NJ State Commission: Minimum Wage Hike Bad for Economy

June 26, 2013

By Steven Russell

In addition to electing a governor this November, voters in New Jersey will decide whether to increase New Jersey’s minimum wage. The proposed constitutional amendment would raise New Jersey’s wage floor from $7.25 to $8.50 and automatically tie future increases to inflation. Although the idea has gained popular support, the government’s own Minimum Wage Advisory Commission has rightly argued that such an increase would greatly harm New Jersey’s economic recovery.

The commission contends that an increase in the minimum wage would increase unemployment. Its finding is largely consistent with recent economic research on the subject—over 85% of studies agree that raising the minimum wage destroys jobs. In fact, a recent study by the University of Chicago found that that latest federal minimum wage increase cost the country almost 800,000 jobs, especially hurting teenagers and low-skilled workers. With some of the highest teen and overall unemployment rates in the country, New Jersey cannot afford to stifle employment opportunities.

The commission also fears that an increase in New Jersey’s minimum wage would make the state less business-friendly than its neighbors. Pennsylvania and Delaware have minimum wage rates of $7.25. The proposed amendment would make New Jersey’s minimum wage rate over a dollar higher than its competitors—a gap that would increase every year due to the inflation clause in the amendment. As a result of the increasing labor costs, some businesses will naturally leave New Jersey, taking jobs and their services with them. As it continues to recover during these tough economic times, New Jersey needs more business—not less.

Finally, the commission argues that a higher minimum wage will increase costs for consumers. In the face of minimum wage hikes, employers have three ways to stay profitable. They can hire fewer employees, reduce hours, or raise prices. The third option would be harmful to the entire state, especially families struggling to make ends meet. According to a study by the University of Leicester, a 10% increase in the minimum wage raises overall prices by 0.4%. By those statistics, the proposed constitutional amendment would cost the average family in New Jersey over $320 a year. Higher prices will hurt both businesses and consumers alike, slowing economic growth in New Jersey.

When considering whether to raise the minimum wage this November, New Jersey voters should take note of the verdict issued by the state itself. Higher minimum wages, while helping the few lucky enough to keep their jobs, will cause unemployment, a poor business environment, and higher prices for the rest of New Jersey. Can New Jersey really afford a minimum wage hike?

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