percent discounts, and the gift cards being used to buy food, the latest
retail sales data confirmed it: We’re coming off the worst holiday
shopping season in decades. Few observers were surprised. With
rising costs and stagnant wages, even the most basic necessities – like
food and clothing – are taking bigger chunks out of working families’
budgets.
But another news item last week that received less attention points
towards a key step for boosting consumer spending in the state: raise
New Jersey’s lagging minimum wage.
The state’s minimum wage advisory commission, chaired by Gov.
Corzine’s labor commissioner, issued its 2008 report. It called on the
legislature to restore New Jersey’s minimum wage to $8.50 – closer to
its value before it started to slide – and to guarantee annual cost-of living
increases to prevent the minimum wage from falling each year.
New Jersey’s minimum wage is just $7.15 an hour, or $14,782 a year
for a full-time minimum wage worker. Despite the fact that New
Jersey is one of the most expensive states in the nation (housing costs
alone are, on average, 55 to 79 percent higher in New Jersey than the
national average), workers in 13 other states and the District of
Columbia are paid a higher minimum wage. Contrary to myth,
minimum wage earners are overwhelmingly adults – in New Jersey, 85
percent are over the age of 20. And because neither New Jersey’s
minimum wage nor the federal minimum wage are indexed to increase
when the cost of living rises (as is the case in 10 other states do), both
have been falling in terms of buying power for more than 30 years.
A strong minimum wage is not only crucial for helping low-income
families make ends meet, it is one of the best ways to stimulate the
consumer spending that drives the state’s economy. A minimum wage
increase goes directly to those New Jerseyans who will spend it
immediately – because they have to – on basic necessities like food,
fuel, rent, clothing and transportation. A recent study by Federal
Reserve Bank of Chicago economists confirmed that minimum wage
increases boost consumer spending substantially more than tax cuts do.
This is spending that goes directly into local businesses and the local
economy. Moreover, as the state grapples with a looming budget
shortfall, a minimum wage boost represents one of the few forms of
stimulus that will not worsen the deficit.
Business lobbyists will of course argue – as they always do, regardless
of the economic climate – that raising New Jersey’s minimum wage will
hurt businesses and worsen unemployment. But repeated studies – in
good times and bad – have found no job losses resulting from minimum
wage increases. As a result, in 2006 more than 650 economists,
including five Nobel laureates and six past presidents of the American
Economic Association, called for increasing the minimum wage, finding
that it “significantly improve(s) the lives of low-income workers and
their families, without the adverse effects that critics have claimed.”
As Princeton economist and 2008 Nobel laureate Paul Krugman
summarized, “All the empirical evidence suggests that minimum wage
increases in the range that is likely to take place do not lead to
significant job losses. True, an increase in the minimum wage to, say,
fifteen dollars an hour would probably cause job losses …. But that is
not what is on – or even near – the table. ”
In fact, the minimum wage’s twin functions as cushion for working
families and fiscal stimulus have been recognized from the beginning.
As the nation struggled through the Great Depression in 1938,
Franklin Roosevelt called for adoption of the first federal minimum
wage as “an essential part of economic recovery.” By increasing the
purchasing power of those workers “who have the least of it today,” he
explained, “the purchasing power of the Nation as a whole – can be still
further increased, (and) other happy results will flow from such an
increase.”
To help working families and New Jersey’s economy weather the worst
economic downturn since that time, the Legislature should act swiftly
to implement the advisory commission’s recent call to restore a robust
state minimum wage.
Eileen Appelbaum is a professor at the Rutgers University School of
Management and Labor Relations. Tsedeye Gebreselassie is an
attorney at the National Employment Law Project.
© 2009 Eileen Appelbaum and Tsedeye Gebreselassie
Email this page
