Opinion: Let’s Leverage New Minimum-Wage Law to Get Some Key Facts

Andrew Sidamon-Eristoff | February 11, 2019 | Opinion
We have a rare opportunity to track the impacts of the minimum-wage increase on individuals, businesses, and the economy

Andrew Sidamon-Eristoff
Well, now it’s the law. On February 4, to the delight of labor activists and the frustration of business groups, Gov. Phil Murphy signed legislation to increase New Jersey’s minimum wage to $15 for most workers as of 2024. The governor’s signature may well have settled the political debate — to the extent there was one in blue New Jersey — but the public policy debate rages on: Will this rapid and significant increase in the minimum wage prove to be good or bad public policy? How will we know?

To paraphrase the late Sen. Daniel Patrick Moynihan, proponents and opponents of the minimum-wage increase may be entitled to their own opinions, but they’re not entitled to their own facts. So, why not leverage New Jersey’s bold experiment to get some facts? With the first wage increase scheduled for July 1, we have a rare but fleeting opportunity to set up a comprehensive data collection effort in advance to track the minimum-wage increase’s impacts on individuals, businesses, and the economy over time.

What kinds of data? I’ll leave that to qualified economists. But here are some questions that might inform future analysis and policymaking.

Who and what and where?

Who earns the minimum wage? Minimum-wage policy impacts real people. Unfortunately, existing data on minimum-wage earners is limited and uneven. We need to know more. For example, what are their demographic characteristics, family size, and levels of work experience and educational attainment? Are they the sole or primary family breadwinner?

Where and in what industries are they working? What size business do they work for? If in retail, are their employers big-box chain stores or small mom-and-pop businesses? Are they unionized? Are they working as employees or independent contractors? Full-time or part-time? Tipped? If formerly unemployed, for how long? How do they spend their money on staple necessities (housing, food, clothing), services, and consumer products? What are their savings rates? How long do they stay at the minimum wage? Are there any changes in these parameters as the minimum wage increases over time?

What’s the impact on individual workers and their families? In addition to changes in family income and average hourly wages at various pay scales and skill levels, we need to know if minimum-wage and other salaried employees in various industry sectors experience changes in hours worked (including overtime), non-salary benefits such as pension and health benefits, or eligibility for and receipt of tax credits such as the EITC or social services such as rental assistance or SNAP benefits.

Moreover, it would be helpful to track whether, when, and to what extent individual workers receive wage increases other than as a function of minimum-wage increases. Finally, for a perspective on changes in purchasing power in relation to income, we’ll want data that tracks price increases in the necessities, services, and products identified above.

We need data

What’s the impact on the broader labor market? We need data that tracks employment rates, workforce participation, wage and price inflation, productivity, and job creation (or loss) across industry sectors and across time, through one or more economic cycles. Some impacts that may be obscured in an expansionary period may stand in sharp relief during a recession.

What’s the impact on businesses? Many minimum-wage skeptics worry that businesses will react to higher mandatory wages by cutting workers and hours, deferring hiring, reducing non-wage benefits, investing in labor-saving technologies, outsourcing, or raising prices — or all the above. We need to track this information at the sector and firm level, especially across business cycles. Moreover, we need data that tracks trends in business formation, expansion, consolidation, and failure, particularly in sectors and businesses with relatively high numbers of minimum-wage earners. Similarly, it would be helpful to have data that tracks the changes in employer types (e.g., big box versus local mom-and-pop) and firms’ mix of workers (salaried versus independent contractors, or supervisors versus line employees).

What’s the impact on compliance? There are legitimate concerns that raising the minimum wage will accelerate ongoing increases in “off the books” employment, wage theft, misclassification of employees, and other forms of noncompliance with labor standards, tax laws, and other regulations. Though extraordinarily difficult and complex, governments at every level need to develop better ways of controlling noncompliance. Confidential employment surveys, as part of a comprehensive data collection process, would be a strong start.

Who will sponsor this research?

So, here’s the challenge: Will some New Jersey-based government entity, university, or nonprofit please step up and sponsor this research, now, before the wage increases kick in and attention inevitably turns to other issues?

Yes, it will require organization and resources over an extended period, especially considering the need to collect control data. And it will require unimpeachable credibility — perhaps a process overseen by a range of independent academics representing diverse backgrounds and ideologies. But, challenges aside, a well-executed research project could amount to a landmark in public policy and economic analysis, with implications and benefits far beyond the minimum-wage debate.