After more than a year in development and nearly $1 million spent, the city released a report this month about the effect of a City Council “living wage” proposal, which would require that businesses receiving city tax breaks or assistance pay their employees higher than minimum wage.
According to the study, if the City Council proposal became law it would cost the city up to 13,000 jobs. But when draft findings released in May made a similar prediction, living wage advocates were quick to perceive a flaw: The report’s dire assessment was based on how the law would affect a specific city real estate program that would not actually be affected.
Now, after five months of heavy criticism, the final report has been released, still reliant on the same, unaffected program for its analysis. The program, called ICAP, is protected by state law from changes by the city to its eligibility rules.
“As a result almost every finding in the report does not apply,” Bronx Borough President Ruben Diaz, Jr. said in May at a Council hearing. “The study that they put out is not worth the paper that it was printed on. In fact, I dare say that the million dollars that the city paid out should be given back to the taxpayers of the City of New York.”
Believed program was covered
Officials from the Economic Development Corporation, which commissioned the study, and whose president and board are appointed by the mayor, have said they originally believed ICAP was covered under the proposed law. “[The study] is based on ICAP because that is the way the legislation is written,” Euan Robinson, a senior director at the Corporation, said at the same hearing.
But the city’s Independent Budget Office (IBO), along with City Council lawyers, concluded in May that the program would be excluded.
“Existing state law would not allow the city to change the eligibility rules for this program. For this reason, we were somewhat surprised to see that the study … used ICAP as the basis for [the authors’] analysis of the impact of the living wage proposal on real estate development,” wrote IBO Deputy Director George Sweeting in testimony for the hearing. The proposal’s primary sponsor also agreed at the hearing to amend the legislation, in case of any remaining uncertainty.
Meanwhile, the Economic Development Corporation has quietly refused to acknowledge ICAP’s exclusion, both at the hearing and since. When asked this month, a spokesman would not comment about whether or not they believe it is included in the living wage proposal.
Despite the uproar in May, at no point during the $1 million report’s year-long creation did the Corporation tell researchers about any controversy over ICAP. According to Anthony M. Yezer, director of George Washington University’s Center for Economic Research and one of three senior consultants who worked on the report, the researchers were specifically directed to use that program for their analysis.
“All I can say is that I was told the program was covered. … If they’re not proposing to cover that, then I hardly know what to say,” Yezer said when he was told the law would not apply to ICAP. “That would be very odd. We were told it was covered.”
A spokesman for the Economic Development Corporation described Yezer’s claim as “not quite accurate.” The other two senior consultants for the report either did not work on the analysis or could not be reached for comment.
But the report itself says all the earnings and employment data in the model—the information about ICAP—was provided by the Economic Development Corporation.
Say findings still valid
While officials from the Corporation have not conceded the program’s exclusion from the law, they have been careful to uphold the validity of their report. A spokesman characterized ICAP as a “baseline” program, similar to the programs that would be affected by the law.
“Opponents seem to be denying the basic economic fact that when something—even labor—costs more, people buy less of it,” spokesman Patrick Muncie said in an e-mail. “Higher wages would mean fewer jobs, particularly in a down economy.”
Even though he designed the study under a different impression, Yezer agreed. “The spreadsheets are the spreadsheets,” he said. “We have a model that is mathematically correct. If you lower your rates, you are going to get a lot more revenue.”
That’s nonsense,” Paul Sonn, legal co-director of the National Employment Law Project, wrote in an e-mail. He said the bill “applies only to projects receiving large discretionary subsidies,” which means “a much smaller number of projects with a far different profile from the ones modeled by the Bloomberg consultants.”
Sonn, along with other living wage advocates, believe the study intentionally uses ICAP to show a particular result.
“The reality is that the study exists to support the mayor’s preconceived thoughts on living wage,” said John Desio, spokesman for Bronx Borough President Diaz. “The fact that they studied something that’s not covered under the bill makes the study useless.”
Desio is referring to Mayor Michael R. Bloomberg’s vocal opposition to living wage laws. The mayor has likened the proposal to communism. “The last time people tried to set rates basically was in the Soviet Union and that didn’t work out very well,” he said.
The proposed law has enough support to pass the City Council, and could perhaps overcome a mayoral veto. Council Speaker Christine Quinn, who is weighing a run for mayor, has to decide whether or not to bring the proposal up for a vote, but so far has not indicated support either way.