By Liz Hay
Elm Staff Writer
On Feb. 5, New Jersey unofficially became the fourth state to raise its minimum wage to $15 per hour. While the official vote has not yet taken place, an agreement among state leadership and Gov. Phil Murphy all but confirms the bill’s passage in the Democrat-controlled state legislature. The law’s passage will fulfill a major campaign promise of the governor and placate unions.
California, Massachusetts, and New York have already raised the minimum wage to $15, along with some scattered cities like Seattle and D.C. These areas will be closely watched for guidance on national wage legislation. With the 2020 presidential race heating up, a federal minimum wage increase will certainly be a point of discussion in the Democratic primaries.
The New Jersey wage hike will not take place all at once, or even apply in the same way to every worker. The current minimum wage in New Jersey is $8.85, which would increase to $10 in July. On Jan. 1 of every following year until 2024, the wage will increase by $1.
Not every profession would see this same wage change. For example, tipped workers like waiters would see their wages increase to $5.13 from the current rate of $2.13 per hour. After 2024, the wage will increase in proportion with inflation rates.
There are many arguments against a $15 minimum wage increase, and the New Jersey wage law will be an interesting test of these criticisms. One concern is that such a high wage will make recovery from an economic recession much more difficult, since businesses may struggle to pay their workers the mandated rate. Since the $15 minimum wage movement is a recent phenomenon, there has not yet been the ability to study the effects of a major recession on a $15 minimum wage economy.
One of the most common criticisms of the wage hike is that it will simply cause employers to downsize, either laying off workers or hiring them for fewer hours. Recent data from the University of Washington shows, however, that Seattle’s 2014 minimum wage increase has “added about $10 per week on average to the earnings of low-income workers through 2016, even while reducing weekly hours slightly.”
If the patterns found in Seattle are replicated in New Jersey, this could mean that the whole state will see both a boosted income as well as slightly more free time.
On the large scale, the push for a federal $15 minimum wage runs into the valid criticism that raising wages in states without a proportionately high cost of living is at best unnecessary and at worst damaging. Since regions of the U.S. vary widely in their economic conditions, it makes sense for a huge change like a $15 minimum wage to be decided at the state and local levels. All of the states that have raised their minimum wage to $15 are in the top 10 most expensive states to live in — including New Jersey. It makes sense for the state to raise its wages in recognition of the high cost of living there, while a state like Mississippi would find the increase burdensome.
Any economic action has both positive and negative consequences, and there will always be people who lose out. Raising a state’s minimum wage will simply shift losses from certain groups to others, while shifting gains in proportion. New Jersey has accepted the complexity of economic policy but elected to prioritize its most vulnerable populations with its new wage system.
The $15 minimum wage is a modern step toward a more equitable New Jersey, and will serve as an important data point for future policy decisions throughout the nation.