Gov. Kathy Hochul wants to link New York’s minimum wage with the rate of inflation, a change that could trigger automatic increases to a wage floor that has remained stagnant in recent years.

The proposal, unveiled during Hochul’s annual State of the State address on Tuesday, comes as New York’s average price of goods has increased by 13% since October 2020, cutting the purchasing power of minimum wage workers by more than $1.75 an hour, according to the governor.

"As a matter of fairness and social justice, I am proposing a plan to peg the minimum wage to inflation," Hochul said, receiving a standing ovation from Democrats. "If costs go up, so will wages."

Among states that mandate a higher minimum wage than the federal rate, New York is alone in not automatically adjusting the minimum wage, or indexing, with the cost of living, according to James Parrott, director of economic and fiscal policies at the Center for New York City Affairs.

“It’s long overdue,” he said.

New York’s successful worker-led campaign for a $15 minimum wage – which took effect downstate in 2016 and is still being phased in upstate – made the state a national leader in paying low-wage workers. But since then, New York’s rate has fallen behind several other states and cities.

In Seattle, the minimum wage recently increased to $18.69 – an 8% jump – as a result of the Consumer Price Index. Arizona, Ohio and South Dakota were all on track to see rates rise by about $1 an hour. Across California the minimum wage recently rose to $15.50, with rates above $17 in several cities.

Research from the Center on Wage and Employment Dynamics at the University of California, Berkeley has found inflation-adjusted pay increases do not significantly reduce job numbers or impact inflation.

Hochul’s proposal would include an unspecified cap to “ensure that no single-year increase would threaten unemployment,” along with an “off-ramp” in the event of certain economic conditions.

The governor has also stopped short of endorsing progressive calls to raise New York’s minimum wage to catch up with recent increases. Under legislation introduced by Sen. Jessica Ramos (D-Queens), the minimum wage would rise to $21.25 by 2026 before future increases are pegged to inflation.

“Like everything else, the devil's in the details,” Ramos said after Hochul’s speech. “My understanding is that she might be proposing a cap on what those annual increases might be. So I'm eager to find out what the details on that are.”

Assembly Speaker Carl Heastie (D-Bronx) said indexing the minimum wage to the Consumer Price Index is a “solid approach.” He suggested he and his members may want to boost the wage first – though he didn’t indicate whether that was something the state Legislature was ready to tackle immediately.

“I don't know where we start with the number, but the fact that you want to have this consistently adjusted to the CPI is great,” he told reporters.

Business groups, meanwhile, said they could live with the idea of linking inflation to consumer prices – and appeared relieved the governor had not embraced calls to “catch up” the raise.

“Compared to some of what the legislative proposals are, this seems more workable to us,” said Ken Pokalsky, vice president of the Business Council of New York State.

Kathryn Wylde, president and CEO of Partnership for New York City, agreed.

“Depending on the details,” she said, “the major employers in the city would probably not object.”