Bloomberg Emphatically Vetoes Prevailing Wage Bill

bloomberg state of the city Bloomberg Emphatically Vetoes Prevailing Wage BillMayor Mike Bloomberg took an unusual tact today in vetoing a City Council measure that would have mandated a higher wage for some workers.

Rather than simply veto the bill and do so with little fanfare other than a press release, Mayor Bloomberg gave a somber speech in the Governor’s Room at City Hall, and –without taking questions from the press–issued a forceful defense of his administration’s pro-business agenda and a denunciation of the Council’s action.

“Those bills – the so-called living and prevailing wage bills – are a throwback to the era when government viewed the private sector as a cash cow to be milked, rather than a garden to be cultivated,” he said. “In those days, government took the private sector for granted. We cannot afford to go back to those days. We cannot take our economy for granted. And I will not sign legislation – no matter how well-intended – that that hurts job creation and taxpayers.”

Most politicians, when vetoing a well-intentioned measure that would give working people a boost, would be expected to do so quietly. That Mr. Bloomberg didn’t speaks to how baleful he thinks these bills are, and how important he believes his economic vision to be.

The living wage bill would mandate that developers of projects that receive substantial city subsidies must pay their employees at those projects a living wage of at least $10/hour.  The prevailing wage bill would require building owners to pay higher wages to workers in buildings that the city subsidizes or where it leases space.

In explaining his veto, Mr. Bloomberg laid out a rationale of the role of government in managing the economy.“When it comes to creating jobs, government is not the architect of the economy – that’s the private sector’s job. Government is the steward. And to be a good steward, government must take a balanced approach to regulation. And that means protecting workplace safety, guaranteeing fair labor standards, preventing discrimination, ensuring that consumers get what they pay for, and that employees are paid what they are owed and not a penny less.

“When it comes to deciding what that pay should be, I believe government has an obligation to set a minimum wage – but beyond that, private businesses should be free to make their own decisions. And I also believe that the minimum wage should keep up with inflation – and that’s why I support an increase to New York State’s existing minimum wage.

“But the prevailing and living wage bills would create a tiered minimum wage that would favor some businesses over others – and some industries over others.

Mr. Bloomberg also tweaked the Council by noting that they carved out some new projects slated for development–such as Hudson Yards and the Fresh Direct relocation–because those developments would not have happened had the living wage law been in place.

The Council seems set to override the mayor’s veto.  As evidence of how firmly Mr. Bloomberg feels that this regulation is misguided, he today promised to sue to prevent the bills from becoming  law. On what grounds, a mayoral spokesperson declined to say.

The full speech is below:

“Good morning. When I was first elected to office, less than two months after the attacks of 9/11, many experts predicted back then that people and businesses would choose to leave New York City. Now, we understood that that was possible, but we also knew it wasn’t inevitable. Not if we found new ways to convince people and businesses to stay here, to come here, and to invest here.

 

“That has been our mission from the very beginning. We never took people or businesses for granted – never. And over the past ten years, we’ve attracted record numbers of people and jobs. How did we do it? We did it by driving crime down 35 percent, by adding more than 700 acres of new parkland, by turning around a broken school system, by supporting arts and cultural institutions, by creating record amounts of new housing, by rezoning major sections of our city, by investing in major infrastructure projects, by cutting taxes on small businesses and freelancers, and by making it easier to open and expand a business.

 

“By doing all of that and more, we have created an environment that encourages people and businesses to come here and stay here – and that helps businesses start here and thrive here. Today, our population is at an all-time high – and so is the total number of jobs in our city.

 

“Three years ago, when we faced the worst national recession the country has faced in decades, I’m not sure anyone would have believed that New York City would pass the record for employment set back in 1969. But we have. We have been a national leader in job growth.

 

“In 2011, New York City created new private-sector jobs at a rate that was approximately 55 percent faster than the nation as a whole. And as we’ve created jobs, people have re-entered the labor market, and that is a big reason why unemployment has ticked up.

 

“But there’s no question that we are on the right track. As of last month, New York City has gained back 185 percent of private sector jobs lost during the recession, while the nation as a whole has gained back only 42 percent.

 

“And unlike in the past, the economic recovery in New York City is being led by businesses outside of the financial services industry. Industries like film and television, health care, tourism, bio-science, media, fashion, modern manufacturing, and tech are all growing in our city.

