Explainer: How Some Lawmakers Want to Delay NJ’s Minimum Wage Increases if Economy Sours

John Reitmeyer | November 12, 2019 | Explainer
Bipartisan move to allow for a pause in the scheduled wage ramp-up is seen as vital by business interests, unacceptable by workers’ advocates

New Jersey’s ramp-up to a $15 minimum wage could be put on hold if the state economy begins to sputter, under a bipartisan bill that is scheduled for its first committee review later this week.

The measure seeks to create ways for state leaders to hit the pause button on a ramp-up schedule; under current legislation, most of New Jersey’s low-income workers would hit the $15 minimum wage by 2024. Prime sponsors of the legislation are Sens. Vin Gopal (D-Monmouth) and Kristin Corrado (R-Passaic).

Business-lobbying groups have suggested such “off-ramp” provisions are vital to ensure the wage increases don’t cause more harm than good for the state economy as they are being phased in. But the off-ramp legislation has drawn strong opposition from liberal groups, who view the planned wage increases as a key tool for lifting people out of poverty and combating entrenched income inequality.

Current ramp-up schedule: Under legislation Gov. Phil Murphy signed into law in February, New Jersey’s minimum hourly rate already went up for most workers from $8.85 to $10 on July 1. The same law also calls for a series of additional $1 annual increases through 2024 to bring the wage to $15. The next scheduled annual hike will go into effect on January, when the minimum wage will increase to $11.

The wage law also put some groups of low-wage workers — farm laborers, seasonal workers and employees of businesses with five employees or less — on a slower ramp-up schedule. They will take longer to get to $15, but will still see increases next year with their minimum hourly rate increasing from $8.85 to $10.30 on January 1.

Off-ramp scenario No. 1: Under the off-ramp legislation — which was introduced in March in response to the enactment of the wage-hike bill — the first way the automatic increases could be suspended would be if an economic decline in New Jersey impacted both employment levels and state sales-tax receipts.

To trigger this scenario, seasonally adjusted nonfarm employment figures would have to drop over three-month and six-month periods. In addition, the state would have to experience a year-over-year decline in retail sales; tax receipts compared to the prior fiscal year would be used to trigger a pause.

The assessments of both the state employment and sales-tax revenue data would have to be conducted by the state treasurer by July 28 every year. (New Jersey uses a July 1 to June 30 fiscal-year calendar.)

A wage-hike suspension triggered by this scenario would last one year. There would be no pause unless both employment levels and sales-tax receipts drop over the specific time periods spelled out in the bill.

Off-ramp scenario No. 2: The other way the automatic wage hikes could be suspended under the off-ramp legislation would be if there is a year-over-year decline in overall state revenues of at least 2%. For example, under the current state budget, which totals $38.7 billion, year-over-year revenue losses would have to equal roughly $775 million to bring on a suspension of the automatic wage hikes. (Such losses haven’t occurred in New Jersey since the Great Recession.)

It would be up to the state treasurer to assess any annual revenue losses each year by July 28. Under this scenario, the automatic wage hikes would be on hold until the 2% revenue losses are fully recovered.

The argument for off-ramps: Business-lobbying groups like the New Jersey Business & Industry Association called for the original minimum-wage legislation to include off-ramp provisions linking the automatic hikes to economic metrics, citing as examples several other states that are also moving to a $15 minimum wage. They also argue that off-ramps are needed to help businesses hedge against future economic declines that could threaten to put many companies out of business if employee expenses are required to rise even as revenues plummet during a downturn.

The argument against: Left-leaning groups like New Jersey Policy Perspective and New Jersey Working Families have complained that the off-ramps would put the interests of businesses above those of  low-wage workers. They’ve also suggested that the state economy — which currently is generating record low unemployment and regular revenue growth — is likely to slow down in coming years due to the nature of the business cycle. Any slowdowns should not be blamed arbitrarily on the scheduled wage hikes, they argue.

The politics: Once again, the possibility of an off-ramp for the scheduled minimum-wage hikes could end up pitting the governor against fellow Democrats who control the state Legislature. Murphy and legislative leaders have bridged differences on many issues since he took office early last year, including new workplace regulations such as expanding paid family leave. But major policy disagreements with lawmakers are still stalling several of the governor’s top priorities, including an overhaul of state tax-incentive programs and the legalization of recreational marijuana. Murphy made the $15 minimum wage a major issue during his 2017 gubernatorial campaign. It remains to be seen whether he would be amenable to adding the off-ramp provisions sought by the legislation’s sponsors.