funding in the House bill that would be allocated to states by formula, preliminary information indicates New York State could receive $1.2 billion for transit, $1.1 billion for highways and bridges, and $108 million for sewer treatment projects.

Spending to Create Jobs

Senate action is not expected until January, most likely following final action on health care reform. In addition to the areas covered in the House legislation, January might see consideration of two White House proposals, a tax credit aimed at creating jobs in small businesses and additional funding to promote job creation by making buildings more energy efficient.

In Washington, opposition to more jobs funding usually comes with an unmistakable partisan fervor. Opponents often argue that jobs funding will increase the federal deficit to unsustainable levels. Critics of more job recovery spending talk as if the recovery bill and President Barack Obama's budget policies are the main reason for the looming federal budget deficits. In fact, tax cuts enacted under President George W. Bush, the wars in Afghanistan and Iraq, and the economic downturn account for 85 percent of the federal deficit over the coming decade.

Obama appears to be undeterred. At the White House Jobs Summit in early December, he said: "The single most important thing we could do right now for deficit reduction is to spark strong economic growth, which means that people who've got jobs are paying taxes and businesses that are making profits are paying taxes."

Any additional funding for jobs is complicated by some public misunderstanding of the recovery act's impact. Critics have made the disingenuous argument that jobs retained by spending under the act don’t count. And in general, while it is impossible to specifically track the number of jobs created by the billions of dollars that has gone to individuals in the form of unemployment compensation, food assistance or tax cuts, simple logic suggests that such spending has helped businesses retain or hire additional workers. Most such assistance provided by the recovery act has gone to low- and moderate-income individuals and households that are very likely to spend every dollar they receive.

The Center on Budget and Policy Priorities has estimated that seven of the law's programs providing tax cuts to moderate- and middle-income families or direct assistance to the unemployed, food stamp recipients or the elderly and the disabled, will keep 6 million Americans from falling into poverty in 2009 and will reduce the severity of poverty for 33 million others . The American Recovery and Reinvestment Act will keep 258,000 New York City residents out of poverty this year and will help an additional 161,000 New York State residents outside of the city stay above the poverty line.

Gov. David Paterson's office estimates that over $31 billion will come to New York residents as a direct result of the act's spending. This estimate does not include the individual or business tax cuts that comprised over a third of the overall $787 billion package.

New York City and the nation face an immense job creation challenge. Nationally, to bring the unemployment rate back to pre-recession levels and allowing for population growth, we need to add 580,000 jobs each and every month over the next two years. We have yet to see a single month with any net job growth at all over the past two years. In the absence of further federal action to spark job growth, millions of Americans will be consigned to misery for years to come.

James Parrott is deputy director and chief economist of the Fiscal Policy Institute. He has been studying and writing about the New York economy since he landed in New York City a quarter century ago.

Cutting Spending as Revenues Rise


Photo (cc) Samuel Huron
Wall Street gains are a chief reason for the surprise increase in this year's tax revenues.

Mayor Michael Bloomberg’s November modification of the city’s four-year financial plan -- very quietly released without a mayoral press release on Nov. 16 -- and his concurrent directive to agency heads demanding big budget cuts offer many surprises. Some, like the modification’s acknowledgment of a sudden spurt in tax revenues and its list of federal economic stimulus monies pouring into the city, are even pleasant.

The mayor’s demand for $1.75 billion in budget cuts, however, is puzzling given the positive revenue news and a reduction in next year’s budget deficit. Another surprise is the modification’s retreat into budget opaqueness, contradicting the Bloomberg administration claims to transparency in governance. Lastly, perhaps less of a surprise, the modification’s does not offer any consideration of revenue options to meet next year’s $4.1 billion deficit.

More Budget Cuts

The good news is that tax revenues in this fiscal year, less than five months after the budget's adoption in June, are nearly $800 million higher than anticipated, with the additional money coming equally from increases in personal and business income taxes. Even when offset by some lower revenues in projected real estate transactions ($74 million less) and unexpected bad news on the expense side of the budget -- someone misjudged the number of police officers who would retire, costing the city $120 million in anticipated savings -- the city suddenly has a mid-year $539 million surplus.

That surplus would seem to offer a good cushion for getting through this fiscal year without further cuts. But that’s not the plan at the mayor’s Office of Management and Budget. The modification takes the $539 million and, rather than using it as a reserve fund for the rest of this fiscal year, uses it as a prepayment of future debt service.

As the rather upbeat budget modification was being released, stories in the New York Post, the Daily News and Times reported that the mayor, in a memo to agency heads, had demanded further budget cuts, both for the current fiscal year and for fiscal 2011.The Post explained that the mayor is asking for $1.75 billion in agency cuts over the next 18 months. The $1.75 billion is in addition to a cumulative $3.2 billion in cuts that have been implemented in six earlier modifications.

Bloomberg would achieve this by reducing agencies' budgets by 4 percent in the second half of this fiscal year and 8 percent in the 2011 fiscal year beginning July 1, 2010.The Department of Education (a 1.5 percent cut this year, 4 percent in 2011) and the uniformed departments (2 percent this year, 4 percent next year) have smaller targets.

The dailies all saw the demand for cuts as a blunt threat to the city workforce to make concessions or expect layoffs. The Post quoted Deputy Mayor Ed Skyler, "So whether it’s attrition or layoffs, some sort of personnel savings is going to be necessary in order to close the $5 billion deficit." (Skyler’s comment ignored the fact that the modification reduces the deficit for 2011 to $4.1 billion).

The Times reported a few days later that mayoral aides "have quietly encouraged such job cuts through an internal budget maneuver" that, as Doug Turetsky, of the Independent Budget Office put it, "incentivizes layoffs." It gives agencies more credit toward meeting their budget-cut targets if they lay off workers rather than, say, cutting supplies or contracts.