 

“Those industries are growing here – rather than somewhere else – not because New York has the lowest taxes in the country; we don’t. They are growing here because our quality of life is attracting the talent they need, and because our Five Borough Economic Development Strategy is creating the conditions that make greater investment possible.

 

“We want to continue improving those conditions so that we can bring more economic opportunities to all communities in New York. Unfortunately, the City Council has recently passed a bill, and is about to pass a second bill, that imposes costly conditions on businesses, and that will make it harder for government to encourage job creation, and harder for businesses to grow.

 

“Those bills – the so-called living and prevailing wage bills – are a throwback to the era when government viewed the private sector as a cash cow to be milked, rather than a garden to be cultivated.

 

“In those days, government took the private sector for granted. We cannot afford to go back to those days. We cannot take our economy for granted. And I will not sign legislation – no matter how well-intended – that that hurts job creation and taxpayers.

 

“And that’s why I will veto both the living and prevailing wage bills. But before I do, I wanted to explain the principles guiding my decision.

 

“When it comes to creating jobs, government is not the architect of the economy – that’s the private sector’s job. Government is the steward. And to be a good steward, government must take a balanced approach to regulation. And that means protecting workplace safety, guaranteeing fair labor standards, preventing discrimination, ensuring that consumers get what they pay for, and that employees are paid what they are owed and not a penny less.

 

“When it comes to deciding what that pay should be, I believe government has an obligation to set a minimum wage – but beyond that, private businesses should be free to make their own decisions. And I also believe that the minimum wage should keep up with inflation – and that’s why I support an increase to New York State’s existing minimum wage.

 

“But the prevailing and living wage bills would create a tiered minimum wage that would favor some businesses over others – and some industries over others.

 

“Think about it this way: if you want to encourage a business to open in a particular location that no one has been willing to invest in for decades, you cannot tell them that they have to pay a higher minimum wage than the competitor across the street. They won’t do it. And those jobs will be lost, and so will the tax revenues they would have generated.

 

“And I don’t think there’s any better example of that than the Kingsbridge Armory. We have new hope that we can find a private business willing to invest in the Kingsbridge Armory – but the fact of the matter is it remains empty to this day in a community that desperately needs more jobs.

 

“Under the prevailing wage bill, if the City leases space in a private building, the building’s owners cannot pay its service workers the going rate – as any other building would, including a building next door or across the street. Instead, under this bill, they must pay their workers whatever the City Comptroller decides.

 

“Having a City employee, like the Comptroller, tell the private sector what to pay – rather than letting the market tell businesses what is fair and equitable – will lead to all kinds of market distortions that cost taxpayers money.

 

“After all, no owner of a building would sign a lease with the City unless the City pays the additional costs the owner would incur as a result of having to pay the higher, government-mandated wage. So as a practical matter, under this bill, New York City would pay part of the wages of private sector employees.

 

“The living wage bill, when passed, would be even more costly to taxpayers. That bill would require businesses that receive more than $1 million in tax abatements or other incentives from the City to pay all of their workers at least $10 an hour with benefits, or $11.50 an hour without benefits, even though a business across the street, or next door, would not have to pay those higher wages.

 

“In practical terms, that means one of two things: Either those businesses will decide not to proceed with their investment because of the costs, which would kill all the jobs that would have been created – hurting job seekers and taxpayers. Or: City government – meaning the taxpayers – would have to pay for those wage requirements by offering more generous financial benefits.

 

“Of course, I understand why some union leaders support the legislation; their job is to increase the salaries and benefits of their members whether by negotiation, arbitration, or legislation. But it’s government’s job to stand up for taxpayers – and for job seekers. And that leaves me no choice but to veto these bills.

 

“The reason City government will occasionally offer incentives to a particular business is to induce investment that otherwise would not largely take place.

 

“The Kingsbridge Armory, as I mentioned, is a great example. But just look at Fresh Direct. The City Council delayed the living wage bill to ensure that it would not apply to Fresh Direct because it was clear that the bill would threaten Fresh Direct’s plan to relocate to the Bronx, expand, and create thousands of jobs. But what about the next Fresh Direct? It may decide not to stay – or not to come at all – if we impose these wage mandates onto our economic development incentives.

 

“The City provides economic development incentives where they are necessary to create jobs, and we’ve often targeted those incentives at projects outside of Manhattan – like the Kingsbridge Armory and Fresh Direct. We have set a very high bar for companies to qualify for incentives. And we have been offering much, much less than our friends across the Hudson River.

