The Rise of Minimum Wage in New York State and Its Implications

By James Kang, New York Politics

On December 17, 2024, Governor Kathy Hochul announced that as of January 1, 2025, the minimum wage for New Yorkers would increase by an additional $0.50 per hour. In other words, New York’s minimum wage increased to $16.50 per hour in New York City, Westchester, and Long Island, with the rest of the state earning $15.50 per hour (Hochul 2024). The adjustment fulfills Kathy Hochul and the New York State Legislature’s historic multi-year agreement to increase the minimum wage through 2026 and index to inflation beginning in 2027. 

In addition to the increase in the minimum wage rate, tipped service employees must be paid at least a $13.75 cash wage per hour with a $2.75 tip credit, with tipped food service workers required to be paid at least an $11 cash wage per hour with a $5.50 tip credit in New York City. Other types of employees are required to be paid at least $16.50 per hour. With this in mind, the purpose of this article is to examine the economic influences and broader political and labor implications of this adjustment. 

Economic Factors 

Hochul’s announcement was part of the ongoing efforts of the New York State Department of Labor (NYSDOL) to educate people about economic changes and reducing potential wage theft. In terms of potential wage theft, the NYSDOL strives to emphasize that “as of September 2023, wage theft is larceny under New York State Penal Law section 155. Failure to pay wages may result in referral to a local District Attorney for consideration of criminal prosecution” (Department of Labor 2025). But more importantly, the NYSDOL addresses the need for New York employers and employees to be educated about businesses, especially on the hourly minimum wage rate. Additionally, “under the Wage Theft Prevention Act, private employers in New York State must provide all of their employees (both exempt and non-exempt) with a pay notice” (My City 2025). It is advised that the pay notice should include information such as pay rate–including overtime–how the employee is paid, when pay-day is, the Doing Business As (DBA) name of the employer, the contact information of the employer, and any allowances towards the minimum wage. Businesses are also advised to keep copies of all available pay notices. 

Furthermore, there are contemporary influences that contributed to the necessary rise of the minimum wage in New York. One is the cost of living, with New York having a cost of living that is 26% higher than the national average in 2024. Housing, which includes buying and renting, is 75% higher compared to the national average. In addition, monthly utilities and food are both 3% higher compared to the national average. Plus, both healthcare and transportation costs are 7% higher compared to the national average, while goods and services are 9% higher (US Bureau of Labor Statistics 2025).

Another contemporary influence is inflation, where the Consumer Price Index for All Urban Consumers (CPI-U), which is a measurement of inflation, throughout the year 2024 advanced by 4.3 percent. In December, food prices rose by 0.5 percent while the energy index increased by 2.4 percent. According to the US Bureau of Labor Statistics, these are the prices that increased from December 2023 to December 2024:

• Food: 2.3%
  • At-home food: 2.0%
  • Away-from-home food: 2.7%
• Energy: 3.4%
  • Household energy: 11.4%
    • Electricity: 12.8%
    • Natural Gas: 15.3%

The only price that declined was gasoline prices by 8.9%. As for items unrelated to food and energy, the index advanced by 4.7 percent throughout the year. A higher CPI in the state of New York indicates that higher levels of inflation were present, contributing to the push to raise the minimum wage.

Overall, both living costs and inflation are the most important factors that Governor Hochul and the New York State Department of Labor considered when increasing the minimum wage rate. As Governor Hochul noted, “Putting money back in your pockets has been the focus of my first three budgets, and that includes increasing minimum wage for the lowest earners across the state. With costs of living, this increase will help to lighten the burdens of inflation for New Yorkers while providing businesses with the time needed to adjust.” Moreover, New York State Department of Labor Commissioner Roberta Reardon stated, “In this current era of inflation and rising costs, every cent counts for all New Yorkers, especially workers who earn minimum wage. By gradually increasing wages for the lowest earners, we are ensuring businesses can adjust to the change while also helping more families make ends meet. I want to thank Governor Hochul and the Legislature for working together to strengthen the paychecks of New Yorkers statewide” (Hochul 2024).

