Increase in N.J. Minimum Wage Would Hurt Teen Workers

Original Article:

  • Author: Michael Saltsman

  • Publication Date: August 2013

  • Newspaper: The Newark Star-Ledger

  • Topics: Minimum Wage

“The constitution is no place to settle issues like the minimum wage.”

Gordon MacInnes, president of the pro-minimum wage hike group New Jersey Policy Perspective, wrote these words last fall. His point was clear: Even if you support the policy, removing it from the normal political process by altering the state constitution is a step too far.

Fast-forward one year: The state Legislature rejected a compromise on wages with Gov. Chris Christie, choosing instead to push a ballot initiative to amend the state constitution and put employers’ labor costs on autopilot. Bizarrely, NJPP has flip-flopped from its earlier opposition to altering the constitution and is now on the campaign’s front lines.

But NJPP had it right the first time around. Using the constitution to enact wage mandates and settle political scores isn’t just irresponsible — it would be actively harmful to the state’s employers and employees. The economic evidence is overwhelming that a government-mandated wage hike makes it more difficult for less-skilled employees, including unemployed teens, to find work.

That means the Legislature has to be especially careful about enacting wage hikes in times when teen unemployment is particularly high — which it is in New Jersey, at a staggering 27 percent. That figure gives the Garden State the dubious distinction of having the worst teen employment market in the Northeast and one of the 10 worst in the country.

The proposal on the ballot this fall takes that power out of the Legislature’s hands. Not only would the minimum wage rise automatically in almost every year, but the Legislature would be powerless to stop it from increasing in years when the labor market is in a slump and the additional wage mandate would make it worse.

Congress learned the lesson about the consequences of wage mandates in a down economy the hard way. A three-step increase in the minimum wage was enacted in early 2007, when the U.S. economy had not yet entered the Great Recession. By the time the third increase was scheduled to take place, in 2009, the unemployment rate for young adults stood at 24.7 percent.

One economist who spent his career studying the subject took to the pages of the Wall Street Journal to plead with Congress to delay the wage hike.

Yet Congress let the increase go through. Economists from Miami and Trinity universities subsequently found that more than 114,000 fewer teens were employed as a consequence of the three-step wage mandate.

Today, teen unemployment is still greater than 20 percent — and it has not gone below that level in nearly five years.

This shows just how dangerous a minimum wage hike would be to New Jersey’s teens. While teens aren’t the only people who look for and work at part-time jobs, the Bureau of Labor Statistics confirms that minimum-wage earners “tend to be young” and half are between the ages of 16 and 24. That means a constitutional amendment to increase the minimum wage will, on an annual basis, make young people that much more expensive to hire.

Thankfully, there are policies that help reduce poverty without negatively affecting demographics such as teens, as the minimum wage does. For instance, the Earned Income Tax Credit — which already provides as much as $7,000 additional income annually to single-parent families in the state — has proved to reduce poverty without reducing employment.

Still, if politicians in Trenton insist on a higher minimum wage for ideological reasons, there’s a normal legislative process through which to accomplish it. MacInnes and NJPP were right on the merits of altering the constitution when they broached the subject last fall. It’s unfortunate that wage hike advocates have now chosen politics over sound public policy.

Michael Saltsman is the research director at the Employment Policies Institute.