New Jersey Raises its Minimum Wage, Congruous with the Sentiment of the Country

10470768135_c866a3529d_b

As of January 1st, the minimum wage in New Jersey will be $8.25/hour, up one dollar from the current rate of $7.25/hour. The minimum wage will also be subject to increase in accord with increases in cost-of-living each year. Despite Chris Christie vetoing a bill just last year that proposed an $8.25 minimum wage, New Jersey voters supported the amendment by a margin of 61% to 39%. While liberals have lauded this as a success for low-wage workers, many conservatives, including Chris Christie, have argued that this will in fact do significant damage to New Jersey’s economy. In particular, conservatives have voiced concern for small businesses because they worry that this hike will cut their margin of profit and lead to loss of jobs and the closing of small businesses. But this begs the question, for a small business, is a one-dollar cut in its margin of profit going to radically affect employment? That one dollar is most likely will go a lot further for the worker earning minimum wage than for the small business owner.

Historically, according to the NY Timesthere have been productivity gains that would support a minimum wage well above $7.25. But the problem is that these gains have not reflected in the wages of minimum wage earning workers. Instead, the gains have been put in executive pay and shareholders. This would explain the increase in income inequality and the whole uproar of Occupy Wall Street. Simply put, $7.25/hour is not enough money to support a family. While some argue that this wage is better than no wage (unemployment), it is hard to accurately predict the number of jobs that would be lost. The New Jersey Business and Industry Association estimates that number to be around 31,000 jobs over 10 years, but again, this is just an estimate.

But beyond just New Jersey, Americans across parties overwhelmingly support an increase in the national minimum wage. A Gallup Poll shows that 71% of Americans support raising the minimum wage to $9 per hour. More specifically, 91% of Democrats support it, 68% of Independents, and 50% of Republicans.

This is why Sen. Harry Reid (D-NV) and President Obama have expressed interest in raising the minimum wage to $10, which would also be subject to raises based on the Consumer Price Index. The problem here is that this could present a slippery slope of continual, unsustainable increases in the minimum wage. The increased minimum wage would most likely lead to an increase in cost of goods in order to compensate the decrease in margin of profit. This would then cause the CPI to increase and the minimum wage as well the following year, thus creating a never-ending cycle.

But to the American public, a rise in the minimum wage is typically a proposal that will receive fairly universal support across parties. People are typically sympathetic to how the current minimum wage has not risen with the cost-of-living. In addition, those in favor of raising the minimum wage counter the argument about deleterious effects on the economy by saying that Americans will have more discretionary income, which will in turn help the economy as a whole. The question becomes which will have a greater effect on the economy, the benefit of more discretionary income or the detriment of unemployment? Though right now, with unemployment at 7.3% (which is still relatively high), anything that will increase the unemployment rate will probably not be looked upon too keenly once its effects are felt.

Despite support across a broad base in America, an increase in the minimum wage would most likely face extreme difficulty passing the Republicans in power. It would be particularly unpopular among the base, which typically moderate Republicans like Chris Christie have to please while looking towards the 2016 elections. So while it can most likely be agreed upon that the minimum wage is not a livable salary, it will probably not be changed in the immediate future (at least on a federal level).

Photo courtesy The All-Night Images on Flickr