ACL: State Assumptions on Minimum Wage Impact Require Adjustments

NYAPRS Note: The following comes from Doug Cooper and our friends at the Association for Community Living, whose conclusions we strongly support. NYAPRS is continuing to work with our colleagues in the community mental health and broader disability communities to press for a much greater and appropriate allocation to support our quality workforce. As reported yesterday (http://www.nyaprs.org/e-news-bulletins/index.cfm?do=headlines&mn=4&yr=2016&article=0EFA292FA00922BA3C312A47C0C10F76), New York State has unveiled calculations that are being used to determine the level of funding that will be provided to Behavioral Health and Developmental Disability Providers to offset personnel costs as the minimum wage increases over the next few years. While we applaud the state for being transparent with their methodology, we strongly disagree with their assumptions that only a handful of positions will be impacted, needing adjustments.

The state used information from Consolidated Fiscal Reports (CFRs) obtained from all not-for-profit providers to determine the minimal impact created by increasing minimum wage. New York City will be increased incrementally to $15.00 per hour by 2018. Long Island and Westchester County will reach the $15.00 per hour rate by 2021. The Rest of State (ROS) will be increased incrementally to $12.50 per hour by 2020.

Unfortunately, the State's calculations only take into account raising the salaries of positions that would need to be brought up to the new minimum wage amounts. This method of looking at the impact of increasing the minimum wage only addresses a fraction of the impact to community based mental health providers.

The hourly rate for many positions in the community mental health sector will need to be adjusted up for there to be any hope of attracting and retaining a qualified workforce. An example is a worker that is currently paid $13.50 per hour. This worker is currently valued and paid at 50% above the current minimum wage of $9.00 per hour. When the minimum wage is increased, the salary of the worker making $13.50 per hour needs to be adjusted to keep the same percentage differential with minimum wage.

So if the new minimum wage reaches $15.00 per hour, the worker in this example would need to make $22.50 per hour to retain the 50% differential with minimum wage. Adjusting the pay of not only workers below the new minimum wage, but including positions that would also be impacted by the increase is referred to as compression. Using compression as a factor, there are over 18,000 positions in the community mental health sector alone that will be impacted by increasing minimum wage.

In addition to the compression issue, fast food workers state-wide are set to see their minimum wage increase to $15.00 per hour over the next few years. This will create a scenario where fast food workers will have a minimum wage above the $12.50 per hour being set for community mental health providers in ROS, further increasing the recruitment and retention problems faced in our sector. New York State needs to support the community mental health sector by increasing contracts and Medicaid payments to address the problems providers are facing when minimum wage is increased.

Just as New York State relied on information from the CFRs of community based not-for-profits, a coalition of advocacy groups in the mental health community have developed a projected impact to the community mental health sector as minimum wage is increased using CFR data from the entire New York State community health system. The total impact once all of the targeted increases to minimum wage are met is in excess of $423 million.

The following shows the year by year impact to the mental health system as the minimum wage is increased:

12/31/16 New Minimum Impact NYC $11.00 $72,985,110 LI & W $10.00 $14,451,118 ROS $9.70 $23,801,841 TOTAL $111,238,069

12/31/17 NYC $13.00 $145,847,806 LI & W $11.00 $28,854,578 ROS $10.40 $47,603,683 TOTAL $222,306,067

12/31/18 NYC $15.00 $218,700,754 LI & W $12.00 $43,245,738 ROS $11.10 $71,287,782 TOTAL $336,628,930

12/31/19 NYC $15.00 $218,700,754 LI & W $13.00 $57,660,760 ROS $11.80 $94,631,851 TOTAL $370,993,365

12/31/20 NYC $15.00 $218,700,754 LI & W $14.00 $72,078,897 ROS $12.50 $118,713,528 TOTAL $409,493,179

12/31/21 NYC $15.00 $218,700,754 LI & W $15.00 $86,463,088 ROS $12.50 $118,713,528 TOTAL $423,877,370