Political Responses and Economic Implications

Most political responses to the minimum wage increase were positive. State Senator and Chair of the Senate Labor Committee Jessica Ramos demonstrated appreciation for Governor Hochul and the Department of Labor, stating, “Thanks to our efforts in the 2023 budget, New York’s minimum wage earners can expect to start every new year with a raise. More money in their pockets means more money circulating in our local economy. I urge New Yorkers to check their pay stubs closely to make sure they are taking home every penny they have earned. Together with the Governor and the Department of Labor, we are committed to fighting wage theft and making sure you can continue to afford to live in our great state” (Hochul 2025).

Assemblymember Harry Bronson and New York State AFL-CIO President Mario Cilento agreed with Ramos. Bronson argued that “our families and workers deserve a minimum wage that keeps pace with costs so they can afford life’s necessities . . . This was about doing right for New Yorkers and creating an economy that supports our businesses and our families.” Cilento applauded the Governor and Department of Labor’s efforts, stating that “the 2025 minimum wage increase is a much-needed boost for hardworking New Yorkers” (Hochul 2025).

But what about the economic implications of increasing the minimum wage? According to the Congressional Budget Office, increasing the minimum wage could contribute to negative effects. “In general, increasing the . . . minimum wage would raise the earnings and family income of most low-wage workers and thus lift some families out of poverty—but doing so would cause other low-wage workers to become jobless, and their family income would fall” (Congressional Budget Office 2024). In other words, by raising the minimum wage, some employers are inclined to employ fewer workers. While it can raise some families’ real income, the income of other families can fall, causing “a net reduction in average family income” (Congressional Budget Office 2024).

New Beginning?

In actuality, the increase of the minimum wage rate signifies a “new beginning” for labor standards and economic equity in the region. Despite having experienced increases in the minimum wage in previous years, these adjustments didn’t contribute to job losses as claimed by economists. In 2018, New York increased their minimum wage rate to $15, which conflicts with the textbook model of a perfectly competitive labor market. As aforementioned, “employers facing higher labor costs reduce their employee headcounts and hours and substitute technology for labor” (Center on Wage and Employment Dynamics 2023). 

However, there are three different outcomes that New York either experienced or will observe because of the increase in minimum wage. First, businesses were able to transfer the cost increases to consumers. “Second, wage increases substantially reduce employee turnover and make it less costly for businesses to fill their vacant positions” (Center on Wage and Employment Dynamics 2023). After all, the number of job openings were much greater than the number of workers searching for jobs. Lastly, numerous low-wage employers hold the power to set their own wage and employment levels, signifying that our labor markets  indeed follow a textbook model of a perfectly competitive labor market. 

Conclusion

Besides the three different outcomes that New Yorkers can experience, Governor Kathy Hochul’s minimum wage adjustment offers a “new beginning” for labor standards and economic equity in the state of New York. After all, it is not the only local policy variation being implemented to support New Yorkers’ adaptability and resolve for economic predicaments. Other state legislatures include the Retail Workers Safety Act, Paid Parental Leave, and NYC Congestion Pricing. Overall, the introduction of these legislatures attempts to stimulate economic growth and development, signifying shifts in New York toward a more market-oriented economy.  In other words, New York’s minimum wage increase essentially opens a new door for New York to try out different economic adjustment strategies. 

References 

Department of Labor. n.d. “Minimum Wage.” NY.gov. https://dol.ny.gov/minimum-wage-0.

Governor Kathy Hochul. n.d. “Money in Your Pocket: Governor Hochul Reminds New Yorkers of Minimum Wage Increase on January 1.” NY.gov. https://www.governor.ny.gov/news/money-your-pocket-governor-hochul-reminds-new-yorkers-minimum-wage-increase-january-1.

NYC MyCity. n.d. “Minimum Wage.” NYC.gov. https://nyc-business.nyc.gov/nycbusiness/description/wage-regulations-in-new-york-state#.

Reich, Michael. 2023. “The Economic Effects of a $21.25 Minimum Wage in New York by 2026.” Center on Wage and Employment Dynamics (March): 1-13. https://irle.berkeley.edu/wp-content/uploads/2023/02/The-Economic-Effects-of-a-21.25-Minimum-Wage-in-New-York-by-2026.pdf.

RentCafe. 2024. “Cost of Living in New York.” RentCafe, September. https://www.rentcafe.com/cost-of-living-calculator/us/ny/.