Associated Press

ALBANY - The minimum wage in New York will increase once again on New Year’s Eve, a change that is welcomed by low-wage workers, but feared by small-business owners and those in the tip-service industry.

The increase is part of a state law approved in March that will boost the minimum wage in New York City and downstate to $15 an hour by 2021.

The first increase starts Saturday, Dec. 31 — when the minimum wage for workers in New York City will increase to $11 an hour or $10.50 an hour for employers with less than 10 workers.

It will rise to $10 an hour in Nassau, Suffolk and Westchester counties. Outside the metropolitan area, the wage will be raised to $9.70 an hour.

Cuomo and advocates of the higher wages said the move will boost the economy and help 2.3 million low-income workers.

“These policies will not only lift up the current generation of low-wage workers and their families, but ensure fairness for future generations and enable them to climb the ladder of opportunity,” Cuomo said in a statement April 4 when the bill was ceremoniously signed into law.

By the end of 2018, the wage will increase to $15 an hour in New York City for large businesses and a year later for small companies with 10 or fewer employees.

On Long Island and Westchester, the wage will hit $15 by the end of 2021.

For the rest of the state, the wage will grow to $12.50 at the end of 2020 and go on a schedule toward $15 set by the state Budget Division and Department of Labor.

The increases worry local businesses, who said they have already felt the impact of previous wage increases.

A year ago, the minimum wage was increased to $9 an hour, and it rose higher for fast-food and state workers: $10.50 in New York City and $9.75 for the rest of the state.

At the end of this year, the fast-food wages will grow to $12 in the city and $10.75 in the rest of the state.

The fast-food wages will hit $15 at the end of 2018 in the city and $15 an hour elsewhere on July 1, 2021.

There was also an increase this year for tipped workers to $7.50 an hour, a $2.50 bump from $5 an hour last year.

The higher wages will ultimately lead to nearly $16 billion in new spending in local communities, the state has estimated.

“Increasing the minimum wage is proven to reduce worker turnover and improve productivity,” said Cullen Burnell, a spokesperson for the state Labor Department.

“Additionally, when low-wage workers receive a pay increase, they tend to spend it locally.”

Some business owners said the minimum-wage increase has negatively impacted their operations.

Tipped wage impact

After the increase in tipped wages, Tim Ward, the owner of McGirk’s Irish Pub in Chenango County, was forced to cut back on his employee’s hours and give shifts to individuals who outperformed their co-workers in order to refrain from passing the cost of the increases onto customers.

The higher wages also backfired, he said.

“Believe it or not, some people know they (the employees) got a 50 percent raise, and they’re tipping them less,” Ward said. “My employees were furious; they are taking home less in their pocket now than they were in 2015.”

Currently tipped workers receive a minimum cash wage of $7.50 if they earn enough in tips to make up the difference for $9 an hour.

For other tipped workers, the rate is $7.65 an hour if they earn at least $1.35 an hour in tips.

If they earn at least $2.20 in tips an hour then they must be paid an hourly wage of $6.80, according to the Department of Labor.

The increases for those in the tip-service industry had a more profound effect on Mike Polasek, owner the Poughkeepsie-based catering service Simply Gourmet, and his employees.

In June, he said he was forced to close Bluestone Bistro in Poughkeepsie because he could not afford to pay his employees at the increased rate without passing the burden onto consumers.

In addition to closing Bluestone’s doors this summer, Polasek said he had to eliminate merit-based raises for his employees and increase booking costs for Simply Gourmet.

Pushback continues

Business owners continue to oppose the higher wages.

Last spring, the Business Council of Westchester released a poll to its members and found that twice as many of the business owners surveyed were against raising the minimum wage compared with those who supported it.

The Greater Rochester Chamber of Commerce found similar results after surveying over 200 of their members last year. The chamber found that roughly 70 percent of members opposed the wage increase, according to Christopher Wiest, vice president of the chamber.

“When you pass wide, sweeping legislation like minimum wage, you sometimes forget about what the cause and effects are going to be on a daily basis for people who are now going to have to live under this new law — and that’s what we’re going to have to wait and see,” said John Ravitz, the executive vice president of the Westchester council.

After the Dec. 31 raise, the New York City wage will grow $2 each year before hitting $15 at the end of 2018. It will grow $1.50 a year for the city’s small businesses until reaching $15 a year later.

For Long Island and Westchester, the increases will be $1 an hour until the end of 2021, while it will rise 70 cents each year until Dec. 31, 2020, for the rest of the state.

Frank Castella, Jr., the CEO of Dutchess County Regional Chamber of Commerce, knocked the plan.

“These increases will also make us less competitive across state lines, as forced inflation is inevitable. Our businesses will no longer be able to compete on price, and sales will be lost to neighboring states,” Castella said.

Unintended consequences

The law includes a so-called “safety valve” that would allow the state starting in 2019 to consider whether to continue the increases based on the economy at the time.

Brendan O’Bryan, the manager of government relations at the Greater Binghamton Chamber of Commerce, said the higher wages have “opened up a whole other can of worms.”

Some businesses are currently paying their employees above the minimum wage, particularly those in the nonprofit sector who depend on state funding.

Now those organizations and employers are left wondering if they, too, will have to increase salaries to stay further ahead of the minimum wage.

“The state’s already said that they’re not going to increase the funding to maintain the [nonprofit] organizations,” O’Bryan said.

For example, Fernan Cepera, the chief human resources officer at the YMCA of Greater Rochester, calculated the higher minimum wage would cost the organization $400,000 per year until 2020, resulting in a total impact of $2 million.

“If they raise the minimum wages for dishwasher to $12.50 an hour, then I have to pay $19 or $20 an hour for a good chef,” Ward said.

Weist said companies and nonprofits are reporting that they will have three choices: cut employee benefits, downsize their workforce or reduce the services and programs they provide.

Higher wage support

Nonprofits, in particular, should lobby for more state funding, said Bill Lipton, the director of state’s Working Families Party, the union-backed group that helped lead the “Fight for $15” effort this year.

“We need to join together with social-service workers, unions and other progressive forces to ensure that there is enough money in the budget so they can continue to provide their vital services,” he said.

The Working Families Party has advocated for small-business property tax relief to prevent them from having to cut back on their employees’ hours or raising their service costs.

“Local businesses are critical to our economy, and we should be changing our policies,” Lipton said.

The National Employment Law Project, a Manhattan-based organization that advocates for the rights of low-wage workers, believes that raising the minimum wage will allow small-business owners to attract talented workers at the same rate that bigger companies do.

“We believe that raising the minimum wage would actually level the playing field so that small businesses are not overburdened by having to compensate workers at a higher rate to compete with large businesses for the most talented employees,” Yannet Lathorp, its policy analyst, said.

The increase to $10 an hour is welcomed by Rockland County resident Norma Criollo, who works in the kitchen of a Nanuet McDonald’s. Criollo works to support herself, her children and her parents who live in Mexico.

“This increase will enable me to keep up with my bills, and I hope to put a little more aside to send to my family,” Criollo said.

“I have been happy to see our paychecks go up and look forward to seeing them go up even more in the new year.”

LRiback@Gannett.com

Lindsey Riback is a staff writer with USA TODAY Network’s Albany Bureau.

What’s new?

New York’s minimum wage is set to increase on Saturday, Dec. 31. It is currently $9 an hour.

The new rate in New York City will be $11 an hour or $10.50 an hour for employers with less than 10 workers.

It will rise to $10 an hour in Nassau, Suffolk and Westchester counties.

Outside the metropolitan area, the wage will be raised to $9.70 an hour.