By Megan McArdle April 9, 2016 | 5:01am
Andrew Cuomo Photo: AP
New York state has always been a very expensive place to do business. Soon, it’ll be more expensive still, as the state begins implementing two new programs just signed into law by Gov. Cuomo: a $15 minimum wage and 12 weeks of paid family leave.
I hardly need to explain why requiring employers to pay at least $15 an hour is bound to be expensive for businesses. But the family-leave policy may require some explaining, because the governor insists it won’t cost businesses anything at all.
When fully implemented, in 2021, it will cover 67 percent of a worker’s weekly salary, capped at 67 percent of the state’s average weekly wage (which is currently about $1,200 a week, making for a maximum weekly benefit of about $800).
This is supposed to be fully paid for by a payroll deduction, which is allegedly going to be a little over a dollar a week.
In other words, it’s supposed to be structured more as a mandatory insurance program than as a free benefit. I don’t see how the promised insurance can possibly be provided on a little over a dollar a week: An employee making the New York state average weekly wage, having an average two children and perhaps caring for a sick parent or spouse once would collect a lifetime benefit of almost $30,000, while paying in about $2,300 over a 40-year career.
But the premiums can be adjusted to make the math work out without forcing employers to cough up.
This doesn’t mean there’s no cost to employers. If the new law encourages people to take more leave, then employers are going to have to find someone to do their work. There will be paperwork. All of this adds to the cost of doing business.
By itself, adding mandatory family leave to the schedule of benefits is unlikely to bring many employers to their knees. But, of course, it’s not as if this is the only cost the government has seen fit to impose. It’s also mandating that employers must start paying their workers a higher minimum wage.
That eventual $15 an hour is going to be costly for a lot of businesses — businesses such as retail outlets in the city that may well be able to simply hike their prices to make up for the increase. But even New York City doesn’t have a huge number of people who are bottomless pits of money able to absorb any increase in the cost of the goods and services.
If prices at the restaurants near my house went up by 10 percent, I wouldn’t stop eating out, but I’d cut back on how often I went out. Or I’d have to cut something else out, and it’s unlikely to be my physical therapy or my daily commute.
And New York state businesses are already groaning under a huge regulatory burden that makes the state a very expensive place to do business. I’m not talking about just labor-market regulations, but about everything from the tax burden to the expensive workman’s compensation system to the high rents driven by land-use regulations.
All of these things conspire to make it very difficult to build a business and employ people.
Of course, New York has offsetting advantages — notably, the fact that it’s the center of the US financial industry and home to assorted glamour industries that draw tourists along with high-wage workers.
The financial industry probably doesn’t care what the minimum wage is, because no one at those companies makes it. But not everyone works in finance. Many people work for companies that sell their goods and services nationwide — and those companies can’t simply raise prices to offset their costs.
The fact that it’s so expensive to start a new business makes it hard for the state to diversify away from its dependence on an industry no one else in the country really likes.
If finance follows industries, like publishing into decline, downstate could start to look like northern and western New York: trapped in permanently low growth by an expensive regulatory regime they can neither afford nor repeal.
None of the state’s regulatory decisions is crippling on its own. New York can afford any of them. The problem is it may not be able to afford all of them — and none of these things is ever considered as part of an overall regulatory burden, which must be kept in balance with the need for economic growth.
Each is considered only in isolation, and approved in isolation. And so the burden grows.