How NYC's new mayor is hamstrung on wage inequality

January 3, 2014: 12:19 PM ET

When it comes to raising the city's minimum wage, recently inaugurated NYC Mayor Bill de Blasio is at the whim of Albany.

New York City Mayor Bill de Blasio

New York City Mayor Bill de Blasio

FORTUNE -- When Bill de Blasio delivered his inaugural address on New Year's Day, New York City's first liberal mayor in two decades told the thousands of onlookers that he would fulfill his campaign promise by working to "put an end to economic and social inequalities that threaten to unravel the city we love."

He said he would "take dead aim at the Tale of Two Cities" by expanding paid sick leave, requiring big developers to build more affordable housing, reforming the police department's controversial stop-and-frisk policy, and providing universal pre-kindergarten by raising taxes on the rich.

But in his vow to "leave no New Yorker behind," de Blasio failed to mention the rallying cry for the mounting movement against inequality: a higher minimum wage. That's because when it comes to raising the city's minimum wage, de Blasio is powerless.

The question of whether a city can set its own minimum wage is a matter of state law and it varies state by state, says Paul Sonn, general counsel and program director for the National Employment Law Project. The handful of states that explicitly allow it -- such as California, New Mexico, and Washington, to name a few -- are home to cities with the highest minimum wages: San Francisco, San Jose, and SeaTac, respectively.

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New York state law prohibits cities from establishing their own minimum wages. A challenge to that law in the early 1960s by then-New York City Mayor Robert Wagner made that clear. Wagner's attempt to impose a minimum per hour rate of $1.25 in New York City was rejected when a state appellate court ruled that the state's minimum wage superseded the city's. Fast-forward half a century, and the state rate still prevails. New Yorkers currently earn a minimum of $8 -- the same amount as residents in the rest of the state.

Some New Yorkers may see an uptick in wages if the city council passes de Blasio's proposal for an $11.75 living wage in cash and benefits for employees of some companies receiving city subsidies. The mayor's office did not respond to a request for an estimate of how many workers that proposal would affect, but it clearly won't raise the wages of all 1.1 million city residents who, according to the Center for an Urban Future, earned no more than $12.89 an hour last year. To do that, de Blasio would need to convince New York State's legislature to give the city the authority to set its own minimum wage.

To his credit, de Blasio has said that's precisely what he wants to do. In a policy platform released during his run for office this summer, de Blasio pledged to "advocate Albany to give New York City the ability to set the minimum wage rate at a level appropriate to the city's high cost of living and worker productivity, rather than having the same rate as that of lower-cost upstate counties."

The mayor's office did not return a request for comment on the status of that plan, but when de Blasio makes the pitch to state legislatures, he'll have a helpful case study to offer: San Francisco.

Inequality -- most exemplified by rapidly rising rents -- is still an issue in the City by the Bay, but by establishing a citywide indexed minimum wage, San Francisco has bucked what's been a national trend of declining wages for workers at the bottom of the pay scale, says Ken Jacobs, chair of the labor center at University of California Berkeley.

San Francisco established its first minimum wage of $8.50 in 2004. The rate has increased every year since then and now stands at $10.74 -- one of the highest in the nation. By comparison, the federal rate of $7.25 -- unchanged for five years -- is worth less than the minimum wage of the 1960s. San Francisco's minimum wage increased worker pay and compressed wage inequality, with few trade-offs. And a 2007 study by UC Berkeley that examined the results of San Francisco's minimum wage policy at some of the city's table-service and fast food restaurants found that it generated no detectable employment loss.

The Berkeley study also argued that San Francisco's experience could be applied to other cities, especially since "the United States appears to be moving toward a more decentralized system of wage determination, with greater variation in wage floors among both states and cities."

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Indeed, the federal minimum has been stagnant since 2009, so cities and states have addressed the wage issue themselves. In addition to the recent $15-an-hour push in the small airport community of SeaTac in Washington state, Seattle, San Francisco, and Chicago are currently considering proposals for a $15 per hour minimum wage, according to NELP.

Local minimum wage laws make sense, Jacobs says, especially in areas with a high cost of living, where pay can be pegged to cities' economic conditions.

The same could be true for New York City, if the state would allow it.

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