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Lawmaker Wants to Halt Automatic Minimum Wage Increases if Economy Dips

Assemblyman Roy Freiman wants ‘off-ramp’ that would temporarily suspend wage hikes if unemployment rose or state revenues declined

Roy Freiman
Assemblyman Roy Freiman (D-Somerset)

Although the first scheduled ramp-up to a $15 minimum wage in New Jersey is set for July 1, even legislators that supported the new law are looking at ways to address concerns raised by the state’s business community. These include fears the $15 minimum wage could harm the economy and small businesses.

One lawmaker, Assemblyman Roy Freiman (D-Somerset), wants to revisit an idea that came up as the minimum-wage legislation took form earlier this year — passing an “off-ramp” law that could temporarily suspend the schedule of phased-in annual wage increases if the New Jersey economy sours.

Freiman is promoting a package of three bills that also include proposals to help ease the impact on small businesses, including the establishment of a new tax credit and a special study commission to review how the increases are affecting both businesses and the workers they employ.

“These bills work to complement small-business employers and employees alike, as well as add an extra layer of security for those impacted by the new minimum-wage law,” Freiman said.

Since the bills were introduced just last week, it remains to be seen whether they can get enough support from Republicans and Democrats to win final passage before the first in a series of phased-in hikes in the minimum wage is due to hit in a few months.

Aggressive schedule of increases

Before the adoption of the $15 minimum-wage law, New Jersey’s minimum hourly rate could be increased incrementally through inflationary adjustments that were authorized under a state constitutional amendment approved by voters in 2013. For example, that amendment caused a slight inflationary increase in the wage floor on January 1, from $8.60 to $8.85.

Minimum wage signing
Credit: NJTV News
Supporters were there when Gov. Phil Murphy signed a higher minimum wage into law in February.

But the minimum-wage law enacted by Gov. Phil Murphy last month calls for a more aggressive schedule of increases through 2024. The hourly rate for most workers will increase to $10 on July 1, and to $11 on January 1, 2020. It would then increase by $1 each subsequent year until reaching $15 in 2024. From there, the wage could continue to go up in accordance with the constitutional language calling for inflationary adjustments.

The wage law creates a separate ramp-up schedule for seasonal workers and those employed by businesses that have five or fewer workers. That group would get to $15 by 2026.

There is also a carveout for farmworkers; they would get to $12.50 by 2024, with an opportunity for state officials to eventually bring them up to $15 by 2027. Workers who earn a tipped wage, including bartenders, waiters and waitresses, would also see their first raise since 1991, with the rate eventually going from $2.13 up to $5.13 over five years.

Worker advocates had pushed for a “clean” minimum-wage bill that didn’t include any carveouts or exemptions, so the final version was seen as providing at least some concessions to the business community given Murphy had made the establishment of a $15 minimum wage a core campaign promise during his run for office in 2017.

Business interests pushed hard for off-ramp

However, business-lobbying groups pushed hard for the wage law to include an off-ramp that would create a way to suspend the schedule of mandatory pay increases in the event of a recession or some other significant economic event. They noted such safeguards were put in place in other majority-Democrat states like California and New York that have also enacted $15 minimum-wage requirements in recent years. But the off-ramp language did not make it into the final version of the law enacted by Murphy, and the business groups said it should be a top legislative priority going forward.

The ability to halt automatic rate hikes is critical,” said Michael Wallace, the New Jersey Business & Industry Association’s vice president of government affairs, in a column published last month.

“A lot can happen in five years,” Wallace went on to say.

Freiman — one of the 75 lawmakers who voted for the minimum-wage legislation when it passed the 120-member Legislature in late January — said his new bill would create a way for the wage-hike schedule to be suspended if state revenues were to decline by at least 2 percent from one fiscal year to another. The bill would also allow the wage hikes to be put on hold in the event of sustained drop-offs in statewide employment, he said.

Another measure in the bill package, which has been introduced with bipartisan sponsors in the state Senate, calls for the establishment of a proposed “Task Force on Wages and Economic Stability.” That panel would be convened to review the impact the wage hikes have on the state economy during the five-year phase-in period, and it would be required to submit annual reports to the governor and Legislature. The 11-member task force would have representatives from government, businesses and labor, according to the bill.

The package also includes legislation that would create a new tax credit for some small businesses to help cover costs associated with paying their employees the higher wages during the five-year phase-in period. The tax break would be offered as a credit on gross income-tax liabilities, with employers with 10 or fewer workers generally qualifying.

While Freiman said the minimum-wage increase enacted earlier this year “does right by the people of New Jersey,” he also described the three new pieces of legislation as a “next step” that lawmakers could take to address business groups’ concerns. The bills would also “ensure that our employees, along with our small businesses, are thriving under the new law,” he said.

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