Take a principled stand against $15 minimum wage
Author: Jordan Bruneau
Publication Date: November 2017
Newspaper: North Jersey
Topics: Minimum Wage
With Gov. Chris Christie leaving office early next year, New Jersey’s $15 minimum wage backstop leaves as well. Twice during his tenure, Christie vetoed dramatic minimum wage increases passed by the state’s Democratic legislature, including $15 legislation last year.
Gov.-elect Phil Murphy campaigned on a $15 minimum wage, and Democratic state Senate President Steve Sweeney has indicated that legislation will be forthcoming early next year. Perhaps seeing the writing on the wall, Senate Republican leader Tom Kean, Jr. recently said he would back a wage hike in return for Murphy dropping his proposed millionaire’s tax.
But just because the biggest impediment to a $15 minimum wage is going away doesn’t mean that a 77 percent wage hike is now a good idea. In fact, a recent study by economists David Macpherson of Trinity University and William Even of Miami University concludes that a $15 minimum wage would bring New Jersey a lot of pain with little-to-no gain.
The economists point out that this job loss would come mostly among less-skilled, young, and female employees, who disproportionately work in the retail and restaurant sectors where razor-thin profit margins make dramatic minimum wage increases especially difficult to absorb.
Their findings are in-line with the vast majority of economic research, including a recent University of New Hampshire survey of U.S.-based economists where five in six respondents agreed that a $15 minimum wage reduces jobs for young employees. Even left-of-center economists associated with the Clinton and Obama administrations have come out against a $15 wage mandate.
Garden State residents don’t need to consult economic research to learn the consequences of a $15 minimum wage. They just need to look across the Hudson River. Last year, New York passed a $15 minimum wage and the consequences have been significant, with dozens of small businesses forced to lay off staff, reduce hours, and even close altogether in response.
In New York City, the wage hike has led to fast-food and restaurant industry employment growth being cut in half since 2015. The minimum wage-induced closures of longstanding eateries like Del Rio Diner, China Fun Eatery, and Da Silvano have contributed to this drop.
But perhaps these job loss consequences are worth it if a $15 minimum wage lifts New Jersey residents out of poverty, as Assembly Speaker Vincent Prieto and other proponents have argued. Unfortunately, there is little-to-no evidence that minimum wage increases have any impact on poverty reduction.
A Cornell University study of the 28 states — including New Jersey — that raised their minimum wages between 2003 and 2007 found no associated reduction in poverty compared with states that didn’t pursue an increase. And a 2012 study by economists Joseph Sabia and Robert Nielsen found “no statistically significant evidence that a higher minimum wage has helped reduce financial, housing, health, or food insecurity among the poor.”
What explains this seemingly counterintuitive finding? A big reason is that most minimum wage earners aren’t poor. In fact, just seven percent of New Jersey employees affected by a $15 minimum wage are single parents. Most of those affected either live with family or are secondary earners. Because so many minimum wage earners live in households where they’re either a second or third earner, the average family income of those affected by New Jersey’s proposed $15 minimum wage is $78,000. Not exactly the income class the policy attempts to target.
Sadly, because two-thirds of New Jersey’s working-age poor residents don’t have any job at all, raising employment barriers by dramatically increasing the wage floor may actually exacerbate poverty rather than alleviate it.
Chris Christie is soon to be gone. But principled opposition to a $15 minimum wage in New Jersey shouldn’t go with him.