Living Wage Law and New York City: A Referendum for the “Bloomberg Era”?

Interior of the Kingsbridge Armory in the Bronx. A plan to turn the ex-armory into a mall founded over a dispute between the Mayor and the City Council over minimum wage laws. The dispute has not been resolved as of this writing - in fact, the stakes for both sides have only gotten higher. Image (C) The New York Times, 2008.

NEW YORK – On one side stands a coalition of local legislators and activists; on the other, the mayor’s office and developers. The two camps are fighting over a City Council bill called the “Fair Wages for New Yorkers Act” that would raise the hourly wages of several thousand New Yorkers.

Similar laws exist in other U.S. cities, such as San Francisco and Pittsburgh. Over a hundred cities in the U.S. now have living wage laws. There are already precedents in New York City for instituting a living wage law: three major development projects subsidized by public funds have had to pay living wages to building service workers. And New York City currently has a (partial) living wage law that guarantees living wages for 50,000 healthcare workers.

But despite being a stronghold of organized labor and home to a “progressive caucus” of pro-union Democratic legislators, there is no full living wage here in New York City. The mayor has made it clear that he will veto the bill if it comes before him: “Government should not be in the business of doing that. The last government that tried that doesn’t exist anymore. That was the Soviet Union.” He and the bill’s supporters have been trading barbs for months now.

City Council members Oliver Koppell and Melissa Mark-Viverito introduced the bill in 2010. If enacted, this bill would raise the legal minimum wages of several thousand workers (no one is sure exactly how many) from US$7 an hour to US$10 or US$11.50 an hour. The employers of these workers would have to pay the workers the US$11.50 hourly wage if they do not want to provide healthcare for their workers. If they do chose to provide healthcare, then they can pay their workers the lower US$10 an hour wage. These new wage levels would be called “living wages” because they take into account the cost of living in New York City.

Even this present bill is a compromise because it targets a specific sector of the city economy: developers who accept public money to undertake the mayor’s development projects.

If a developer (i.e., a property owner) accepts public funds to develop property, then it would have to guarantee that its tenants (i.e., retail enterprises) would be paying their workers a living wage. It would only apply to developers who accept tax breaks or subsidies.

Why are City Council members linking public funds and living wages together now? Up until 2010, none of the mayor’s development projects were vetoed by the Council – for any reason, living wages or otherwise. The financial crisis that hit the United States in 2008 precipitated this contest between the mayor and the Council.

The crisis slowed down all of the city administration’s development projects. As it became apparent that developers would not be able to fulfill their promises to complete the projects on schedule, legislators began scrutinizing the projects more carefully. They were incensed that the mayor’s office wanted to sink even more subsidies and extend tax breaks to new projects – even while maintaining these subsidies and tax breaks for the stalled projects. Democratic legislators on the City Council decided that in the light of the economic crisis, they ought to do more to protect people’s incomes.

One of the new projects – the Kingsbridge Armory project – became the tipping point for living wage legislation in New York City. It provoked Ms. Koppell and Ms. Mark-Viverito to link the subsidies and tax breaks to the demand for a living wage.

In 2008, the ex-armory was purchased from the city by a developer, The Related Companies. But as Related began drawing up development plans for Kingsbridge Armory, local activists, including religious and labor leaders, demanded that Related sign an agreement to guarantee that the firms moving into the property would pay their employees living wages (US$10 an hour). Related, and the mayor, balked.

Jamin Sewell, legislative counsel for Mr. Koppell, said that legislators had hoped to come to an understanding with Related. Both sides wanted the development to go through: Related did not want to lose their contract, and legislators wanted the 2,200 jobs the project would create – but only if those jobs came with a living wage guarantee.

Related, pressured by the mayor’s office to cease negotiations with the legislators, decided not to accept the conditions. The Council vetoed Related’s plans last year. The mayor then vetoed the Council ruling, normally a death sentence for legislation in this city because the Council must then secure X votes to overturn the mayoral veto. But the Council’s opposition to the plan was so strong that they then overrode the mayor’s veto. Related lost the project.

This was the first time the City Council had rejected one of the Bloomberg administration’s development projects. Mr. Koppell and Ms. Mark-Viverito proposed the Fair Wages for New Yorkers Act following this vote.

Proponents of the bill argue that since developers and large enterprises continually receive tax breaks and subsidies as incentives to come into the city (developers received US$2 billion in tax breaks and subsidies from the city last year) through the Economic Development Corporation (EDC), taxpayers should see a return on this investment of taxpayer money in the form of higher wages for retail workers who are employed on these properties. They do not accept the reasoning that developers and large enterprises need such incentives to tap into the New York City market.

The mayor and his allies disagree. They say the subsidies are necessary to attract development and should not be tied to wage guarantees. They argue that mandating this hourly wage increase will only worsen the city’s economy by increasing labor costs and discouraging development.

The bill’s supporters are working to counter the mayor’s assertions that living wage laws do not hurt a city’s economy or reduce employment, but in fact lift people out of poverty, citing studies by think tanks of other major cities, like San Francisco and Pittsburgh, that have living wage laws. These studies, by think tanks such as the Berkeley Labor Center and the Center for American Progress conclude that living wages do not harm the economy or deter investment by developers. John Petro of the Drum Major Institute, an economic research institute based in New York City, who has testified before the City Council on living wage laws, said, “there is no evidence out there that says a living wage is going to hurt the city economy.”

Of course, legislators are not hopeful that their evidence will change the mayor’s mind, as his office has commissioned a US$1 million study by a consulting group, Charles River Associates, to contest the conclusions of economists like Mr. Petro. They are developing their case to ensure that they can secure enough votes in the City Council to pass the bill and override the mayor’s anticipated veto.

The likelihood of the bill becoming a law is very uncertain. To pass a vote or override a mayoral veto, 34 “yes” votes [out of the 51 members on the Council] are required: only 29 “yes” votes have been secured. The Five more votes that are required include the vote of Speaker Christine Quinn, the leader of the Democratic caucus in the Council. Proponents of the legislation are especially worried about her vote since she has, so far, refused to comment on the legislation.

Even though she is just one of five votes, as the Speaker of the City Council, she has more influence over other members because of her position. She has procedural control over hearings and votes, so the bill cannot go anywhere without her agreeing to hold a vote on the measure. And council members are more likely to vote in line with her because of her leadership role, so her support would solidify Democratic Party support for the measure.

Most worrisome for the legislation’s supporters, however, is the strength of the opposition. Proponents of the legislation described the “real estate-development lobby” as the strongest lobby in city politics.

According to Mr. Petro, “the developer/real estate lobby wields vast power over elected officials. I don’t want to underestimate the power and the will of the ‘business lobby’ to crush laws like this one. They’re clearly motivated and willing to put [a lot of money] behind their efforts. That money can’t be matched by labor unions.”

The bill will be publicly debated at a hearing this April. There is no word yet on whether or not the legislation will be put to a vote in the City Council.

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One Response to Living Wage Law and New York City: A Referendum for the “Bloomberg Era”?

  1. Pingback: Balloon Sheds… « Distant Voices, Vibrating Electrons

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