New Jersey Policy Perspective: Increase the Federal Minimum Wage Now
Friday, August 24, 2012
Increasing the federal minimum wage from $7.25 to $9.80 per hour would give 485,660 New Jersey workers an average raise of $596 per year, giving struggling low-wage workers a crucial leg up in high-cost New Jersey while stimulating the state’s economy through increased consumer spending, according to a new issue brief prepared by the Economic Policy Institute (EPI).
The “Fair Minimum Wage Act,” introduced by Iowa Senator Tom Harkins, would raise the minimum wage to $9.60 in three incremental increases of 85 cents an hour, and would tie future increases to inflation.
Opponents of raising the minimum wage suggest that most workers affected are part-time teenagers working to finance their nights out or upgrade their cell phones. In fact, only 17 percent of New Jerseyans working for $7.25 an hour are under 20; most are women (54 percent) and 22 percent are parents. A little more than one-fifth are working part-time (under 20 hours a week); about half are working full-time. More surprising is the fact that 38 percent have some college or an associate or bachelor’s degree.
Think of your typical day and those pumping your gas, clearing the table at fast-food outlets, delivering meals to your grandmother in the nursing home or wheeling her wheelchair to the departure gate, and you have the face of New Jersey workers struggling to survive in this high-cost state. If they work 40 hours a week, every week, they earn only $15,080 a year – not nearly enough to meet essential needs of food and shelter.
In addition to the 486,000 workers who would see a first-year gain of almost 12 percent in their wages, it is probable that workers earning just above the minimum wage would realize improved wages over time. An additional 229,424 workers would benefit from this “spillover” effect, according to EPI’s analysis. This group is even more likely to be working full-time (61 percent), raising families (32 percent), and to have attended or graduated college (46 percent).
The push to raise the federal minimum wage, which has been stagnant for over three years, comes as New Jersey lawmakers are considering raising the state’s minimum wage from $7.25 to $8.50 an hour and tying future increases to inflation. Regardless of what happens at the federal level, the state Senate needs to follow the Assembly’s lead and pass this common-sense legislation.
“The proposal to increase the federal minimum wage makes great sense for New Jersey: it would help families that are ‘playing by the rules’ struggle into the middle class, while generating greater consumer spending to help our anemic economic recovery” says Gordon MacInnes, president of New Jersey Policy Perspective. “With the current state of political paralysis in Washington, quick passage of the Harkin bill is unlikely. New Jersey’s governor and legislature could set an important example by enacting the bill increasing the minimum wage to $8.50.”
While increasing the minimum wage immediately benefits the lowest-paid workers through boosted earnings, it also yields positive effects on the larger economy. Raising the federal minimum wage to $9.80 would put nearly $1 billion in the hands of New Jersey’s working families when they need it most, augmenting their spending power in the local economy. In return, these families would be more likely than any other income group to spend these extra earnings immediately, in New Jersey, on basic needs or services they could not previously afford.
This additional spending power would be a useful tool to spur job growth, as employers would need to hire new staff to keep up with heightened demand for goods and services. In fact, an increase in the federal minimum wage from $7.25 to $9.80 per hour would result in a net increase in economic activity of approximately $25 billion, generating approximately 100,000 new jobs nationwide. This hike would have a positive impact across the country, with job creation in every state.
“Now is the perfect time to raise the minimum wage,” says EPI researcher Doug Hall. “Not only will it generate billions of new dollars for the economy while adding new jobs when we sorely need them, it will begin to address the wage stagnation working families have faced during the last four decades, while putting more money in their hands when they need it most.”
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Jon Whiten
Director of Communications & Development
New Jersey Policy Perspective