Of Ceilings and Floors

How Zohran Mamdani’s $30 minimum wage proposal, like other parts of his platform, could throw New York City’s economy for a loop

Photo by Robinson Greig on Unsplash

Democratic mayoral nominee Zohran Mamdani’s proposal to phase in a $30-an-hour minimum wage for New York City workers by 2030 has gotten far less scrutiny than his marquee pledges to make buses free, freeze rent hikes in stabilized apartments, provide taxpayer-funded childcare and create a network of publicly funded grocery stores. A promise this big, with consequences this profound, shouldn’t escape the red pen.

It’s impossible not to sympathize with low-wage workers trying to make ends meet in one of America’s most expensive cities, where rents have been rising faster than inflation for decades. Minimum wage increases are politically popular. But raising minimum legal pay isn’t a simple moral decision; it’s a complex economic one.

While many cities and states (including New York City, where the wage is now north of $16 an hour after hard-fought increases) have indeed raised wages with success in recent years, the amount and speed of Mamdani’s plan put it in a league of its own. An 82% increase over five years, which is what he is advocating, would push New York far beyond any comparable experiment — especially in household employment, where the impact will likely be the most difficult for employers to absorb.

On the merits, those who reflexively dismiss increases in the wage floor on the ground that minimum-wage jobs are overwhelmingly held by teenagers lost the argument long ago. So did those who insist there is always a painful tradeoff between a higher minimum and diminished employment opportunities. Research is pretty convincing that modest wage hikes can improve earnings without major job losses. Studies from UC Berkeley’s Labor Center and the University of Washington show that raising wages from $10 or $12 to $15 or $17 in cities like Seattle and San Francisco increased incomes, improved employee retention and had little impact on overall employment levels. Columbia University’s Center on Poverty and Social Policy concluded that New York City’s last big minimum wage increase, from $11 to $16 over an eight-year stretch, was a boost to low-income people with few negative ramifications.

But in all those cases, wage floors after the hikes generally stayed relatively low, and the phase-ins took their time. Mamdani’s plan would raise the wage from $16.50 to $30, an 82% increase. At $30 an hour, someone working 40 hours a week would make $62,400 per year before taxes.

That’s a very high minimum, and it is likely to have economic ramifications.

How high? A common economic benchmark called Kaitz index compares the minimum wage to the median wage. Research suggests that if the ratio is 60% or higher, businesses are likely to face especially substantial cost increases because more of their workforce will be affected, particularly in low-wage industries. Significant increases to a ratio that’s already high can reduce employment, particularly among low-wage workers and in areas with less economic slack. While some firms may cut jobs or hours, others may adapt through higher efficiency, price adjustments or restructuring.

New York City’s current median hourly wage is in the $28-$30 range, according to the Office of the City Comptroller, which would put the ratio at about 55%, higher than in most of America. If the Mamdani wage hike happens as planned and median hourly wages haven’t risen much by 2030, the minimum hourly wage could be near 100% of the median. That’s likely to be a serious drag on businesses, especially those with large numbers of low-wage workers.

In many businesses, higher wages can be absorbed through modest price increases or operational adjustments. A Berkeley study on fast food pricing found that a 10% wage hike led to a price increase of just 0.7%. But when wages go up 82% over a relatively short period, the resulting price increases in many sectors will probably be larger — and this at a time when Americans are still reeling over sticker shock.

Mamdani himself has spotlighted the rising cost of living in New York. In social media videos, he has suggested that halal cart prices are too high. But a sweeping wage hike like the one he’s championing would likely add new upward pressure on these prices. Indeed, there’s tension throughout Mamdani’s platform between a supposedly relentless focus on affordability and commitments to layer on new regulations and other mandates that could well make New York a more expensive place in which to live.

In one sector in particular, the tradeoffs could be especially severe. In domestic work — such as nannies, housekeepers and home health aides — there is no broad customer base to spread costs across. Approximately 5.9% of New York City’s workforce is employed in care-related occupations such as home health aides, childcare workers, housekeepers, and personal care aides, according to the New York City Comptroller’s Office. This represents a substantially larger share than in other places: only 2.7% of the workforce in New York State and 1.9% in California are employed in these occupations. Nationally, about 4% of the U.S. workforce is employed in similar care-related jobs. This makes New York City the most care work-intensive major labor market in the country by both share and absolute number.

In this sector, labor isn’t part of the product; it is the product. As a result, wage increases land squarely on the family employing the worker or, in some cases, on taxpayers who pick up the bill or subsidize this work. Of course, this is assuming families don’t start paying people in larger numbers off the books in part to avoid the higher minimum, also a potential consequence.

Mamdani’s promise of taxpayer-funded childcare is meant to address some of the current affordability crunch in this realm, especially for parents struggling to pay for care while earning low wages themselves. But if the government ends up subsidizing both sides of the equation — wages for care workers and the cost of care itself — it will substantially raise the fiscal stakes of implementation. Every additional dollar mandated in wages would increase the amount the city or state must cover to keep care affordable. And if the wage hikes were to kick in before the taxpayer-funded benefit, household budgets would have to absorb the whole difference.

That’s one slice of the domestic labor market. According to the New York State Department of Labor, between 2015 and 2023, nearly one in five new jobs created in the city was in home health care, making it the fastest-growing employment sector. The New York City Comptroller’s Office reports that the number of home health aides has more than doubled in the past decade, with most earning between $17 and $22 per hour. Much of this work is paid for through Medicaid-managed long-term care programs, which are themselves under serious stress from federal cuts right now.

Zeroing in on what’s called the Consumer Directed Personal Assistance Program (CDPAP) — whereby family members and others are often paid to care for their loved ones — throws the issue in especially stark relief. A chart buried in the state’s financial plan (see page 116) shows that past minimum wage hikes, which have been much smaller than what Mamdani is proposing, already cost the state about $4.8 billion a year in Medicaid alone, mostly for home care workers. Upping the wage to $30 would expand that cost dramatically, likely forcing tax increases just to maintain existing services.

New York already spends more on Medicaid home care than any other state — nearly as much as California, Texas and Florida combined. A steep wage mandate would automatically inflate the cost of tens of billions of dollars in publicly funded care, unless the state found ways to reduce utilization or cut services.

New York City cannot raise the minimum wage to $30 on its own. That authority rests with Albany. But even if the city could act alone, a $30 minimum wage is not the unalloyed good that Mamdani seems to think. Some economic actions carry equal and opposite reactions.