Ithaca’s workers – and employers – facing high economic inequality and a rising living wage

For many Tompkins County employers, paying a living wage has long been one of the biggest challenges. 

The Racker Center is no exception. “Our primary funding source comes from the state government, with additional funding from counties, school districts and parent fees,” said Cris Donovan, Racker Center executive director. “Unlike some other industries, nonprofit voluntary disability service providers do not have direct control over our revenue.”

 In spite of many hurdles, the Racker Center, which employees 800 people across Tompkins, Cortland, Tioga and Broome counties, is a certified “living wage” employer until the end of 2024, paying all of its employees a minimum of $16.61 an hour, which was the living wage calculated for Tompkins County in 2022.

Now a new living wage has been calculated by the Massachusetts Institute of Technology’s living wage calculator. 

MIT’s calculations found that the living wage for Ithaca has risen from $18.45 an hour in 2023 to a current living wage of $24.64, putting even more of a strain on employers like the Racker Center that are trying to keep up.

Cornell Research Professor and Director of the Ithaca Co-Lab Ian Greer said that he is inclined to trust the new MIT figure.

“We [at Ithaca Co-Lab] have used similar methodology in the past, and our result has been very similar [to MIT’s],” Greer said.

The timing of this living wage calculation coincides with the release of a new national study by the Milken Institute that ranked Ithaca near the bottom of its list of 200 small cities around the country in terms of inequality and wage growth.

According to the Milken Institute’s ranking of “Best-Performing Cities,” Ithaca ranked in the bottom fifth of the 203 small metropolitan areas studied, based on a compilation of 13 economic and social indicators. For wage growth between 2017 and 2022, for example, Ithaca ranked 188th.

Ithaca’s income inequality is also considered high. With a Gini index of 49, Ithaca ranks 172nd out of 203 small cities in the Milken ratings.

The Gini index is a summary measure of income inequality that measures the extent to which the distribution of income or consumption among individuals or households within an economy deviates from a perfectly equal distribution. A Gini index of 0 represents perfect equality, while an index of 100 implies perfect inequality.

Ithaca’s Gini index is higher than that of the United States (40) and is similar to countries like Angola (51), Honduras (48) and Guatemala (48), and is close to that of the New York City metro area (54), points out a recent press release by the Tompkins County Workers’ Center.

In ongoing discussions of the local living wage and expensive housing, employees at the Workers’ Center say that all of these current findings support their argument that concrete steps should be taken to better support workers in Ithaca and Tompkins County.

Their opinions are backed by Greer, who supports instituting a higher minimum wage in Tompkins County.

“Ian and his group have done research and figured out that at least 30% of workers, disproportionately people of color, get paid less than the living wage. So, they and their families would be the working poor, not making enough and having to depend on social services,” said Carl Feuer of the Workers’ Center.

“The amount of gentrification here is profound,” said Pete Meyers, coordinator at the Workers’ Center,  a local organization formed 25 years ago with the mission to “stand up with all people treated unfairly at work.”

Feuer and Meyers, as well as Greer, are encouraging local lawmakers to institute a living wage that is higher than the minimum wage set by New York state, which is $15 an hour.

“This would be the only place in the state where that has happened,” Feuer said. This means that all of upstate New York accepts the statewide minimum wage, and Feuer said that in many places that wage is inadequate.

“And in Tompkins County, it is extremely inadequate,” Feuer said.

But not everyone thinks raising the minimum wage is a good idea for the health of the local business community.

“Frankly, I’m not aware of many employers who haven’t already significantly raised wages well above the minimum wage and likely above the living wage without additional legislation being needed,” said Jennifer Tavares, president of the Tompkins County Chamber of Commerce. “The market here has already to a large degree increased wages beyond what is required from New York state.”

“For a small business with 10 employees, they may be trying to increase entry-level pay, but then they also need to increase everyone else’s, so you get wage compression that ends up costing tens of thousands of dollars a year in net revenue,” Tavares added. 

Donovan confirmed that wage compression has been a major issue for Racker. 

“One of the biggest obstacles and challenges was wage compression. As Racker focused our resources on raising the base wages for our employees so that everyone had a living wage, we experienced a lot of wage compression,” Donovan said. “This is still something we are working to adjust for employees. The cascading effect of an increased base wage for entry-level staff requires increased wages for others, and that continues to be a challenge for us within our existing funding.”

Though the Milken study ranks the Ithaca area low, it is important to consider other factors that may influence those numbers, Taveres said. She pointed out that perhaps some of the small cities that ranked well in terms of wage growth started with a minimum wage that was very low five years ago and went up in the subsequent years, forcing wage growth even though a municipality’s current average wage could be well below that of Tompkins County.

“We have seen total wage growth, particularly at the lower wage level,” Taveres said. “Even in the time I’ve been here [at the Chamber], I’ve been looking at people trying to increase the minimum wage to $11 an hour, and now it’s $15 an hour…I also think we have had a higher minimum wage in this area than others have had.”

Four out of the 10 top-ranked small cities are in Idaho. Idaho has kept the federal minimum wage of $7.25, which was set in 2009. None of these cities are in a county that has adopted a higher wage.

