My name is John Petro and I am an urban policy analyst at the Drum Major Institute for Public Policy. The Drum Major Institute is a non-partisan, public policy think-tank based here in New York City. My job is to study the best local-level policies from cities across the country and to apply the lessons learned to New York City.

The bill under consideration today would establish a new wage standard—the city’s prevailing wage—for building service workers at economic development subsidy sites and at buildings where the city leases office space. It would create good paying jobs, and it should be supported.

This bill reflects a trend occurring in cities across the country in which these cities establish wage standards for projects that receive public assistance and subsidies. By doing so, cities seek to ensure that when taxpayer dollars are used to support development projects, local communities directly benefit from the city’s investment.
I want to point out the goal of this bill—ensuring that local communities directly benefit from the city's economic development subsidies—because it represents a relatively new approach to economic development that has emerged in certain cities recently, most notably in Los Angeles. This approach stands in contrast to the status quo in which economic development subsidies are used to promote development for development’s sake. While the growth that comes with development creates jobs and tax dollars, it does not necessarily follow that local communities, especially low-income communities, benefit from this growth. In New York City, we’ve experienced tremendous growth over the course of the last decade. And yet communities from Brooklyn to the Bronx still combat entrenched poverty and the gap between rich and poor has widened. This is not just problematic for the families who struggle with the realities of poverty, but also for the city as a whole.

Establishing standards—in this case wage standards—is a way to maximize the impact of economic development subsidies by creating direct benefits for city residents by creating good paying jobs. And not only do wage standards help individual workers: by lifting wages for low-income New Yorkers, we can stimulate the local economy. We know that every $1 increase in wages for a low-income worker creates about $3,200 in new spending at local businesses every year. Raising wages is an economic development tool in its own right.
Maximizing the impact of economic development subsidies is especially important at this time of strained budgets and cuts to vital city services. These standards protect the taxpayer from subsidizing poverty-level jobs that do not pay enough for working families to be self-sufficient. When tax dollars are used to subsidize low-wage jobs, the city ends up paying twice: once on the development subsidy, and then again to provide public assistance to the working families who cannot afford rent, food, and other necessities.

Setting wage standards will also help the city correct the structural imbalance in the city’s economy that is being caused by the growth of low-paying jobs. For example, the retail sector is among the fastest-growing sectors in New York City, but these jobs pay paltry wages, between $17,000 and $22,000 a year on average. Unless we find ways to create good-paying jobs for New York residents, more and more families will be added to the ranks of the working poor and increase the city's tax burden through increased reliance on public assistance. Unfortunately, we already have a lot of ground to cover: one-in-three adult New Yorkers are currently employed in low-wage work.

These are all ways in which the city, by establishing wage standards for economic development projects, can maximize the impact of economic development subsidies: by lifting up communities that have not been able to share in the city's renewed prosperity, by stimulating consumer spending in local communities, and by transforming low-paying jobs into good jobs that pay enough to support a family in New York.

I mentioned before that this bill is part of a trend. Most recently the city of Pittsburgh implemented a prevailing wage bill quite similar to the one we are considering today. Other cities, like Los Angeles, require that all workers at all economic development sites are paid a living wage. Prevailing wage and living wage are different, but both achieve the aims that I outlined above.

Thank you. I welcome your comments or questions.