The Unintended Consequences of a $15 Minimum Wage in New Jersey

Date: May 02, 2018

 

There are numerous labor proposals being considered in New Jersey that would have a negative impact on small business owners, but the $15 minimum wage is one of the most harmful. If the New Jersey Legislature passes Senate Bill 864, which would gradually raise the state’s base wage to $15.10 per hour over the next few years, an NFIB Research Foundation report found that the state would suffer private-sector job losses of more than 119,000 over the next decade as well as an $89 billion reduction to economic output. Most of these job losses would come from the small business sector.

Ultimately, this would mean that the measure would hurt the very people—low-wage workers—it’s intended to help by putting them out of work. This has happened time and again in other places where the minimum wage has been raised significantly. For example, in Seattle, where the minimum wage was raised to $13 per hour in a stairstep increase on the way to $15 per hour, a National Bureau of Economic ResearchFIB study cited estimates found that after that wage hike, more thoroughly 5,000 low-wage jobs were gone. The study found the number of hours worked by low-wage workers declined by 3.5 million hours, and these workers’ wages dropped by $6 million.

In California, an Employment Policies Institute study of the state’s minimum wage increases over nearly 30 years found that each 10 percent hike in the minimum wage led to almost a 5 percent reduction in employment in industries with a high concentration of minimum wage employees. And a new report from the Mercatus Center at George MasonWashington University showed that minimum wage increases were a primary reason for the uptick in teen unemployment.

Small business owners are not surprised by the results of these various studies. They know that when a wage increase is mandated, they are facing higher labor costs for not only the employees directly eligible for the new rate, but also for employees who were previously earning that rate or just above it and in the form of payroll taxes. Profit margins are slim at a small business, and in the facet of these rising costs, many simply will not be able to afford them and will have to either raise the prices of goods or services, eliminate jobs, cut hours, or close up shop altogether.

NFIB/NJ is looking for members who are willing to share their story and show the real-life, human impact of these proposals. If you would like to share with us, the media, or legislators how SB 864 would impact your business, please email [email protected].

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