April 21, 2015
By James Parrott Deputy Director and Chief Economist for the Fiscal Policy Institute
New York, NY – After years of wage declines, several signs are emerging of wage growth in New York City, according to a new report from the Fiscal Policy Institute. Several government data sets all point to fairly widespread and firmly-established wage growth beginning in 2014. According to the most recent data, average private hourly earnings increased 3.3 percent for the six months to February 2015 versus the same period a year ago. This is twice the annual average 1.6 percent gain from 2009 to 2013.
While the wage trend is clearly up over the past year, low-wage workers are seeing much smaller wage gains than those who are better-paid. Moreover, average wages for the typical New York City worker are still below where they were before the recession. Inflation adjusted average annual wages were 2.1 percent lower in 2014 than in 2007 for private workers.
Why is this recovery finally starting to generate wage gains after years of stagnation? Partly, it's supply and demand: falling unemployment and a fifth consecutive year of strong local job growth. Employers responded by raising wages. In addition, policy choices played an important role. Two state minimum wage increases have lifted the wage floor by 20 percent since 2013.
There was also a flurry of union contract settlements in 2014 that raised wages for over 300,000 public sector workers who had labored for several years under expired contracts. This included over 260,000 City of New York workers and 40,000 MTA workers. Also, 70,000 1199 SEIU members working at private hospitals received 3 percent wage increases, as did 30,000 32BJ SEIU building service workers in residential buildings.
As long as the economy continues its moderate growth pace, average wages should continue to rise 2 to 4 percent a year over the next few years. Most of the settled city labor contracts will provide annual increases through 2017 or 2018.
These long overdue wage gains help hundreds of thousands of families cope with the city’s high living costs and contribute to the sustainability of the recovery by pumping additional consumer spending into neighborhoods across the city. This will also help extend the current expansion which is the first one in New York City since the 1960s that has not relied heavily on Wall Street.
Yet, further changes are needed so that prosperity is more broadly shared. Wage gains have been greatest for those who are already better-compensated. Forty-two percent of New York City families have incomes below the level necessary to provide for basic family needs, and 83 percent of those families have one or more workers.
Public and private policies need to ensure better results for those lower down the wage spectrum. Albany should follow the lead of a growing number of other states that are raising minimum wages above $10 an hour. A target of $15 an hour may seem like a lot compared to current minimum wage levels ($7.25 federal, $8.75 New York State). On an annual basis, $15 an hour comes to about $31,000—roughly the supplemental poverty measure for a 4-person family as estimated by the city’s poverty research office, the Center for Economic Opportunity.
The City should also adjust its outdated and inadequate living wage for contract workers. In particular, City government has a responsibility to fund wage increases in the Social Assistance sector where half of the workforce that is predominantly women of color earns less than $15 an hour.