Minimum wage hike will cut worker salaries
Author: Frayda Levin, Michael Saltsman
Publication Date: March 2018
Newspaper: Daily Record
Topics: Minimum Wage
In his inaugural address, Gov. Phil Murphy told his colleagues in the legislature, “Send me the bills … to raise the minimum wage to $15 an hour,” promising a stronger, fairer economy as a result. On January 25, Senator Troy Singleton gave Murphy what he wanted in S1142, the first step to reaching a $15 minimum wage. Unfortunately, raising New Jersey’s minimum wage will likely result in decreased wages for hourly employees.
New Jersey should heed the warnings from locales that have already experimented with drastic wage hikes. Take Seattle: It was one of the first cities that imposed a $15 an hour minimum wage. A city-funded research team at the University of Washington found that Seattle’s rising minimum wage had reduced work hours for affected employees. On average, employees saw their paychecks shrink by $125 a month.
Yes, you read that right: A policy designed to boost employees’ paychecks actually left them worse off. A $15 wage in New Jersey isn’t expected to fare better. A forthcoming analysis by economists at Miami and Trinity Universities finds that roughly 33,000 jobs would be lost in New Jersey as a consequence of $15. The policy’s harm would be felt most acutely by young employees, and by those with less than a college degree.
New Jersey’s restaurant and retail industries would be a similarly hard-hit — a consequence that’s played out in real time in New York City, where the minimum wage is rising towards $15 at a rapid clip. The consequences have been as tragic as they are predictable: According to data from the Department of Labor, 2016 was the first year since 2009 where the city’s retail industry experienced a decline in year-over-year employment growth. In the restaurant industry, employment growth is less than half its 2015 average.
Whether wage hikes are the only factor driving these closures, anecdotes of business closures make clear that they play a role. Beloved city eateries such as the Del-Rio Diner, Da Silvano, China Fun Eatery and fine-dining favorite Annisa have been forced to close their doors, citing the impact of rising labor costs. The owner of Annisa explained her frustration: “We do the numbers, and they don’t work anymore.”
This shouldn’t come as a surprise to the state legislature in Trenton. At a hearing in 2016 on increasing New Jersey’s minimum wage to $15, the owner of Morey’s Piers explained that such a policy would make his business impossible to operate. The owner noted his family-oriented entertainment park once employed 1,500 seasonal workers, about two-thirds of whom were under age 22. Already, the state’s rising minimum wage had forced the company to cut roughly 200 of those seasonal positions.
Further increases to $15 across the broad would make the price of a ticket unaffordable for most families; as a consequence, this popular summer park may simply close.
The minimum wage was meant to protect starter-wage jobs to allow less-skilled or less-experienced jobseekers to enter (or re-enter) the workforce. For the vast majority of workers, a minimum wage job serves that purpose; two separate analyses of Census Bureau data confirm that the vast majority of workers get a raise in 1-12 months on the job.
For the relatively small percentage who have difficulty moving up the ladder, or who have families to support, policies like the Earned Income Tax Credit (EITC) exist to subsidize their income without putting their job at risk. Thanks to the state and federal EITC, the minimum wage for a single parent with two children in New Jersey is already $12 an hour.
We take Gov. Murphy at his word that he wants to improve the state. He can start by listening to the economic experts, nearly three-quarters of whom oppose a broad $15 wage mandate, according to a University of New Hampshire survey. The evidence has borne out their concerns; the question now is whether the governor will value evidence over ideology.
Frayda Levin is a resident of Mountain Lakes and former business owner. Michael Saltsman is Managing Director of the Employment Policies Institute.