NJBIZ

Minimum Wage Rises

NJBIZ — Monday, October 9, 2006

BY Scott Goldstein

STATEHOUSE — The hourly minimum wage in New Jersey increased by $1 last week to $7.15, but it was a statement issued by Gov. Jon S. Corzine, not the pay hike, that has some business advocates worried.

A news release by the governor says the new minimum wage could also lift the wages of those who make slightly above the minimum, "as their wages may increase as the wage floor rises."

That was the primary concern expressed by the New Jersey Retail Merchants Association last year when it opposed the bill that raised the wage, says John Holub, president of the association.

"Most, if not all, of our members pay over the minimum wage, so our biggest fear is the ripple effect," Holub says. "Unfortunately, my worst fears were confirmed by Corzine's press release because he mentions that it will hopefully have that ripple effect."

A 2005 law that passed the minimum wage hike, signed by then-Gov. Richard Codey, actually increased the wage by $2. The first part of the hike, to $6.15, took effect last October.

Holub worries that employees who were making above minimum wage might now demand raises. "A worker could have a legitimate interest in saying we were making $3 over minimum wage and we want to continue making $3 over minimum wage," Holub says.

The New Jersey Chamber of Commerce did not wage a battle against the legislation. "Most of our members pay the minimum wage," says Jim Leonard, legislative lobbyist for the chamber. "The larger issue is the creep effect. If you raise the wages at the bottom, will you then have to raise wages for the rest of your employees?"

At $6.15 an hour with a 40-hour workweek, a minimum-wage earner made about $12,300 annually. At the new rate of $7.15 an hour, annual earnings increase to $14,300. About 264,400 New Jersey residents make less than $7.15 an hour, although some of those workers are employed as servers in restaurants or other jobs where tips are a significant part of their income.

A report released last year by Legal Services of New Jersey found that the amount of money it takes to support a family of four ranges from $30,000 in Union County to $56,000 in Hunterdon County.

Jim Walsh, assistant program director of New Jersey Citizen Action, says, "$7.50 an hour doesn't even get you to the federal poverty line, let alone self sufficiency. While we're excited to see the minimum wage increase, we call on the state and federal governments to do more to increase minimum wages."

The minimum wage in New Jersey has been raised once in 13 years – by 10c in 1999, says Jon Shure, president of New Jersey Policy Perspective, a liberal-leaning think tank based in Trenton. "It should be higher, but this increase is a good step," Shure says. "Working people will still be in the hole, but not so deep."

Shure pushed for automatic indexing, so the minimum wage would increase every year based on the cost of living. "There's no reason why people at that level of income should wait until politicians feel they should get raises," Shure says. "It should be more automatic than that."

The legislation does not install automatic increases, but it creates the New Jersey Minimum Wage Advisory Commission to annually evaluate the adequacy of the minimum wage and report its recommendations to the governor and the Legislature. The first report will be due no later than December 2007. The commission includes the state labor commissioner and members appointed by the governor, business organizations and the New Jersey AFL-CIO.

Shure says he predicts that minimum wage increases will benefit, not hurt, companies. "I cannot believe that giving more money to lower-income people is bad for the economy," Shure says. "They will spend it and spend it close to home. This is an economic stimulus, far more than cutting taxes for the rich."

During a speech late last month before labor unions in Atlantic City, Corzine says the minimum-wage increase is a step toward helping working families "afford a better quality of life, and we need to continue in this direction. It's the right thing for our workers, our state and our economy."

State Minimum Wages

How New Jersey's new standard compares with other states in the region:

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