What is Low Wage Buffalo?

Low Wage Buffalo is a project of the Cornell University School of Industrial Relations Buffalo Co-Lab’s Good DEEDS initiative. Good DEEDS, or Data for Equitable Economic Development and Sustainability, aims to function as a public data repository and a forum for public policy. The overarching mission of Good DEEDS is to provide an empirical basis for ensuring that development and community change in and beyond Upstate New York follows the High Road to shared prosperity for all residents, from the present to all future generations.

The objective of Low Wage Buffalo is to bring new attention to a particular dimension of inequality in Buffalo, NY, by shedding light on the magnitude and diversity of the City’s low-wage workforce. The launch of the project coincides with the twelfth anniversary of the most recent increase to the federal minimum wage, which occurred in July 2009. Prior to 1968, the federal wage floor in the United States tracked with economic productivity — meaning that as society produced more goods and services, adjustments to minimum wage ensured that workers earning that baseline level of income were able to purchase more goods and services over time. Since 1968, the relationship between productivity and minimum wage has not just been severed — it’s been inverting.

As illustrated below, the real (inflation-adjusted) federal minimum wage in the U.S. has been steadily dropping in value for decades, while productivity has continued its upward march. If the pre-1968 connection between productivity and minimum wage kept its historical pace during this time, the federal floor for hourly earnings today would be nearly $25 — about three-and-a-half times the current value of $7.25.

In this view, the problem is not that minimum wage is not increasing fast enough — it’s that minimum wage is not increasing at all. It’s lost so much value that a full-time (40-hour per week) minimum wage worker living in the United States “cannot afford rent anywhere…There is no state, county or city in the country where [such a worker] can afford a two-bedroom rental.”

On that backdrop, there is a strong national campaign to increase the federal minimum wage to $15 per hour. While that number is also insufficient to afford housing in most places, it has become a popular and potentially winnable position. For that reason, Low Wage Buffalo adopts $15/hour as something of an organizing framework. It aims to quantify and describe the universe of workers living in Buffalo whose effective hourly wages fall below this threshold. (Note: Because of the nature of the data used for this project [see “Data and Sources” below], workers’ actual hourly wages are not observable. Rather, the project uses self-reported data on hours worked per week, weeks worked per year, and annual wage earnings to compute workers’ effective hourly wages. In the vast majority of cases, effective hourly wages should be close to contract wages. Inevitably, though, there will be cases for which effective wages are lower than contract wages. These cases are often due to a form of wage theft, whereby workers work more hours than they are compensated for. While this issue goes beyond the scope of the Low Wage Buffalo project, wage theft is a problem that cannot be overlooked. Any effort to raise the minimum wage — through, for example, the federal Raise the Wage Act — should be coupled with supplemental mechanisms to fully protect workers from wage theft.)

Crucially, because state and local governments have the authority to increase working conditions in their jurisdictions — which can include raising the minimum wage — the current $7.25/hour federal minimum wage does not apply in all geographies. In fact, New York is one of a handful of states to already pass a $15/hour statewide minimum wage and begin moving toward that mark. At present, New York State minimum wage in Buffalo and the rest of upstate is $12.50/hour, with no clear timetable for when $15 will take effect ($15 is already in place in the New York City area downstate).

Does that mean the national campaign for a $15/hour minimum wage does not impact Buffalo and New York State? Absolutely Not. The current “Fight for $15” at the national level is intimately linked to the federal “Raise the Wage Act” (S. 53, sponsored by Sen. Sanders [I-VT]; H.R. 603, sponsored by Rep. Scott [D-VA3]). While Raise the Wage shares New York State’s commitment to phasing-in a $15 minimum wage, it goes one step farther. Specifically, New York’s recent law to expand minimum wage retains a two-tiered system that allows tipped employees (e.g., bartenders, food servers, etc.) to be paid sub-minimum wages. Although New York’s new rules on this matter are much more generous than current federal rules — the tipped wage is set to max out at $10/hour under New York’s law change, whereas the current federal sub-minimum tipped wage is just $2.13/hour, a value that’s been frozen since 1996 — the retention of a two-tiered system keeps a current source of economic inequality firmly in place.

More precisely, empirical research suggests tipped employees tend to experience poverty at higher rates than non-tipped employees, and still earn less than those employees, after accounting for tips. As Low Wage Buffalo demonstrates, the Accommodation and Food Services industry is the third largest source of sub-$15/hour employees in the City of Buffalo. Whereas workers in that industry account for just 10.6% of civilian wage earners living in Buffalo, they are 16.1% of low-wage workers. Fully two-thirds of workers in the Accommodation and Food Services industry who live in Buffalo earn less than $15/hour — including 57% of workers in the tipped positions of “Bartenders” and “Waiters and waitresses”.

Returning to federal policy, the Raise the Wage Act not only establishes a $15/hour minimum wage for the whole nation — it eliminates the two-tiered system and requires that all employees, regardless of whether they receive tips, be paid at least $15 per hour. It therefore goes beyond current statewide efforts and has the potential to positively impact the lives of thousands of workers and families in the city of Buffalo.

Data and Sources

The data for this project come from the most recent Five-Year vintage (2015-19) of the U.S. Census Bureau American Community Survey (ACS) Public Use Microdata Samples (PUMS). Data were obtained through IPUMS. A detailed description of these data for Buffalo can be found here: https://ssrn.com/abstract=3778025

The methods used to estimate workers’ effective hourly wages from self-reported ACS PUMS data are described in end note #59 in: Weaver, Russell. “The Raise the Wage Act Could Lower Housing Cost Burden and Advance Racial Equity.” High Road Policy 2, no. 1 (2021). Available at: https://ecommons.cornell.edu/handle/1813/104227

The methods used to compute and classify household family-size adjusted income for the Buffalo-Niagara region are described in: Weaver, Russell, and Jason Knight. “Advancing Housing Security: An Analysis of Renting, Rent Burden, and Tenant Exploitation in Erie County, NY.” (December 28, 2020) Available at SSRN: https://ssrn.com/abstract=3778025

It is important to note that the most recent ACS PUMS data available as of July 2021 were collected over the five-year period from 2015 to 2019. New York State’s new minimum wage laws were passed during the 2016-17 legislative session and began phasing in higher minimums throughout the state on December 31, 2016. For that reason, data from 2015-19 have the potential to overstate the current (2021) universe of workers earning below $15 per hour. However, until newer data become available, the 2015-19 estimates provide the clearest picture possible of Buffalo’s low-wage workforce. What is more, the [bleak] picture painted with the ACS PUMS data with respect to the massive size of Buffalo’s low-wage workforce is reinforced by other data. As an external measure for assessing reliability of the estimated size of Buffalo’s low-wage workforce, observe that the employment marketplace ZipRecruiter currently estimates that 62% of jobs in Buffalo pay between $8.20 and $15.47 per hour. Jobs paying below $12.50 per hour are presumably occupations where employees receive tipped compensation. From that perspective, the overall estimate from ACS PUMS data that ~44% of wage earners in Buffalo have effective hourly wages below $15 is not just reasonable, but potentially conservative.

Contact

Direct questions and feedback on these resources to: rcweaver@cornell.edu or on Twitter @RustBeltGeo.