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Study restarts war between city, living-wage backers
Crain's New York
Daniel Massey

October 5, 2011
View the Original Article

Details of a $1 million study predicting the impact of living-wage mandates for city-subsidized projects were released Wednesday. Advocates for higher wages called the analysis badly flawed and worthless.

The city released a nearly $1 million living wage study Wednesday that concluded that mandating higher wages at subsidized projects would stifle development, particularly in the outer boroughs, and cost tens of thousands of jobs over the next 20 years.

Supporters of a City Council living-wage bill promptly called the study flawed and pointed out that it did not consider changes to the legislation that were unveiled earlier this week. The bill would require employers at projects that receive substantial tax breaks to pay $10 an hour plus benefits, or $11.50 without benefits.

City officials released a summary of the study in May, triggering a similar debate about its merits. The study, conducted by Boston-based Charles River Associates, cost just under $1 million and was in the works for more than a year.

The study estimates the bill would result in a slowdown in development, preventing the addition of 33,000 jobs and $7 billion in private investment over the next 20 years. A separate labor analysis found that between 6,000 and 13,000 low-skilled jobs would be lost as a result of employers cutting back on labor because of the wage mandates.

Overall, the study found that income losses for low-skilled workers resulting from a decline in jobs offset the income gains to other low-skilled workers from higher wages.

“This study shows clearly that, while wage mandates may raise income for a few, they also result in significant job losses and reduced private investment for many,” a spokeswoman for Mayor Michael Bloomberg said. “We'll review any proposed legislation when it's introduced, but this administration is working to make it easier to create jobs in New York City, not harder.”

Proponents of the living-wage bill, however, said the Charles River consultants did not take into account alleged failings of the study's methodology that labor-friendly economists flagged in the spring.

“The findings are complete junk science,” said Paul Sonn, legal co-director of the National Employment Law Project. “We're really baffled why the Bloomberg administration failed to have its high-priced consultants fix the errors flagged for them months ago.”

Mr. Sonn said that the study's greatest flaw was that it is based on data from projects, usually in the outer boroughs, that receive small amounts of subsidy when those so-called as-of-right subsidies are excluded from the bill.

“The real focus of the bill is the large, mixed-use development programs that get huge city subsidies—the mega-projects like Coney Island, Hudson Yards and Willets Point,” he said. “Bafflingly, they have failed to cover those projects.”

He said the study also relies on the notion that enforcement and liability provisions of the bill are groundbreaking and would lead to serious harm for developers, including preventing them from getting financing. But the provisions are already in place in the city on projects that receive subsidies under the 421-a tax-abatement program, he said.

Bill proponents also said the city failed to examine the results of specific projects in cities like Los Angeles and San Francisco that have living-wage mandates. The Bloomberg administration said the study did examine major cities like Los Angeles, San Francisco and Chicago.

City Council Speaker Christine Quinn has been pressured by the Retail, Wholesale and Department Store Union to call a vote on the bill, which has the support of 30 of the council's 51 members. She has yet to take a stance on it.

The building trades unions, which are still upset with the retail union for getting the council to torpedo the subsidized Kingsbridge Armory retail project in 2009, could emerge as a potential wild card in the debate. The trades are desperate for work and are trying to get around contractors and build an alliance with union developers, who would be affected by the bill. If the trades took a strong stance against the measure, it could help the fledgling initiative and give Ms. Quinn cover to shelve or oppose it. A spokesman for the Building and Construction Trades Council said it had yet to take a position.

A separate prevailing-wage bill, which covers only building service workers and is being pushed with less fanfare by 32BJ SEIU, could also give Ms. Quinn an out. The city has opposed that bill as well, but could strike a compromise with the speaker that would advance the building-service bill and kill the living-wage one.