Monday’s conditional veto of a proposed minimum wage increase makes it clear that the fate of the state’s low-wage workers will play a central role in the 2013 general election — at least as a Democratic rallying point.
Along with sending the bill back to the Legislature, Gov. Chris Christie is offering a three-year phased increase to $8.25 — 25 cents this year, 50 cents in 2014, and 25 cents in 2015 – along with an increase in the state’s Earned Income Tax Credit to 25 percent of the federal credit in tax year 2014.
The EITC increase would restore cuts made in the program during the governor’s first budget in 2010 and has been a central demand of Democrats over the past three years.
The original Democratic proposal — which passed both houses of the state Legislature in December along party votes — called for the state minimum wage to increase to $8.50 on March 1, with an annual cost-of-living increase set to go into effect every subsequent year on January 1, beginning in 2014.
Democrats are promising to put the minimum wage on the ballot in November, when Gov. Chris Christie is up for reelection, and all 120 seats in the state Legislature also will be on the ballot.
Democrats appear to be banking on the popularity of a minimum wage hike to counter the popularity of the governor, while the governor appears to be betting that his offer and reputation as someone willing to work across the aisle will allow him to set the agenda.
Recent polling shows that New Jersey voters support a wage hike by a five-to-one margin, while the governor leads potential Democratic opponents by as much as a three-to-one.
Ben Dworkin, director of the Rebovich Institute for New Jersey Politics at Rider University in Lawrence, said a minimum-wage ballot measure likely would generate “enthusiasm among base supporters” on both sides and could affect the outcome in the Legislature. He does not see the minimum wage being a central argument in the gubernatorial race, unless the Democratic candidate can be effective in raising the issue. Sen. Barbara Buono (D-Middlesex) is the most likely candidate of the moment.
“The fact is, I don’t think the governor — he is not going to be talking about this a whole lot,” Dworkin said. “He is going to be running on the strength of his leadership in the wake of Sandy; the tough decisions he has said he has made over last three years; and his holding the line on taxes. The minimum wage might mobilize certain constituencies, but it is not going to be among the top four things the governor talks about in his stump speech.”
“If it’s on the ballot, if the Democrats’ proposal is on the ballot,” continued Dworkin, “it will likely help the Democrats pull their voters to the polls and get them to vote. In that sense, it helps whomever the Democratic candidate for governor is, because the more Democrats that show up, the better they will do.”
A Balancing Act
The governor called his conditional veto a “balanced approach” that provides needed assistance without harming New Jersey businesses.
“I urge the Legislature to act quickly to provide real relief to New Jersey’s working families, while giving our small businesses a critical phase-in period to plan for the wage increase,” he said in a release.
The plan, he added, “will give workers the additional income and relief that will spur consumer spending and help grow strong, sound families.”
Democrats said they do not plan to challenge the veto and will not accept the phased-in minimum wage increase, which means that the hike is dead for now. Democrats had three options under the conditional veto: accept the governor’s proposal; vote to override, which would have required a two-thirds vote of both houses; or allow the veto to stand.
“Gov. Christie’s callous action leaves us no choice but to send this matter to the voters,” Assembly Speaker Sheila Oliver (D-Essex) said in a press release following the veto.
“The optimal approach,” Oliver added, “would have been for Gov. Christie to show some heart and approve this pro-worker measure as proposed. Because Gov. Christie would rather play politics, asking voters to approve a constitutional amendment this November is the only other choice.”
Rob Duffy, of the New Jersey Working Alliance, said that about 500,000 workers would have been affected by the increase and that the increase likely would have generated about $280 million in new economic activity for the state.
The Quinnipiac University poll, released last week, found that voters overwhelmingly supported increasing the minimum wage, with 82 percent of all voters and 67 percent of Republicans backing the hike. Of those, 32 percent backed an $8.25-an-hour minimum wage, while 45 percent supported increasing the minimum by more than a dollar.
In addition, voters by a 55-to-40 margin rejected the arguments being put forth by Republican legislators and business groups that a minimum wage increase would lead to reduced hiring.
“New Jerseyans are in a generous mood when it comes to raising the minimum wage, with overwhelming support for an increase, even among Republicans,” Maurice Carroll, director of the Quinnipiac University Polling Institute, said when the poll was released January 24.
