Automatic wage increase is a disaster

Posted on June 06, 2009

Sen. Steve Sweeney (D-West Deptford) and other state lawmakers must beware of the unintended consequences of automatically indexing the minimum wage, even if the economy recovers (“What should the minimum wage be in New Jersey?” Political Exchange, May 4).

Putting minimum-wage increases on autopilot, without any mechanism for stopping the increases during a recession, is an extremely misguided policy that will yield disastrous results for vulnerable employees in the state.

Decades of economic research predicted that there would be an increase in job losses following minimum-wage hikes, particularly among vulnerable groups like minority teens and adults without a high school diploma. This job loss is only exacerbated in a weak economy.

When wage rates are artificially increased, employers who are seeing demand for their products and services dropping dramatically are forced to cut employees’ hours and eliminate some jobs entirely in order to stomach automatic wage hikes that take place regardless of the economic climate.

The unintended consequence of reckless, autopilot minimum wage hikes is job loss for the least-skilled workers at a time when they need help the most. State lawmakers should recognize this and keep their focus on job creation and job retention.

Kristen Lopez Eastlick, senior economic analyst
Employment Policies Institute
Washington, D.C.