Amid the wake of Assemblyman Alex DeCroce’s sudden passing last week, one story that didn’t make waves (but should have) was Assembly Speaker Sheila Oliver proposal to raise the minimum wage from $7.25 to $8.50, a 17.2% increase that would result in only liberal Meccas Oregon and Washington having a higher minimum wage.
Before Leader DeCroce’s death changed plans in Trenton last week, Oliver released an advance copy of a speech she was to give which contained her proposal.
Incredibly, despite forcing businesses to increase their expenses by up to 17.2% during a sluggish economic recovery, Oliver claims that increasing labor costs for businesses will magically not hurt the bottom line or cause less hiring, citing a study from the National Employment Law Project:
Now I know some people will call this a burden on businesses, but recent studies by the National Employment Law Project show minimum wage increases do not cost jobs. In fact, this is economic stimulus.
Oilver further goes on to ignore the basic laws of economics by calling her proposal an economic stimulus, and cites some odd “facts”…
The National Employment Law Project has noted that minimum wage workers are most likely to cycle their money back into the economy. The Federal Reserve Bank of Chicago has noted that every dollar increase in the minimum wage means each family with minimum-wage earners spends an additional three thousand, two hundred dollars per year.
Oliver then cites a 2009 recommendation from New Jersey Minimum Wage Advisory Commission that the minimum wgae should be increased to $8.50.
This proposal is a terrible idea for New Jersey businesses and consumers. It will do more harm than good for numerous reasons, most notably the five listed below:
1. Citing the National Employment Law Project is a joke. Here is the first sentence describing that org when you do a Google search: “A national advocacy organization for employment rights of lower-wage workers.” Checking out their website further reveals that they are a left-wing group constantly advocating wage increases no matter the task, job performance or economic climate and advocating for better unemployment benefits. This group appears to have an ideological agenda, and wouldn’t you know, by happy coincidence every study they commission that I’ve seen, including the one Oliver cites, seems to 100% support that far-left agenda. A National Employment Law Project study saying that raising the cost of labor on already struggling businesses doesn’t cost jobs has as much credibility as a Marlboro studying saying that cigarettes cure cancer!
2. Increasing cost of labor means employers can buy less of it. Simple rule of economics. Employers are not swimming in cash, they are just trying not to drown. Things are so bad that businesses raise hell if they see expense increases of even half a percent. And Oliver expects them to absorb a 17% expense increase? Forget about hiring new people, businesses may not be able to afford their current workforce. This will either cost jobs or…
3. Businesses will have to increase prices, which hurts consumers. Any business that pays less than $8.50 an hour will most likely have to raise prices, because they will all be affected by the raise. And I’m guessing A LOT of businesses you patronize will be affected. Wawa. Gas stations. Coffee shops. Donut shops. Hardware stores. Margins are already razor thin for most business. You mandate a major increase in one of their expenses, businesses have to choose between raising prices or operating in the red. They will raise prices to survive, which means consumers will pay more to get the same thing.
4. Growth will be stunted, not stimulated. Oliver cites the Federal Reserve Bank of Chicago as saying this proposal will act as stimulus, as for every $1 raise families with minimum wage earners spend $3,200 more. Now, a $1 hourly raise for ONE worker who works 52 weeks a year, 40 hours a week results in a gross (ie pre-tax) wage increase of $2,080 a year. The study didn’t say how many earners they consider per family, but for their numbers to work, families must have at least TWO wage earners, which with New Jersey’s unemployment rate is not a safe assumption to make, or families must incur $0.50 of debt for every $1 per hour raise. Not a plan for stimulus, we won’t see a $3,200 increase in spending in those households.
What will actually happen is growth will be stunted. Another basic law of economics - businesses have limited resources. Oliver, having never run a business, maybe having slept through her college econ courses while earning a Sociology degree? And doing God knows what to get a “Planning and Administration” degree? Clearly doesn’t know the first thing about business planning. If she wants businesses to spend up to 17% more on labor, that money has to come from somewhere. Like the marketing budget, which drives business growth. Or by laying off some people, which adds to the problems we face instead of solving them.
5. The New Jersey Minimum Wage Advisory Commission disagrees with Oliver. Oliver cites their 2009 annual report saying it should be raised to $8.50. She had to go back to 2009 because their 2011 report says it should stay at $7.25. They very people Oliver cites as to why it should be raised to $8.50 disagree with her and say it should remain where it is.
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[...] Speaker Sheila Oliver is still ignoring the realities businesses in New Jersey face, as she just rammed her plan to raise the minimum wage from $7.25 to $8.50 as of July 1, 2012 [...]