Studies show minimum wage hike has little to no negative impact on employment

TRENTON – The major economic policy priorities were laid out last week by Republicans and Democrats.

Gov. Chris Christie and Republicans are united behind the three-year, 10 percent income tax cut for people of all socioeconomic backgrounds. Also, Christie wants to keep the business tax cuts in place that were instituted last year.

But Democrats have said the tax cut is just another example of Christie protecting the well-off and takes the focus off of addressing the real financial choker for many families: high property taxes.

While they have yet to detail an alternative to Christie’s income tax cut proposal, the Democrats appear solidly behind a bill that would raise the minimum wage that Assembly Speaker Shelia Oliver has called for. The minimum wage would go up from $7.25 to $8.50 per hour.

That bill, A2162, riled up many business groups during an Assembly budget hearing last week, who said it could lead to, in some cases, businesses shutting down.

But is that really true? Do businesses contract and stop hiring people?

Studies of past minimum wage hikes in the state shed a different light, putting the claims of deleterious impacts expressed by some business groups in doubt.

In a study by the University of Delaware’s Alfred Lerner College of Business and Economics, it determined that there is  “little evidence of negative employment effects for teens or less educated adults.” The report also stated that while some industries saw employment levels slip “a bit,” primarily affecting men ages 20 to 24 with little education, it went on to state that “the difference is very small and, in no instances, close to statistical significance.”

History of recent minimum wage hikes

New Jersey’s minimum wage was last increased in 2009, when the federal minimum was increased from $6.55 to $7.25, forcing all states (Alaska, New York, Pennsylvania, and Delaware) that paid lesser wages to follow suit.

Previously, the state Legislature increased the minimum wage in 2006 under Gov. Jon Corzine by $1, raising it from $6.15 to $7.15

A 2007 study also done by researchers David Card and Alan Krueger found that when New Jersey increased its minimum wage in 1992, from $4.25 to $5.05, it actually saw employment levels increase, particularly in the fast food industry. Meanwhile, neighboring Pennsylvania, which didn’t increase its lower wage, saw employment levels fall.  

President Bill Clinton even cited that development in a 1995 nationally-televised speech as an example that business doesn’t buckle just because it has to pay its workers more.

“A modest increase does not cost jobs and may even lure people in the job market,” Clinton said.

A latter study also determined that the minimum wage increase “has little or no systemic effect on total fast-food employment in the state.”

Between 1995 and 1998, when the federal minimum wage increased from $4.25 to $5.15, teen employment overall increased 2 percentage points.

New Jersey, which wasn’t affected by the federal minimum wage hike since the state’s wage was already higher, continued to show growth during this time, with unemployment dropping from 6.4 percent in 1995 to 4.8 percent in 1998.

Despite the increases in the minimum wage in recent years, the effect in general has been as if the worker didn’t see one. According to the New Jersey Policy Perspective, the minimum wage lost 6.2 percent of its values since 2006, due to various cost of living measures. Such a loss meant a worker receiving minimum wage was actually earning $964 less in 2010 dollars than previously.

A 2004 Rutgers University study found that minimum wage increases, while leading to some job losses, was beneficial from a quality of life standpoint. The study found that the wage hikes raised food security and reduced hunger, particularly in low-income households where “householders had completed no more than a high school degree or were a single parent.”

The study goes on to state that the federal government used to regularly raise the minimum wage between 1938 and 1981 to keep pace with inflation.

However, between 1981 and 1997, the federal minimum wage was raised only three times, but they were all below the Consumer Price Index, which meant a dollar doesn’t go nearly as far as it did in the past, the study said.

The report goes on to state that the people most likely to benefit from minimum wage increases, and be able to buy more food, are “low-income households, primarily African-American, Latino, single-parent, female-headed, and less educated households.”

Studies show minimum wage hike has little to no negative impact on employment