The mayor’s financial plan for 2011 had included a projected $557 million savings from future concessions by the city unions -- $357 million from having city workers pay 10 percent of their health insurance premium and $200 million from pension cutbacks. The state financial control board called this goal "a risk" in its July report on the adopted budget. Cuts in the city workforce could help make up for the mayor's likely failure to meet the goal.

Retreat from Transparency

The Times article noted that an administration that "prides itself on transparency" did not disclose this budget-cutting maneuver to the public or to the unions affected by it. What is more disturbing, however, is that the format of the modification itself is a major retreat from the level of disclosure in last year’s November modification. The 423-page conglomeration of facts includes not a single sentence about what any of it means.

Last November's modification had a 55-page summary that included a two-page overview, an economic update, material on financial-market volatility and a list of possible revenue options to meet future deficits. This November's modification, in spite of continuing distress about economic and fiscal conditions nationally and locally, and a $4.1 billion deficit for 2011, has none of these features.

Among the unanswered questions: Why such an increase in personal and business income taxes? One assumes it has something to do with record Wall Street profits and bonuses that many have predicted. But all we have here is the $402 million increase in personal income taxes and $407 million in business income taxes. How likely are these increases in tax revenues to continue this year and for the following three years of the financial plan?

The document does not offer any discussion of alternatives to the agency cuts proposed in the directive to the agencies. Last year, for instance, the November modification offered two options. One, across-the-board increases in the personal income tax rates, was dropped later in the year. The other, various minor sales tax increases, were abandoned in the face of the huge 0.5 percent hike in the city sales tax rate included in June’s adopted budget.

The Stimulus Money

One useful -- if again, unexamined -- part of the November modification is a section on how the New York City government distributes the federal economic stimulus monies. The one big budget relief program is $850 million of new federal Medicaid funding, which replaces $850 million of city funding. In 2011, though, the Medicaid budget relief will drop to $295 million.

In addition, the federal plan puts $1.4 billion of new federal money into the fiscal 2010 expense budget. This money must be used for specific services defined by the federal government and so does not provide budget relief. The biggest part, $1.04 billion, goes to education, funding: 14,190 pedagogical positions that otherwise would need city and/or state money. Similar education funding, $1.03 billion, is set for fiscal 2011.

Other federal expense-budget distributions in 2010, totaling about $370 million, include $48 million for community development; $104 million for supplemental nutrition, child care, and TANF (welfare) programs; $28 million for homelessness prevention, $95 million for workforce investments, $16.5 million for criminal justice grants and $4 million for senior home food deliveries.

The city also gets $1.05 billion of capital funding for the Department of Education through school tax credit bonds in 2010 and an additional $995 million spread over three years, 2011 to 2013. Another $269 million of capital funding goes in 2010 to the departments of environmental protection and transportation for a variety of construction projects. Here, as in other sections, there is no analysis of the data, but presumably these billions of federal dollars have a significant impact on the city’s economy.

Next Steps

Earlier in November, the Daily News reported that Bloomberg, when asked if he would keep his promise not to raise taxes through the 2011 fiscal year, "more or less stuck to his campaign pledge ... but left himself some wiggle room by reiterating that a lot depends on how Albany decides to address its own budget woes." He also called the November modification a "minor mod," and said that he would offer more specifics about resolving the 2011 deficit in his January 2010 preliminary budget.

It seems odd that a modification that fails to examine a major (positive) shift in tax revenues at a time of deficit worries would be characterized as a "minor mod." The disconnect between the improved revenue news and demands for $1.75 billion in agency cuts over the next 18 months would appear to be worthy of discussion.

Perhaps the City Council can initiate such a debate, since it must approve the modification. Last year the council held several hearings on the modification because of controversy over property tax rate increases and homeowner rebates.

Should the mayor or council want to at least consider taxes in the face of the proposed service cuts, it might be useful to look at a study just released by the Fiscal Policy Institute and Institute on Taxation and Economic Policy. It shows that "middle-income families in New York pay a higher share of their income in state and local taxes (12.0 percent) than do the state's richest families (who pay only 9.4 percent of their income in state and local taxes)."

The same study reports that the top 1 percent of New York State residents, who in 2007 had an average annual incomes of $3.1 million, pay less than 1 percent of their income in sales and excise taxes while the 20 percent of New Yorkers with the lowest income (average income: $9,600) pay 7.3 percent of their income in sales and excise taxes.

The other question the council might raise is why the mayor and Office of Management and Budget continue to make major changes in mid-year. As recently as the end of fiscal year 2008, the city had a surplus of $6.5 billion. Yet since January 2008 there have been seven modifications featuring mostly across-the-board agency cuts. Mid-year expense cuts, in particular, are disruptive to agencies – to non-profit contract agencies as well as, if not more than, city agencies -- and individuals. Why can’t we have a budget that is stable for at least 12 months?

Glenn Pasanen, who teaches political science at Lehman College, has been in charge of Gotham Gazette's finance topic page since 2001.



Print Friendly and PDF

Editor's Choice


Gotham Gazette: New York Voters Approve $4.2 Billion Environmental Bond Act
New York Voters Approve $4.2 Billion Environmental Bond Act
Gotham Gazette: 
New York City Voters Approve Racial Justice Ballot Measures
New York City Voters Approve Racial Justice Ballot Measures
Gotham Gazette: 
Housing Development in New York City Slows to a Crawl as Officials Debate Tax Incentives
Housing Development in New York City Slows to a Crawl as Officials Debate Tax Incentives
Gotham Gazette: 
City Council Examines Low Voter Turnout, Moving Local Elections to Even Years City Council Examines Low Voter Turnout, Moving Local Elections to Even Years