But another thing these cities have in common is their access to affordable housing. The Idaho cities of Idaho Falls, Coeur d’Alene, Twin Falls and Pocatello, which ranked 1st, 2nd, 5th and 7th overall, respectively, have respective rankings in housing affordability of 37th, 146th, 73rd and 95th — a bit all over the board, but three out of four are in the top 50% of small cities included in the “Best-Performing Cities” rankings.

What else do these four Idaho cities have in common? They all rank in the top 15 cities for wage growth from 2017 to 2022 or 2021 to 2022 (the study calculated both timeframes). The study acknowledges that many of the top-ranking small cities were clustered in Idaho and speculates that this is likely due to a combination of high job and wage growth, “bolstered by a small but growing high-tech sector and high rankings on resilience and income distribution metrics.”

With Cornell University, Ithaca College and Tompkins Cortland Community College all located in Tompkins County, jobs obtained by students, which are often part-time jobs or jobs with tipped wages, drive down the low end of the wage scale in the city of Ithaca, Taveres said.

But not all small cities with a high population of college students struggle with wage growth and inequality the way Ithaca does, at least not according to the Milken study.

Burlington, Vermont, is another college town situated in relatively rural surroundings. But “Burlington-South Burlington” (which were scored as one entity in the study), ranked 19th overall, 84th in wage growth and 33rd in income inequality.

One way in which Ithaca and Burlington differ: Burlington scored high in the high-tech sector while Ithaca scores relatively low, hovering in the middle of the pack of 203 cities in the four categories that measure high-tech performance.

Burlington also ranks 10th in “community resilience,” which the Milken Institute defines as the ability of a city to respond to a disaster of any kind, including natural disasters and the COVID-19 pandemic. Ithaca ranked 40th in this area.

One area in which the two cities are fairly closely ranked is housing affordability; Burlington actually ranks higher at 163rd, and Ithaca 139th. 

Ithaca’s high cost of housing is a huge factor, said Shaianne Osterreich, Ithaca College professor and chair of the Economics Department.

“In every conversation I have about Ithaca, people are always talking about the affordable housing crisis; this report notes that 30% of Ithaca residents are paying more than 30% of their income on housing,” Osterreich was quoted as saying in a recent Workers’ Center press release. “This is unsustainable and it maps onto multiple known inequities regarding housing, racialized and class-based labor market inequities, and meager inflation adjusted wage growth. The current situation is forcing families to consider leaving town.”

Greer said the lack of investment in affordable housing, particularly at the state level, has led to Ithaca’s current situation. “We could have been investing in affordable housing, and instead the price of housing has gone way up, the quality of housing is not great, and the result is that housing is very unstable for a lot of people with jobs.”

Greer added that this is not just an issue for those living with unaffordable and/or low-quality housing, as people without a stable roof over their heads have a hard time showing up as reliable employees within the workforce. “That’s a problem in the workplace for employers,” he said.

Greer argued that retail and hospitality — the kinds of relatively low-paying jobs that students often flock to — are not the real issue in Ithaca in terms of low wages for the working poor.

“I’ve been tracking people’s wages, so I can tell you which sectors have wage growth above and below inflation,” Greer said. “There is a lot of pressure on employers, and they are responding by bringing up the bottom, but that is only true in some sectors. That’s true in food service, and last I checked it was faster than inflation in that area. But health care and education — in those sectors wages have been lagging inflation for similar reasons; all caring industries are stagnant. We expect them to bring their wages up anywhere near living wage by bringing up the bottom wage, and it’s very hard, then, to adjust wages above that. It leads to very compressed pay scales, which limits the overall effect on wages.”

Despite the difficulties and complexities around raising wages, some local businesses have had success while paying a living wage. Currently, 127 Tompkins County businesses are certified “living wage employers” by the Workers’ Center, and some are in industries that Greer said tend to struggle in this area.

One of the core values of the Racker Center, which provides strength-based support for individuals with disabilities and their families, is to provide staff with the highest wage possible using its various funding streams, Donovan said. 

“In 2018, we identified a goal within our strategic plan to provide a living wage to all Racker employees, and we were able to do so in 2022 thanks, in large part, to temporary government funding available throughout the COVID pandemic and a 5.4% cost-of-living adjustment to our reimbursements included in the 2022 New York state budget,” Donovan said.

With the living wage continuing to climb at a rapid rate, Racker’s “living wage employer” status may not be sustainable, according to Donovan.

“We will need help,” she said. “The proposed 2024 New York budget only includes a 1.5% increase in our reimbursement rates, which is well short of the 9.6% increase in the living wage. Our team is working on various plans, but without government help in adjusting our rates so that we can direct that funding toward our employees, this will be very challenging for us.”

Still, Donovan said, the Racker Center will do everything in its power to pay a living wage under difficult conditions, even outside of Tompkins County.

“We still struggle to find enough qualified staff, even with our wages at the living-wage level,” she said. “Racker is a regional service provider and has employees across a four-county service area. One additional positive is that we use the Tompkins County wages for all employees. This puts our employees in other counties significantly above the living wage for those areas.”