 

“But there are occasions when it would be foolish not to offer incentives. The Applied Science campus on Roosevelt Island – perhaps the most important economic development initiative our city has seen in decades – required an incentive package. So did the new applied science campus that NYU is building in downtown Brooklyn.

 

“These projects would have been exempt under these bills, it’s true, because they are nonprofit institutions – and the City Council wisely carved out nonprofits from the bill. The Council also wisely carved out a large number of other groups that would have been hurt by these bills, including certain developers of affordable housing, supermarkets, and the Far West Side – as well as manufacturers.

 

“But the fact is, the bill would still threaten many of the City’s efforts to create new jobs and housing across the five boroughs. From Hunts Point to Willets Point to Coney Island, we’re working to revitalize long-neglected areas by attracting new investment. We cannot write those communities off – and we won’t.

 

“But these two bills would make it harder and more costly to bring economic opportunity to all five boroughs. They would make it harder and more costly for businesses to start, harder and more costly for businesses to stay, and harder and more costly for businesses to thrive.

 

“There are some on the far right who say government should never intervene to offer assistance to private businesses to create jobs. And there are others on the far left who say that if government aids business it must do so only if it sets separate wage requirements. They are both wrong.

 

“Government has an important role to play in fostering economic development, but it will not succeed in doing so if the conditions it sets for assistance harm rather than help businesses. Those conditions should encourage broad-based growth – not impose selective redistribution of revenue.

 

“The Council wants to take revenue from owners and give it to a select group of employees. That’s not the way the free market works. The costs would be paid by taxpayers – both in more generous financial packages to the companies, and in lost tax revenue and jobs when the City Council cannot afford more generous packages.

 

“The way to raise wages and salaries is not for government to impose legislative mandates. It is for government to foster broad-based economic growth that gives people opportunities to climb up the economic ladder. That is what we have been working so hard to do over the last ten years, and why we’ve not only created jobs that have produced record levels of employment, we’ve invested in programs that help people learn the skills they need to advance and earn promotions.

 

“I share the City Council’s desire to see people earn higher wages and salaries, but there are no short-cuts. Government cannot bend the laws of the labor market without breaking the bank – and destroying job prospects for people who most need work. Unemployment is still much too high in the city, and these bills will do nothing to help lower it.

 

“In fact, these bills will not only impose harmful conditions on businesses, they will send a signal to the private sector that New York City government may move to adopt even more requirements on wages – and more onerous regulations on their business in the future.

 

“When businesses do not have confidence in what future conditions are likely to be in a given market, they sit on the sidelines. They don’t invest. That’s what so many companies across the country are doing right now the same thing because they have no idea whether or not, how, or even if Washington is going to grapple with long-term budget deficits, which could have a major impact on interest rates and tax rates.

 

“In New York, if businesses do not have confidence that City government will continue to manage its budget responsibly, and invest in the future, and not attempt to impose burdensome new regulations and costs, they will not invest here.

 

“Some of them will leave – and others will decide to make their investments in another city. We can’t afford to lose out on those jobs. But that is the slippery slope we are starting down with these proposed laws.

 

“I urge the Council Members to vote against the living wage bill, and to vote against overriding this veto on the prevailing wage bill. Both bills are based on legally dubious theories, and if they become law, we will challenge them in court.

 

“Now, just about 30 years ago, I started a small business here in the city. Most people told me I was crazy, but I believed in my idea – and I believe in the future of the New York City market.

 

“My business turned out to be successful due to a lot of reasons – including a lot of luck. But the most fundamental reason is very simple: After a terrible decade in the 1970s, New York City was succeeding in getting people and businesses to come and stay, and invest in their futures.

 

“And that is still true today – thanks to an awful lot of hard work. But we cannot take our economic growth for granted. And as soon as we do, as soon as we begin imposing costly conditions on companies to do business here, the smallest entrepreneurs and the biggest companies will decide to build their future elsewhere. They don’t have to move out, they can just as they grow make that growth occur elsewhere. It’s something you won’t see, but the effect will be with us for decades.

 

“We just cannot allow that to happen. We’ve come too far over the past ten years to turn back now. New York’s future, I think, could not be brighter – but that is only true if we allow businesses to help us build it.

 

“Therefore, on behalf of New York City’s taxpayers and job seekers, I will veto Introductory Number 18-A, and if and when the living wage bill is passed I will veto that as well. Thank you.”