Higher minimum wage will hurt economy

By Phil Kirschner
President, New Jersey Business and Industry Association

New Jersey voters will soon decide whether to amend the state Constitution to increase the minimum wage from $7.25 to $8.25 an hour and guarantee annual increases in the minimum wage which would be tied to the consumer price index.

While we certainly understand the point of view of those who would seek to increase the minimum wage, using a constitutional amendment to do so is the wrong way to bring about change. 

While the state’s economy is improving many employers are still struggling.  Requiring an immediate increase on January 1, 2014 with annual increases beginning September 30, 2014 and every year thereafter, no matter how the state’s economy is doing, is not the way to go. 

As businesses still struggle to get back on their feet, a constitutional amendment would require them to continually increase wages beyond the point many of them will be able to afford.  And when they cannot afford to pay higher wages they will be forced to reduce hours and shifts and eliminate jobs.

Passage of this amendment would add $2,000 per employee a year, but businesses don’t have additional sales to support such an increase. The very people this amendment seeks to help could be cut to part time or lose their jobs entirely. Also, employers may be forced to raise prices to pay for an increased minimum wage—hitting all consumers in the pocketbook.

Raising the minimum wage, particularly through a constitutional amendment, will put New Jersey out of step with the majority of other states, including all of the states in our region. There are only four other states that include minimum wage provisions in their Constitutions—Colorado, Florida, Nevada and Ohio.

If there is another economic downturn, or even worse, another serious recession, there will be no flexibility. The Legislature will not be able to step in and relieve the pressure on businesses by delaying or postponing an increase in bad economic times.  If the voters approve this amendment, it can only be changed by another constitutional amendment, which could take years to achieve.  Requiring businesses to raise wages in bad economic times is too large a burden to ask the state’s small businesses to bear. 

During the height of the worst recession in eighty years, employees were not getting raises or had their pay reduced. Under this amendment minimum wage workers would continue to get increases.  Where is the fairness in that?

There is no one among us who does not want to be part of a society in which businesses can be successful and workers can make good wages.  The problem arises when a proposal such as this  tries to engineer a predetermined outcome regardless of the underlying economy.

Rather than constitutionally mandating salaries, it would be a much more effective strategy to help low wage workers improve their skills so they can get a better job and earn higher wages.  Mandating a higher minimum wage through a constitutional amendment, regardless of economic conditions, will hurt the economy and limit job growth. 

Higher minimum wage will hurt economy