Can Advocates Sell a $15/Hour Minimum Wage to New Jersey?

Hank Kalet | February 26, 2018 | More Issues
Backers say the benefits of higher minimum wage would benefit both workers and small businesses

The statewide minimum wage is set to go to $15 by 2024.
New Jersey voters overwhelmingly approved a $1.00 per hour minimum wage increase to $8.25 in 2013. The bllo initiative – technically a constitutional amendment – was necessary to move the wage increase forward because bills increasing the minimum wage had been vetoed by then-Gov. Chris Christie a year earlier, and it was clear the governor would not budge on his opposition.

Fast-forward four years. The minimum wage in the state has risen to $8.60 per hour, thanks to the indexing provision of the 2013 amendment, but advocates for workers say that’s not enough. They are pressing for a $15.10 per hour minimum wage to be phased in over four years, and they appear to have the support of Christie’s successor.

The business community remains adamantly opposed to such a hike – particularly one that will be phased in this quickly. Both the New Jersey Business & Industry Association and the Chamber of Commerce are on record of saying that it will force business, most likely small business, to cut staff. Proponents dismiss this charge, saying it will bring more money into the economy.

But Gov. Phil Murphy, a Democrat, campaigned on the wage hike last year and said after being sworn in that it remained a priority. This has groups like New Jersey Policy Perspective believing a wage hike is possible. Jon Whiten, vice president of NJPP, a liberal think tank that focuses on economic issues, said during a telephone press conference Thursday that there is a rare “consensus in Trenton” that “raising the minimum wage to a more livable, family-sustaining wage is a top priority.”

NJPP, hoping to influence the debate and push the state Legislature to move quickly, issued a report Thursday offering data it says supports the need for the wage hike. A $15.10 minimum wage, NJPP says, would directly aid about 1.2 million workers and indirectly help others by injecting $4.8 billion in increased wages into the economy by 2023, when a phased-in hike would take effect.

Legislation has been introduced in both houses of the state Legislature that would increase the wage over four years, with an indexing provision tying the minimum wage to changes in the Consumer Price Index. The indexing would kick in once the phase-in is complete. Similar legislation was vetoed by Christie in 2016.

‘Critical policy fix’

“Raising the wage is a critical policy fix to fight poverty and inequality, improve the lives of low-wage workers and their families, and boost the state’s economy by making sure that working families have money to spend,” Whiten said Thursday.

As noted, the business community opposes a minimum wage hike, as it did in 2013. A survey by the NJBIA found that “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,” according to a NJ Spotlight story. In February manufacturers told a legislative hearing that a minimum wage hike “could lead them to adopt automation that in turn would reduce the industry’s current demand for labor” as part of a larger cost-cutting strategy.

Jennifer Lollino, the human resources director for Earth Friendly Products, supports a minimum wage increase and says companies would benefit from reduced turnover. The company, which has four manufacturing plants around the country including one in Parsippany, increased its starting wage over four years, settling at $17 an hour in 2014. The higher wage helped reduce turnover and training costs, increase productivity, and put money in workers’ pockets that are then spent on their products, she said during the NJPP press conference.

“The cost of turnover is huge and can result in the loss of knowledge and the time and resources it can take to find and train new workers,” she said. “The fact that we’re able to keep our voluntary turnover low has had a huge impact on the business and allowed us to remain competitive.”

Truer measure of poverty

Business concerns should be trumped by the broader social and health benefits of increasing the wage, which would include addressing the state’s stubborn poverty rate, says NJPP report author Brandon McCoy. About 10 percent of the state’s population falls below the federal poverty line and another 13 percent fall below 200 percent of the federal figure, which anti-poverty advocates say is a truer measure of poverty.

“We have seen the unemployment rate drop pretty significantly over the last three years, but the poverty level remains stubbornly high,” McCoy said.

The NJPP report links the lagging poverty figures to the imbalance between wages and costs in New Jersey.

“(T)he poverty rate is far too high and too many hard-working New Jerseyans are not paid adequate wages for their work, in large part because the state’s minimum wage remains far below a survivable wage, never mind a living wage,” the report says.

The low wage has a negative effect on the state’s economy, as well, the report says. The “widespread hardship” faced by workers at the lowest rungs of the economic ladder “also hurts businesses and the state’s economy.”

“How can anyone expect a robust economy when 1 in 4 workers have insufficient incomes?” the report asks. “How can any business expect to thrive when so many would-be customers aren’t paid enough to purchase their products or services?”

Stimulating state economy

Increasing the minimum wage would have a direct stimulus on the state’s economy, the report says, because it “directly puts more money in the pockets of low-income workers who cannot meet their basic, everyday needs.” The money is “liquid,” the report says, which means it gets spent rather than saved.

The benefits go beyond economic issues, McCoy said.

“There are a lot of positive health and social effects as well,” he said. He pointed to research that indicates higher wages lead to reductions in prison recidivism, reports of domestic violence, and the teen pregnancy rate. “Poverty is linked to diabetes, heart disease, arthritis” and other health issues, he said.

The biggest beneficiaries of a $15-an-hour wage would be full-time workers. NJPP estimates that 65 percent of those who would see wage hikes work at least 35 hours per week, 92 percent are 20 or older, 56 percent are people of color, 52 percent are women, and 26 percent have children. In addition, most work in retail, food service, and health care.

This means the state and federal government have to step in with programs to assist families with medical costs, rent, utilities, food, and other expenses. NJPP says the state “spends an estimated $726 million a year on basic safety-net programs for working families,” a figure that does not include Medicaid, the Children’s Health Insurance Program, and Temporary Assistance for Needy Families.

“A $15 an hour minimum wage is not some random number that has been picked out of a hat,” McCoy said. “It makes sense in New Jersey, right now, today there is no part of the state where a single worker with no dependents can work and make ends meet on less than $15 an hour.”