COMMENTARY: NJ shouldn’t raise minimum wage
Author: Michael Saltsman
Publication Date: April 2016
Newspaper: Cherry Hill Courier Post
Topics: Minimum Wage
New Jersey Democrats are hoping to capitalize on the momentum gained by New York and California’s recently passed $15 minimum wages. Their proposal, currently before the state Legislature, would likewise increase the state minimum wage to $15. But as with so many trends — political and otherwise — that come out of New York and California, this one shouldn’t necessarily be followed elsewhere.
That’s especially true for New Jersey, which raised its minimum wage by 14 percent and indexed it to inflation less than three years ago. “It’s just not enough,” says Senate President Stephen Sweeney. “We didn’t get it right. … We need to go back and do it and get it right.”
A 79 percent minimum-wage increase may be right for Sweeney politically (though support plummets when its consequences are explained), but it couldn’t be more wrong economically. Even left-of-center economists, who support more moderate wage hikes, including Obama administration alum Katharine Abraham and Clinton administration alum Harry Holzer, have expressed concerns about a broad $15 mandate.
They are not isolated examples. A University of New Hampshire Survey Center poll of U.S.-based labor economists finds that nearly three-quarters of respondents, including a majority of those who self-identify as Democrat, oppose a broadly applied $15 mandate. Four out of five say that it would reduce job opportunities for young job seekers, whose limited skills may get priced out of the job market.
The best and most-credible economic research concludes that even at more moderate minimum-wage increases, job loss will still occur. The nonpartisan Congressional Budget Office estimates that a $10.10 minimum wage would cost 500,000 jobs nationally. Replicating the CBO’s methodology, economists David Macpherson of Trinity University and William Even of Miami University found that a $15 minimum wage would cost the state over 33,000 jobs by the time it’s fully phased in.
New Jersey policymakers just need to look across the Hudson to see the reality of dramatic minimum-wage increases up close. Especially in the New York’s poorer upstate counties, recent minimum-wage increases have forced numerous low margin businesses to reduce job opportunities to compensate.
Betty’s diner in Buffalo, Longway’s diner in Watertown, McGirk’s Irish Pub in Binghamton and Peppermill Restaurant in Rochester are just a few of the companies that cut employees’ shifts to try to recoup costs from the new minimum wages. Piggy Pat’s BBQ in New Hartford and the Tilted Kilt Pub & Eatery in Watertown were forced to lay off employees. And Medici House, a restaurant in East Aurora, closed altogether because of the wage hike. Similar stories exist in California, where experiments with dramatic wage hikes are also underway.
But what about the claim that a dramatic minimum-wage increase would save New Jersey taxpayers money because it would reduce dependence on social welfare programs? Assemblyman John S. Wisniewski states: “When businesses fail to pay a living wage, government is forced to fill the gap. … Essentially, taxpayers are subsidizing these low-paying jobs.”
Dr. Joseph Sabia and Thanh Tam Nguyen of San Diego State University examined this appealing claim and found that it was without merit. They analyzed 35 years of government data across six major social welfare programs and found that minimum-wage increases have had no measurable impact on spending on or participation in public benefits programs.
If New Jersey residents are interested in the real impact of $15, they should ignore the spin by Sweeney and advocacy organizations like New Jersey Policy Perspective, and talk to the small businesses who will be forced to pay it. Patty Talese, who owns a coffee shop and bistro in Ocean City, supports a smaller increase in the state’s minimum wage to $10.10. But she calls the $15 proposal “extreme” and says it will be “devastating” for businesses and employees.
As a public policy measure, then, New Jersey’s proposed minimum-wage increase fails on all counts. New Jersey policymakers who actually want to help the working poor would be better off strengthening the state’s Earned Income Tax Credit, which is far more targeted than the minimum wage and has far fewer unintended consequences.
New York and California set many trends that New Jersey is right to copy. A $15 minimum wage is not one of them.