War on Wages Heats Up

Posted:
BY MARGIE BARHAM
Many argue that raising the minimum wage to $15 an hour would serve as a death toll for farms in the Garden State.
New Jersey farmers say they will not be able to compete on the world produce market if the proposed legislation to incrementally raise minimum wage to $15 an hour is passed without exemption for farm workers. According to farmers and business leaders, this legislation would mean a drastic economic impact to the state agriculture industry, as farmers who cannot absorb this cost will not be able to survive.
According to New Jersey Farm Bureau Executive Director Pete Furey, farms are “uniquely vulnerable” to the state minimum wage rate. The New Jersey Farm Bureau represents a member of 11,000 farms and agricultural-related businesses in the state. Farms with hired labor compete directly with producers in other states, so increasing the minimum wage rate puts New Jersey growers at a significant competitive disadvantage. As a consequence, increases in the state minimum wage rate also serve as an inducement for producers in other states to target New Jersey’s grocery and other retail channels, further undercutting in-state growers.
“Put plainly,” explains Furey, “not only is a New Jersey peach farmer, for example, unable to increase the price of a box of peaches in the wholesale marketplace to account for increased labor costs, but a peach grower in South Carolina, Georgia or elsewhere is all too eager to exploit this vulnerability, capitalizing on the spoils of New Jersey's vast consumer-base.”
Furey further points out that many growers also provide housing and transportation for their employees, out-of-pocket benefits not reflected in the hourly wage rate. “Agriculture is the only industry we are aware of where such non-wage benefits are provided,” he says. “These expenses are significant for many growers, and enable farm employees to avoid paying market-rate for rental or other housing elsewhere.”
The risk profile of farming is also relevant to this discussion. “Farm businesses, unlike any other industry segment, are acutely susceptible to wholly uncontrollable externalities, ranging from oscillations in the weather and pressure borne from invasive insects and diseases, to name a few,” says Furey. “To account for these risks, successful farm businesses actively manage expenses wherever possible to maintain profitability. A drastic increase in the minimum wage rate throws a wrench into their ability to manage such risks.”
Indeed it does, echoes John Ploch, president of Ploch Farms in Vineland. This family business started in 1915 and has survived the Depression and 101 years of sometimes-extreme weather conditions, and annual economic fluctuations, but such a significant increase in wages would threaten its existence.
“Payroll cost is through the roof now, and labor is our largest expense,” says Ploch, whose 280-acre farm employs 35 people. “Our prices must remain competitive, so it comes down to how much we can absorb. If we cannot make a decent living, we have to decide if we can continue to farm. I guess we’ll cross that bridge when we come to it.”
Bill SCR-1500 would amend the State Constitution and raise New Jersey’s minimum wage to $9 per hour on January 1 of the year following the amendment’s approval (expected to be January 1, 2018) followed by increases of a dollar each year until it reaches $15 per hour on January 1, 2024. Starting in 2025, it further calls for the minimum wage rate to keep pace with cost-of-living increases, based on increases in the consumer price index.
New Jersey State Assemblyman Bob Andrzejczak (D-District 1) said he is generally opposed to the $15 minimum wage increase and has been advocating for an exemption for agriculture proposal. “This is an industry that cannot set its own prices, and exists almost entirely on the margins,” he explains. “Bad weather, or too much good weather, can lose a farmer a season, either from losing a crop or prices driven too low from too much supply.” Andrzejczak, who serves as chair of the Assembly’s Agriculture and Natural Resources Committee, further noted that many of our state’s farmers also provide their workers with compensation for transportation, housing, food, and medical expenses, which drives pay over and above their hourly wages.
If the bill fails to pass or Governor Chris Christie vetoes it, the legislation will go to the hands of the voter as a public referendum. Christie has indicated he would veto such legislation. Andrzejczak said that he and his colleagues Assemblyman R. Bruce Land (D-District 1), and State Senator Jeff Van Drew (D-District 1) are pushing for an amendment to the legislation to exempt farmers from this mandatory increase. The three represent Atlantic, Cape May and Cumberland counties.
“At this point, I cannot speculate on whether the minimum wage bill will pass, or if it does whether the subsequent ballot measure will be approved by the voters,” Andrzejczak says. “But I do believe that if it did, and agriculture was not exempted, it would devastate one of the most fragile, and absolutely necessary, industries that we have in New Jersey.”
Local business leaders agree that the legislation will harm businesses and ultimately cost jobs. “The minimum wage legislation is an issue that we are following closely and as the bill is currently written, we oppose it,” says Dawn Hunter, executive director of the Vineland Chamber of Commerce. Like many organizations that represent the business community, they believe that a 79 percent increase, even if phased in, is a cost that businesses cannot absorb and will lead to increases in costs of products and services, reduction in jobs, and ultimately could result in business closures.
“We recognize that the agricultural community would be especially hard hit by this increase,” she notes and explains that a variety of businesses that hire hourly workers—seasonal employers who hire teenagers as summer help, for example—will have to reduce staffing levels and/or charge higher prices for products and services if they are required to give workers a 79 percent pay hike.
