Minimum-Wage Standoff: No Resolution Likely Before 2013 Vote

Hank Kalet | December 11, 2012 | More Issues
Almost-classic contest pits low-wage advocates against much of NJ's business community

The debate over raising New Jersey’s minimum wage pits the state’s low-paid workers and their advocates against many in the business community — and it is an issue that is not likely to be decided before next November’s election.

On the one side are advocates for low-wage workers. They say the proposed increase from $7.25 an hour to $8.50 is necessary to set an appropriate wage floor, one that can do a better job allowing those at the bottom of the wage ladder to become self-sufficient.

Business owners argue that increasing the wage by 17 percent and indexing it to inflation will result in higher costs. The inevitable result of that increase either means fewer jobs and fewer hours for remaining workers or increased prices for consumers.

The debate has taken on a partisan cast in the state, with Democrats backing the $1.25 wage hike, along with an annual inflation adjustment, while Republicans are asking for a slower increase without the inflation adjustment. Gov. Chris Christie has taken the same position as his fellow Republicans, but has not said how he plans to address the legislation, which has been approved by both houses of the state Legislature. He has until January 17 to act.

Democrats, anticipating at least a conditional veto, are eying a constitutional amendment that would remove the hike and future adjustments from the legislative process. The state Senate approved the amendment November 29. The Assembly will vote on it later this month. It needs to pass both houses of the state Legislature in successive calendar years to qualify for the ballot. Senate President Stephen Sweeney said he expects the amendment to be on the November 2013 ballot — with the governor and every member of the Legislature — unless Christie signs the proposed wage hike into law.

During the Senate debate over the wage-hike bill last week, Democrats repeatedly pointed to the difficulties that low-wage workers have supporting families and making ends meet, while Republicans characterized minimum-wage workers as being in high school and college.

According to data from the Bureau of Labor Statistics in the Department of Labor, 5.5 percent of New Jersey’s 1.8 million hourly employees are paid at or below the minimum wage (which includes those covered by legal exclusions from the wage law, as well as those who earn tips and commissions). Nationally, the figure is 5.2 percent, and New Jersey ranks 22nd among states with the largest percentage of hourly employees at or below the minimum wage.

The Economic Policy Institute, a liberal think tank in Washington that supports an increase in state and national minimum wage rates, compiled demographic data by state, breaking down low-wage workers by age, gender, race, marital status, and type of job. It found that there are an estimated 307,000 workers in New Jersey who get paid less than $8.50 per hour, workers who would see their hourly wage increase if the wage hike is signed into law. It describes those workers as being “directly affected” by the proposed increase. Another 230,000 workers are paid $9.75 or less and will be “indirectly affected,” the EPI says, “as employer pay scales are adjusted upward to reflect the new minimum wage.”

The 537,000 workers represent 14 percent of the state’s workforce. EPI says the total annual wage increase would be about $438.7 million, with an approximate $277.7 million increase in state gross domestic product. The average worker now earning less than $8.50 would see a $1,200 annual wage increase and those between $8.50 and $9.75 would see an annual increase of $310, according to EPI modeling. This is based on the existing average work week of hourly employees and assumes they work the full year.

Michael Egenton, senior vice president of government relations for the state Chamber of Commerce, acknowledges that the minimum wage increase will have an effect that is broader than just those directly affected. It will mean a much wider increase in wages and a much greater increase in costs to businesses.

“It will have a domino effect,” he said. “You’re not just going to raise the minimum wage. How do you handle an employee who is close to the mark? That is a concern that we have heard from business owners.”

Egenton said that a “17 percent increase would be detrimental to business owners,” who will be forced to “pass on the costs to consumers, scale back hours, or not hire.”

“The economy is in tough shape and you have the effects of Hurricane Sandy, with certain businesses being devastated,” he said. “This is the wrong time.”

The EPI, in an August report called “How Raising The Federal Minimum Wage Would Help Working Families And Give The Economy A Boost,” said that “its positive effects would far exceed [the] extra income” for minimum-wage workers.

“Recent research reveals that, despite skeptics’ claims, raising the minimum wage does not cause job loss,” it said. “In fact, throughout the nation, minimum-wage increases would create jobs.”

The reason is that a wage hike “puts more money in the pockets of working families when they need it most, thereby augmenting their spending power.”

“Economists generally recognize that low-wage workers are more likely than any other income group to spend any extra earnings immediately on previously unaffordable basic needs or services,” the report said.

Gordon MacInnes, president of New Jersey Policy Perspective a liberal New Jersey research group, agrees.

“I think that the weight of the research, and this has been acknowledged by the Economist is that raising the minimum wage does not decrease employment,” he said.

He called business opposition “an automatic response.”

“I know of no business leader who has called for anything by way of legislation that increases costs and they always put the most dire consequences on their opposition,” he said. “As The Economist notes, this is a less and less accurate tale to be spinning.”

MacInnes said that the stronger economic argument favors increasing the wage, because “the people receiving the increase will spend it quickly, and locally.”

“You have benefits that are certain,” he said. “I don’t think anybody doubts that this is money that will be spent. These are people struggling to survive and they need every penny they can get.”

Demographically, women and minorities make up a greater proportion of low-wage jobholders than they do of the general workforce. According to EPI data, women make up 55.3 percent — 170,012 workers — of those currently earning less than $8.50 an hour and 55.5 percent of those earning less than $9.75 an hour, as compared with the 48.7 percent of the overall workforce that is female.

Hispanic workers also are overrepresented among low-wage workers, according to the EPI numbers. A total of 183,506 Hispanic workers currently earn less than $9.75 an hour, or 34.1 percent of low-wage workers. The make up 19.8 percent of the total workforce.

Blacks make up 14.3 percent of those earning less than $8.50 and 12.8 percent of those making less than $9.75, compared with 11.4 percent of the total workforce.

Whites, who make up 60 percent of the total workforce with 2.29 million workers in the state, make up 45.9 percent of those earning $9.75 or less.

In addition, single parents make up 9.5 percent of low-wage workers and married parents 14.2 percent. Another 14.5 percent of those earning less than $9.75 an hour are married without children, while 61.9 percent are not married and do not have children.

Overall, workers younger than 20 are overrepresented among low-wage workers, according to the EPI data, when compared to the overall workforce. While they make up just 2.7 percent of the total workforce, they represent 19.9 percent of those earning less than $8.50 and 15.1 percent of those earning $9.75 or less per hour. Still, the bulk of those like to be either “directly affected” or “indirectly affected” — at 80.1 percent, or four of every five low-wage worker — are older than 20, according to the EPI estimates.

“When you profile that group, 80 percent are over 20, a quarter have children and almost half are working full time,” MacInnes said. “This is not the picture painted by the business associations and the businesses who are saying these are high school kids who want to get a new X-box. There is very much an adult audience for this legislation and it is quite large.”

There are college and high school students working these jobs, he said, but they make up only a small part of the picture.

“When you go into Wawa to get cup of coffee and a buttered roll or you go to visit your grandmother in a nursing home, you can see the people making minimum wage,” he said.

Assemblyman Anthony Bucci, on Monday, said increasing the minimum wage is not the correct way to help low-wage workers or consumers.

“Increasing the minimum wage by 17 percent will not help New Jersey’s economy,” he said in a press release. “It will have a negative effect on a large segment of wage-earners who are seasonal employees or part-time workers. Businesses will adjust their operation in a manner that will not help those who are earning money to pay for college tuition or car insurance.”