NJ Businesses Bullish but Say $15 Minimum Wage Would Cause Job Cuts, Price Hikes

John Reitmeyer | December 5, 2017 | More Issues
One-third of businesses plan to hire more workers in 2018 and almost two-thirds expect sales to rise next year, but they’re bracing for a new push to raise wages at the lower end

Minimum wage
New Jersey has had a relatively slow pace of wage growth since the recovery from the Great Recession. But a recent poll of state business owners suggests a turnaround may now be in the works, with nearly 70 percent reporting they gave raises to their employees this year and plan to offers raises next year as well.

The latest survey of New Jersey Business & Industry Association members found that 69 percent of the state’s business owners are planning to give their workers raises in 2018, with most in the range of 1 percent to 5 percent.

But even as the business owners are indicating that many workers in New Jersey will see a hike in their pay next year, the state’s business community is also bracing itself for a new push inside the State House to increase New Jersey’s minimum hourly wage rate to $15, a campaign promise from Democratic Gov.-elect Phil Murphy.

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The NJBIA poll found more than 60 percent of the businesses that responded to the survey would be impacted by a higher hourly wage, with staff cuts and price increases among the steps they say they will have to take to absorb the change.

“This is really important when we talk about issues around lifting the wages of earners and we talk about a $15 minimum wage,” said Michele Siekerka, NJBIA’s president and chief executive officer, while outlining the poll results yesterday.

State’s jobless rate above the national average

“It’s important to take into consideration that New Jersey businesses already are remaining competitive in terms of increasing wages for their workers,” Siekerka said.

While New Jersey’s unemployment rate has dropped significantly since the recession ended, the state’s jobless average has gone up in recent months and, at 4.9 percent in October, it remained well above the national unemployment rate of 4.1 percent. The state’s unemployment is also slightly higher than it was a year ago, even as 22,000 jobs have been added since January. And while income figures don’t always get as much attention as the unemployment rate, economists also look at changes in wage growth as an economic indicator.

Earlier this year, the Pew Charitable Trusts reported that personal incomes in New Jersey had gone up by only a little more than 1 percent annually over the last decade, trailing the national pace of personal-income growth measured by Pew, which was a little less than 2 percent. But U.S. Census data released in September offered some good news on the income front for New Jersey, indicating that the median household income in the state rose by nearly 4 percent in 2016.

More than 30 percent of the businesses surveyed by the NJBIA said they would increase hiring in 2018, compared to 6 percent that are planning to cut jobs. And nearly 60 percent said they are expecting sales to rise in the new year, with 55 percent forecasting increased profits.

Strongest economic performance in years

“This is New Jersey’s strongest economic year in quite a long time, and we should be very excited about that,” Siekerka said.

She also said the impact of changes to the state’s tax policies that were enacted in 2016, including a phase-out of the estate tax, are starting to show up in the survey, with fewer business owners reporting they plan to leave state upon retirement.

The survey also outlined other concerns among the state’s business community heading into 2018, with healthcare costs, property taxes, and the general cost operating a business in New Jersey leading the way. But even amid the optimism on the issue of employee raises, 64 percent of the businesses surveyed said they would see some impact from a hike of the minimum wage.

The minimum hourly wage in New Jersey is currently set at $8.44, and the rate is scheduled to rise to $8.60 on January 1, thanks to changes that New Jersey voters made to the state constitution in 2013. Those included immediately hiking the minimum wage by $1, and tying future adjustments to the federal rate of inflation.

Christie vetoed $15 minimum wage

The inflationary adjustments, however, have been very modest in recent years, and that’s prompted Democratic legislative leaders to push for the establishment of a $15 minimum rate. A bill passed both houses of the Legislature last year that would have phased in a $15 minimum wage over a number of years, but it was vetoed by Gov. Chris Christie, who warned it would have brought layoffs and other economic impacts. With Murphy now due to take office in mid-January, Democratic legislative leaders said in a news conference with Murphy last month that enacting a $15 minimum wage will be a top priority for the incoming leadership group.

Among the 64 percent of businesses who said in the NJBIA survey that the higher wage would impact their operations, 30 percent said it would cause them to increase prices on consumers, and 29 percent said it would lead to staff reductions. In addition, 27 percent said they would cut hours, and 11 percent said it would bring on more automation.

Siekerka, the NJBIA leader, suggested that forcing businesses to pay a higher minimum wage could upset the state’s current market conditions, which are already fostering wage growth for many workers.

“A competitive company that provides competitive salary and benefits gets the competitive edge, and that’s the discussion we should be having,” she said. “When you come in and you now artificially mess around with that, and you reset the levels, you’re really taking away the ability for companies who are today competitive. They’re now going to be less competitive.”