“Small businesses would then have to pay $22.50 for time and a half and $30 an hour for overtime,” she said. “There is also the ripple effect where those employees who are now making $15 will also want raises commensurate with the 79 percent increase in the minimum wage. Not to mention unemployment and workers compensation insurances all increase as payrolls are increased.”
However, according to the key sponsor of the bill, State Senator Stephen M. Sweeney (D-District 3) who represents Cumberland, Gloucester and Salem counties, this legislation provides a living wage to the nearly one million New Jerseyans living in poverty and will likely help businesses overall. Furthermore, he quoted a New Jersey Policy Perspective study that found that 90 percent of those this increase would help are over age 20; 61 percent work fulltime; 28 percent are parents, and almost half of those attended or graduated college. New Jersey Policy Perspective is a nonpartisan, nonprofit organization that conducts research on public policy issues in New Jersey.
In a news release issued in February of this year after he introduced the legislation, Sweeney said that the phased-in schedule will allow businesses to gradually absorb the increases. He noted that a fairer wage will also lower the burden on the state and federal governments to provide assistance for those living at or below the poverty levels and that it will spur spending.
“The critics who always claim that ‘the sky is falling’ every time we raise the minimum wage are just trying to use scare tactics that just don’t come true,” said Sweeney in a news release. “They said we would lose jobs when we raised it before but we actually gained jobs. They try to say it’s bad for the economy but every legitimate study shows that just isn’t true.”
Sweeney explained that when the minimum wage was increased in 2013, the NJBIA predicted it would cause the loss of 31,000 jobs over a decade but instead, he said that New Jersey has actually experienced one of the most significant employment increases since then, gaining approximately 29,000 jobs in 2014 and more than 64,000 jobs in 2015.
This bill has the support of state senators representing nearly half of New Jersey’s 40 legislative districts, including Senator Jim Whelan (D-District 2) who represents Atlantic County.
The plan to phase in the increase mirrors legislation offered by U.S. Congressman Donald Norcross (D-NJ1) and cosponsored by Congressman Frank Pallone (D-NJ6) and Congresswoman Bonnie Watson Coleman (D-NJ12) that would set the same minimum pay scale nationally. Senator Sweeney’s proposal would have the voters approve a constitutional amendment, the same process used in 2013 to overcome Governor Christie’s opposition. Assembly Majority Leader Louis Greenwald will sponsor companion legislation in the Assembly.
Senators Sweeney and Turner said they will also introduce legislation to provide tax credits to small businesses that raise the wages of minimum wage workers faster than the schedule set in the proposed constitutional amendment,
According to Sweeney’s news release, the amendment would maintain the “indexing” already in the constitution that creates automatic future increases tied to inflation. As an amendment to the state constitution, the proposal would have to be approved by both houses of the Legislature with majority votes in two consecutive years or with three-fifth votes in one year. In order to become law, voters would need to approve the amendment by a simple majority. The likely two-year timetable would have the proposed amendment go to voters in 2017.
Last month, on April 3, California Governor Jerry Brown (D) signed a law making his the first state in the nation to enact a $15 statewide minimum wage, while New York Governor Andrew Cuomo approved a $15 minimum wage to New York City and its suburbs, with a $12.50 minimum elsewhere in New York State.
The “Fight For 15,” a movement that started with unions and community groups backing the efforts of fast food workers to win a living wage, has become a national movement and a critical element of this year’s Democratic presidential campaigns, according to Senator Sweeney. “As more and more states and cities raise their minimum wage—and thereby drive up the wages of all workers—consumer spending will rise, and with it, prosperity for all Americans,” he states in a news release.
To stay abreast of the progress of SCR1500 visit njleg.state.nj.us.
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By the Numbers
On April 14, the New Jersey Department of Labor and Workforce Development issued a news release, which announced that New Jersey employers added 17,300 nonfarm jobs in March, according to preliminary data from the U.S. Bureau of Labor Statistics (BLS). It shows private sector employment increased by 78,800 jobs over the past year (March 2015–March 2016). Garden State private sector employers have added 265,000 jobs since February 2010, the recessionary low point for private sector employment in the state.
The release noted that New Jersey residents who have reported to have jobs again reached an all-time high, climbing to a historic 4,378,500 in March 2016, according to the BLS household survey.
Among the gains posted were in eight of nine major private industry sectors. Leisure and hospitality (+3,500) and education and health services (+3,400) experienced the most growth, followed by construction (+3,000), trade, transportation and utilities (+2,900), professional and business services (+1,600), other services (+1,200), financial activities (+1,000) and information (+600). Manufacturing was down 200 jobs, while the public sector recorded a gain of 300 jobs. Farming jobs were not noted in the report.
Based on more complete reporting from employers, previously released estimates for February were revised up by 3,400 to show an over-the-month total nonfarm employment loss of 5,200 jobs. Preliminary estimates had initially indicated an over-the-month loss of 8,600 nonfarm jobs.  Preliminary BLS data for April will be released on May 19.