Controversial Charles River Associates study sparks NYC deba

by Vault Consulting Editors | May 11, 2011

Boston-based consultancy Charles River Associates found itself the subject of a tense political debate this week in the nation's largest city. On Monday, the firm published an executive summary of a study entitled "The Economic Impacts on New York City of Proposed Living Wage Mandate", warning of the economic consequences such a mandate might have on jobs and private investment in Manhattan and the other boroughs. The release of the long-await study prompted a barrage of political crowing from both sides of the aisle, with supporters of the legislation questioning the integrity of CRA's work.

The subject of CRA's study is a proposed "living wage" mandate that would require employees working on government-subsidized projects (specifically, those that enjoy $100,000 or more in government aid) to be paid at least $10 per hour.

Chief opponent to the bill is Mayor Michael Bloomberg, who has repeatedly vowed to veto any proposal that reaches his desk. Both Bloomberg and the city's Economic Development Corp., which commissioned the study at a cost of $1 million, have suggested that the mandate's implementation would result in a citywide reduction of private investment amounting to $7 billion. Other allies of the Bloomberg administration have called the proposed legislation "a job killer" and "a development killer".

Conversely, proponents of the bill pointed to successful examples of the living wage's implementation as evidence of economic feasibility. "The core question here," asked National Employment Law Project co-director Paul Sonn, "is why New York can't do what Los Angeles and San Francisco have been doing for years: ask major businesses that receive taxpayer-funded benefits to pay a living wage in return."

The Wall Street Journal reports that "dozens of cities nationwide have some type of living-wage law."

CRA's conclusions largely backed the Bloomberg administration's claims. Among the firm's findings: if the bill were to become law, 1/3 of retail projects outside of Manhattan would fail; 1/4 of office projects in Manhattan would fail; and, most spectacularly, 33,000 jobs would be lost every year.

Opponents of the bill were understandably pleased by the consultancy's findings. "The legislation would result in major job losses at all income levels and particularly among low-income New Yorkers," a mayoral spokesman said, citing the study. "The biggest job losses would occur in the areas with the highest unemployment at a time when too many New Yorkers are without jobs."

Living wage advocates lashed out at the firm, calling the study "rhetoric at its worst" and its methodology "unreliable." Others suggested that CRA simply returned the verdict that its client, Bloomberg and the Economic Development Corp., were seeking (cue the Gothamist headline: "Living Wage Study Ordered by Bloomberg Agrees with Bloomberg"). The bill's lead sponsor, Bronx Democrat Oliver Koppell, told the Journal that he was "very skeptical" of the firm's ability to produce an objective account on the subject.

The study's authors at Charles River Associates seem to be the only stakeholders who aren't claiming victory or crying foul. Good riddance, I say!

For more information:
WSJ
Gothamist

Photo: John Amis, AP

Filed Under: Consulting


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