The Star-Ledger

Minimum Wage Hike Will Create Jobs

The Star-Ledger — Wednesday, May 23, 2012

By Star-Ledger Guest Columnist
Elizabeth Nisbet and Joan Entmacher

With a flurry of recent media portraying women on the verge of becoming "the richer sex," one might think women have it made. But that's not the case for many thousands of women in New Jersey struggling to make ends meet on the current minimum wage of $7.25 an hour, earning just $14,500 for a year of full-time work.

Women substantially outnumber men among minimum wage workers in New Jersey. They provide valuable services in all kinds of businesses and industries. Many of them have children of their own — but full-time minimum-wage earnings leave a mom with two children thousands of dollars below the federal poverty line in a state with a notoriously high cost of living.

Tomorrow, the Assembly is set to vote on a bill, A2162, that would raise the state's minimum wage to $8.50 per hour, putting an extra $2,500 per year in the pocket of a full-time minimum-wage worker, and index the wage to keep up with inflation. Indexing is critically important to ensure that the buying power of the minimum wage does not erode as it has over the past decades; indeed, if the minimum wage had kept pace with inflation since the 1960s, it would be more than $10.50 per hour today. For tipped workers, wage erosion has been even more dramatic: current law requires employers to pay them just $2.13 an hour.

Arguments that a minimum wage increase would harm businesses and cost jobs are unfounded. In fact, more money in workers' paychecks means more dollars flowing into local businesses, and that means more jobs. The Economic Policy Institute estimates that raising the minimum wage to $8.50 per hour would impact nearly 300,000 women — including more than 170,000 who earn less than $8.50 and workers who earn just above the proposed new wage. Women account for 55 percent of workers in this category. The change also would benefit more than a quarter of a million children whose parents earn low wages and would generate more than $277 million in economic activity in New Jersey, creating close to 2,500 jobs.

These findings are consistent with other research, including a Federal Reserve Bank of Chicago report showing that household spending rises following a minimum wage increase. A 2010 study published in the Review of Economics and Statistics by the economists Arindrajit Dube, T. William Lester and Michael Reich compared counties across states with differing wage policies and did not find negative employment effects where minimum wages were higher. Paying good wages makes good business sense for other reasons: increasing wages for low-wage workers can reduce turnover, boost worker efforts and encourage employers to invest in their workers.

The public budget also would benefit from higher wages, because low-wage work comes at a cost to government. Benefits such as the Earned Income Tax Credit, other income supports and Medicaid, which help working families get by, are vitally important but also are part of the broader cost of low-wage jobs to society.

The problem of low-wage work is not going away: these jobs have grown more than others in the economic recovery, and projections show that job growth will occur disproportionately in low-wage occupations for the rest of the decade. As low-wage work expands and the value of the minimum wage continues to drop, working women and their families continue to suffer. In fact, three of the common excuses for not acting — pressure on public budgets, the impact on business and job creation, and concern about economic growth — may, in fact, be three of our best reasons for change.

Elizabeth Nisbet is a postdoctoral associate at the Center for Women and Work at Rutgers University. Joan Entmacher is vice president for Family Economic Security, National Women's Law Center in Washington.

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