Ten states increased their minimum wage on January 1, nine through a cost-of-living indexing provision. Overall, minimum wages in 16 states are higher than the $7.25 federal wage. New York Gov. Andrew Cuomo, in the state budget proposal he released on January 22, called for increasing New York’s minimum from $7.25 to $8.75, though he told Crain’s Business New York that he was willing to be flexible.
Dworkin said he does not think the New York discussion will affect New Jersey, because “people tend to stay focused on their own state.”
But advocates for an increase are hoping that the wave of recent wage hikes, especially if they include New York, will help maintain support as a vote grows near.
Gordon MacInnes, executive director of New Jersey Policy Perspective, said the January 1 increases show the effectiveness of indexing the wage to inflation.
“We’ve seen the consequences of episodic legislative action,” he said.
The last New Jersey increase occurred in 2005 – from $5.15 an hour to $7.15 an hour over two years, though a 2009 federal increase pushed the New Jersey rate to $7.25 an hour, which is where both rates currently stand. Since its first reports in 2007 and 2008, the state’s NJ Minimum Wage Advisory Commission, created as part of the 2005 wage-hike package, found that the wage had already lost ground to inflation.
The current minimum wage is now worth $6.17 an hour in constant 2005 dollars, MacInnes said, and that is with a relatively low inflation rate over the past half-dozen years. If the minimum wage had kept up with inflation, he said, it would be $8.52 an hour.
“That emphasizes how useful, important and effective the escalator [annual cost-of-living increase] would be,” MacInnes said. “The value of the indexing has been badly discounted.”
“If you think about what the governor has proposed, that people get a quarter, the benefit of that increase will be almost gone by the end of the year in terms of purchasing power,’ MacInnes explained. “That is more evidence that the escalator would be a sensible thing to do — if people were motivated by trying to assist the lowest-wage workers in New Jersey.”
“States that have raised their minimum wage in the past have not seen a dip in employment,” Duffy said last week. “The Economic Policy Institute [a liberal Washington think-tank] estimated that New Jersey could actually gain 2,200 jobs. The minimum wage acts as a stimulus, because low-income workers are forced to spend their wages on basic necessities, like food and rent, which means it goes right back into the economy.”
But John Holub, president of the New Jersey Retail Merchants Association, said recently that a minimum wage increase would result in a reduction in hours for low-wage workers, or in a reduction in the size of the workforce. He said that wages are one of the few costs that can be controlled by a small business. Most costs – taxes, utilities, and so on — are outside of the small-business owner’s control.
“But you can control your inventory and your labor costs,” he said. “To increase the cost of labor without a corresponding increase in sales is not sustainable.”
Most of the members of his association pay above the $7.25 minimum, but he expected there to be a “ripple effect” that would cause those making a bit more than the minimum to get raises, as well.
“The individual making $8.15 or $8.25 an hour is going to want $9.25 or $9.50,” he said last week. “This is a floor that is being pushed up. This places a lot of pressure on the wages of other employees.”
Workers like Rhiannon Anderson, a 23-year-old assistant manager at a chain pizza restaurant in Highland Park, says she already is feeling pressure on her wages — because they barely cover her expenses.
“I’m disappointed,” she said by phone between customers. “I’m working at a pizza chain and I’m trying to scrape by here. I’m an assistant manager, but I’m only getting paid $7.50.”
That translates into $300 a week to pay for rent and utilities, car insurance, food, and other regular expenses. At the end of the month, she is left with about $100, which is why she is looking for a second job.
“All of it adds up,” she said. “I have to work two jobs just to get by. I’m still working here, but I need to get a second job just to try and make ends meet. I already gave up a cell phone.”
Increasing the minimum wage would ease some of the stress and might allow her to start saving for college – something she says will help the state’s economy in the long run.
That is the issue, says Regina Santos, a member of Service Employees International Union Local 1199.
“My daughter earns $7.50 an hour at a fast food restaurant,” she said in a press release issued by New Jersey Citizen Action.
“She works hard, but because she makes so little she can’t support herself financially. I help to pay her bills, but it’s tough because I only make $10.61 as a caregiver at a nursing home, Santos said.
“I want her to have a bright future and be able to live independently,” she continued. “Increasing the minimum wage would have really helped us out, so I’m very disappointed that Gov. Christie refused to sign this bill.”