NJBIA: $15 minimum wage agreement will have big impact on small business

By Michele Siekerka, NJBIA
Trenton | Jan 18, 2019 at 2:34 pm
Op-Ed

The agreement by Gov. Phil Murphy and legislative leadership to raise the minimum wage to $15 an hour may be predictable, but it is far from economically responsible.

Yes, the phase-in is deliberate. But there does not appear to be any consideration of the significant impacts this increase will have on small businesses and its various sectors, both now and in the future.

There has been no acknowledgment of the cumulative costs our small businesses already have to absorb to run a business in New Jersey — like added mandates, expensive compliance regulations, more subsidies for energy delivery and increased taxes as a means to balance the state budget. For this, New Jersey ranks dead last for business friendliness before we even get to a $15 minimum wage.

But, also consider that the agreement fails to include an economic analysis of the annual increases on the state’s economy and job creation. Such a provision would give the state the ability to freeze a scheduled increase during an economic downturn or after a natural disaster, like Superstorm Sandy.

Even California realized the need to enact a similar economic safeguard when it decided to raise its minimum wage to $15 an hour by the year 2022. Recall how a hard-hitting recession impacted New Jersey small businesses just 10 years ago, not to mention the devastation to businesses that were closed for weeks post-Superstorm Sandy, with many not being able to reopen at all.

We should also be concerned about the impact on health benefits and overall compensation. In the New Jersey Business & Industry Association’s 2018 Health Benefits Survey, we were already seeing a 7 percent decline in employers who offered health coverage plans for their employees, due to costs. Unless there is consideration of how to address overall compensation in this minimum wage proposal, more employers will undoubtedly choose to drop employee health benefits plans to adjust for the increase in wages. In fact, they have told us so.

Also lacking are exemptions or tax credits for Medicaid providers. Consider home health care aides, for example, who treat the most vulnerable members in our community. When Medicaid reimburses less than New Jersey’s minimum wage for those services, where will the money come from to make up the difference?

And, when it comes to exempting seasonal workers, we need to remember that New Jersey is blessed with having four seasons of tourism, not just a summer one.

Further, a small business exemption — at a minimum — should be made for businesses with 10 employees or less. These are the true Main Street businesses who make our economy thrive.

And, most critical is the role of workforce development. The danger in artificially raising entry-level wages without raising skills — as this proposal does — is those employees lacking skills will be left behind.

NJBIA has long been an advocate for workforce development. Knowing that our members invest in their employees’ skill-building, we are calling for complementary legislation that would provide tax relief for companies who invest in their employees through investing in workforce development.

The fact is that small business owners pay their employees what they can afford. They want the best workers who can provide the best products and services to be competitive, with a full understanding of their own budget. The economic pie is only so big for small business owners and the slices continue to get smaller. It is these job creators that drive New Jersey’s economy through the jobs that they create.

We call upon the governor and our legislative leadership to hit the pause button and take a deeper look into these consequences before pulling the trigger on such a significant piece of legislation that has long lasting ramifications for New Jersey’s economy.

Michele Siekerka is the CEO and president of the New Jersey Business & Industry Association.

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