Gov. Phil Murphy has called for the Legislature to pass a $15 minimum wage by the holidays to build a ‘‘fair economy,” help “combat the crisis of hunger” and “keep the lights on” for New Jersey’s working families. His appeal evokes compassion, and there is no doubt the vast majority of New Jerseyans don’t want to see anyone in our state going without food and electricity.
But there is a serious flaw in the governor’s linkage of the desire to erase poverty with a significant increase in the minimum wage. It’s important to determine whether that solution will accomplish his stated goal.
Legislation is stronger when driven by a deliberative process and not by the heartstrings. It is critical to learn who is actually making the minimum wage and determine whether raising it to $15 per hour will address poverty or exacerbate it. There are reams of research on the topic, and even quite a few studies on recent laws raising the minimum wage to $15 per hour.
Seattle raised the minimum wage three years ago by increments, and it will reach $15 an hour by 2021. The city commissioned annual studies on the impact. The third report, just released in October, shows that, while pay for low-wage workers rose $8 to $12 a week, all of those gains were for workers who had work experience. Less-experienced workers saw no significant change in weekly pay.
A quarter of those increased earnings can be attributed to experienced workers making up for lost hours in Seattle at other jobs outside city limits. While there was an 8 percent reduction in job turnover, there was also a significant reduction in the rate of new employees into the workforce. In other words, job opportunities for those with no skills and no experience disappeared.
A May 2018 study on a $15 minimum wage in New Jersey used population and poverty data to determine that two-thirds of working-age state residents living in poverty are not working, and won’t benefit from a raise in pay. The study determined that only 9 percent of workers who would be impacted by the wage hike are single parents, and 60 percent live with family or are secondary earners where both spouses work. It concluded that the minimum wage isn’t well-targeted to address poverty. That report projected thousands of job losses if the state’s wage threshold is raised to $15.
As an advocate for thousands of small businesses in the New Jersey, I can tell you that those in the retail, hospitality, food service and recreation sectors will be hard-pressed by a steep rise in the minimum wage. Operating on narrow profits, those businesses owners must decide if they can pass on the cost to customers, or if their customer base would disappear — a more likely scenario. The only other option is to reduce employee hours and cut jobs.
In the long run, a “fair economy” isn’t fair when neither the job creators or their employees win.