Can New Jersey Businesses Handle a $15 Minimum Wage?

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CUMBERLAND COUNTY, N.J. -

Is a $15 per hour minimum wage good for New Jersey? SNJ Today fields the debate amongst economists and advocates for small business owners, teens, and agricultural workers.

While campaigning to become governor, then-candidate Phil Murphy ran on a platform to increase the minimum wage for New Jersey. Now coming close to the end of his first year in office, the measure, Assembly Bill 15 (A15) has come to a stop as lawmakers face some differences in the bill.

According to NJ.com, talks will resume later this week. Opinions vary on what should be done with the minimum wage, but one question that always bubbles to the top is this: Can New Jersey businesses handle a $15 minimum wage?

WHAT EXACTLY IS THE LAW?

In short, A15 will raise the state’s minimum wage incrementally each year, starting in 2019 and building to a $15 per hour rate in 2024. But as stated in the current version of the bill (likely to change as state lawmakers make adjustments), employees at small businesses (employing 10 or fewer people), teens under the age of 18 years old, seasonal workers, and agricultural workers will see their wages change later. Employees who receive gratuities or tips would have their hourly wages increase from 2019 to 2024. 

If the federal minimum wage, now at $7.25 per hour, would increase higher than the state’s wage, then it would be raised to that rate.

A “Task Force on Wages and State Benefits” will be established to evaluate how the new minimum wage would affect the “eligibility of low-income individuals, other disadvantaged individuals for a variety of services and benefits provided or administered by the State or its instrumentalities...”

This task force would include the commissioner of Health, Human Services, Education, Community Affairs, and Labor and Workforce Development, and the State Treasurer, and four public members appointed by the governor.

The Proposed Increments

Most New Jersey workers being paid the state’s minimum wage have already seen a boost to $8.85 in the new year. Below, you can see how the minimum wage will increase if the current A15 bill is passed.

July 1, 2019 - $9.50

January 1, 2020 - $11

January 1, 2021 - $11.50

Then from 2022 to 2024, the minimum wage will increase by $1.15 a year until the state’s minimum wage is $15.

Other workers, such as employees of small businesses, teens under the age of 18, seasonal workers, and agricultural workers won’t see their wages increase to $15 an hour until 2029.

WHAT ARE PEOPLE SAYING?

Brandon McKoy is director of Government and Public Affairs for The New Jersey Policy Perspective, a think tank that advocates for New Jersey to raise the minimum wage. He says that a gradual increase would help, not hinder New Jersey.

In “A $15 Minimum Wage Would Help Over 1 Million Workers and Boost New Jersey’s Economy,” written by McKoy and released in February 2018, he says that the increase would flood the economy with more money, including more from low-income workers.

“Raising the minimum wage directly puts more money in the pockets of low-income workers who cannot meet their basic, everyday needs,” said McKoy. “With more take-home pay, these workers will spend that money immediately and locally on goods and services they were previously unable to afford.”

McKoy also states that academic research shows that raising the minimum wage would also reduce recidivism, domestic violence and child abuse, and lower the rate of teen pregnancy.

As more and more New Jerseyans gain larger paychecks, fewer will depend on support programs, Medicaid, Children’s Health Insurance Program (CHIP), and Temporary Assistance for Needy Families (TANF.) This means New Jersey could have millions of extra dollars to spend on other state programs and initiatives.

“New Jersey spends an estimated $726 million a year on basic safety net programs for working families,” said McKoy.

However, Dawn Hunter, executive director of the Greater Vineland Chamber of Commerce, warns that a $15 an hour minimum wage could have negative consequences for Vineland and its residents.

“All rising costs of business operations usually have to be passed onto the consumer,” said Hunter, “meaning higher prices of goods and services, thereby increasing everyone’s cost of living. Vineland has many positive economic developments going on and is poised for a stronger economy. We [the Greater Vineland Chamber of Commerce] would be disappointed to see a $15 minimum wage hinder that growth.”

The Chamber has been listening to Vineland business owners very closely and many of them are concerned about their futures.

“They are extremely worried and concerned,” said Hunter. “Many have looked into automation so they can replace employees and hire less people. They have been dealing with a new Paid Sick Leave Law that is burdensome and costly to their operations. You add a $15 minimum wage and a possible expanded Family Leave Act. There has to be a breaking point.”

However, Hunter clearly states that the Chamber isn’t against employees making a reasonable wage.

“The Greater Vineland Chamber of Commerce is not against people making a decent wage,” said Hunter. “However, minimum wage was never intended to be a long-term living wage. We oppose this legislation because it will halt hiring and close some businesses. Those are the very businesses that offer jobs to begin with. Our unemployment rates have improved recently and this $15/hour minimum wage will erase any positive progress that has been made.”

Shirley Kline, president of the State Board of Agriculture for the New Jersey Department of Agriculture, says that she is worried for wholesale growers, younger farmers who are just getting into the industry, and farmers who are not quite old enough to retire.

For wholesale growers, “if the minimum wage rises too quickly, they will not be able to adapt,” said Kline. “And you will find those farms either going out of business completely or changing their operations completely.”

Another problem is the marketplace itself. Farmers sell their produce at a small margin or they take a hit and make no money from their produce. Having a market work like this, many farmers won’t be able to give their workers a $15 minimum wage.

Then there is competition from other states with a lower minimum wage.

“And a lot of the farmers say to me, that they wouldn’t mind paying $15 an hour if everyone else paid $15 an hour,” said Kline. “But if you look at the states around us, those that border New Jersey, we have one that’s still at the federal minimum wage, that’s $7.25 an hour it’s Pennsylvania, and it’s really hard for our wholesale producers to compete with a farmer in Pennsylvania who’s paying $7.25 an hour if we are paying $15 or something even little less than that.”

WHAT ELSE CAN BE DONE BESIDES RAISING THE MINIMUM WAGE?

Instead of increasing the minimum wage, Matthew Johnson, president of JVI Business Strategies, thinks that school systems should focus on the demands of today’s job market.

“Instead of mandating higher wages, we should help people increase their potential,” said Johnson. “Schools, starting at early levels, should have more hands-on education to make learning more engaging and better geared towards today’s job market.”

He also suggests that the Earned Income Tax Credit should be expanded and that the federal government could start a “job training partnership program that would help businesses meet hiring needs with supplemented wages from the state.”

Another way to help those living with a low-paying job is a Living Wage. According to Lauren Banko, an economics lecturer for the Department of Political Science & Economics at Rowan University, this is “one [wage] that people can live off of, normally thought of without public assistance.”

But the problem with a living wage is how to adjust that wage from family to family or even one worker to another.

“A big issue with this is that it is difficult to adjust for family size (looking at identical workers, should one get paid more because they have children?),” said Banko. “Health care is another issue that one must consider. Even if you can receive some of a subsidy through the Health Care Marketplace, many individual plans are more costly than if you can pay for them through your employer.”

Governor Murphy is still advocating for the minimum wage hike, but it seems it will take some time, as people voice their opinions and concerns about A15 and how it could damage small businesses throughout the state. It does seem likely, however, that A15 will be passed in some form soon.

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