New Jersey Minimum Wage Increases July First

Many employers in New Jersey will be paying their staff a higher wage starting July 1. Governor Philip D. Murphy and the New Jersey state legislature made a deal that will raise the minimum wage to $10 per hour by that date. By 2024, New Jersey’s minimum wage will be $15 per hour.

What does this mean for workers and small businesses? Let’s take a look.

New Jersey minimum wage facts

Right now, the minimum wage in New Jersey is $8.85 per hour. As mentioned above, for employers with six or more employees, the minimum wage will generally be increased to $10 per hour on July 1. On January 1, 2020, it will be $11 per hour. Then the new law states it will increase by $1 per hour every January 1 until 2024, when it reaches $15 per hour.

For employers with six or more employees, the minimum wage will generally be increased to $10 per hour on July 1st of this year.

Employers of all sizes will also be required to pay tipped employees a minimum of $2.63 per hour, up from the previous $2.13 per hour.

There is also a separate timeline for seasonal employees and people who work for small businesses with five or fewer employees. For those workers, the minimum wage will reach $15 an hour by 2026.

Agricultural workers have a slight exception also; the minimum wage will reach $12.50 an hour by January 1, 2024. At that point, a special committee will review whether to raise farmworkers’ minimum wage to $15 an hour by 2027.

That $15 minimum wage puts New Jersey ahead of much of the country in progressive labor policies. California, New York, and Massachusetts have passed similar legislation, with their minimum wages set to increase to $15 per hour sometime in the next few years. Washington, DC’s minimum wage will be $15 per hour by 2020.

How will the New Jersey minimum wage affect workers?

According to the New Jersey Policy Perspective (NJPP), a left-leaning research group, raising the minimum wage to $15 per hour will boost the incomes of over 1 million New Jersey workers.

NJPP reports that low-income workers badly need this pay raise. In New Jersey, unemployment has dropped quite a bit in recent years. It was 5.3 percent in 2017, down from 6 percent in 2016 and 10.9 percent in 2011 at the height of the recession.

But poverty rates are even higher than they were before the recession. The New Jersey poverty rate in 2017 was 10 percent in 2017, up from 8.6 percent in 2007. That means that 143,000 more New Jerseyans are living in poverty than were 10 years ago.

Advocates hope that the increased minimum wage will lead to an improved quality of life for many low-income workers in New Jersey.

What’s worse, those numbers are based on the federal poverty level. The cost of living in New Jersey is actually much higher than the US average. When you factor in the cost of living differences, NJPP says that 22.89 percent of New Jerseyans were living in poverty in 2017, up from 20.89 percent in 2007.

Advocates hope that the increased minimum wage will lead to an improved quality of life for many low-income workers in New Jersey.

How will the New Jersey minimum wage affect small businesses?

This new law does have its opponents, of course. Some business leaders oppose raising the minimum wage because they believe it will cause economic hardship to small business owners, and possibly force them to eliminate jobs.

In an interview with the New York Times, Michele N. Siekerka of the New Jersey Business and Industry Association said that the increased minimum wage was “another hit to small businesses who are absorbing cumulative costs in the form of new mandates, more subsidies for energy delivery and increased taxes.”

Siekerka continued, “Most small business owners pay what they can afford for their workers. Now that it’s a mandate, it is inevitable that some of those with the smallest of profit margins will struggle, stagnate or simply fail.”

Contrary to conventional wisdom, the fast food restaurants in New Jersey who had been affected by the wage change actually increased employment by 13 percent relative to similar restaurants in Pennsylvania.

However, some studies suggest that might not be true. For instance, a 1992 study by economists David Card and Alan B. Krueger looked at the effect of another New Jersey minimum wage increase on fast food business and employment.

That year, New Jersey’s minimum wage increased from $4.25 to $5.05 per hour. In neighboring Pennsylvania, the minimum wage stayed the same–$4.25 per hour. The study compared business and employment at fast food restaurants in both states to see if the minimum wage increase had affected them in any way.

Contrary to conventional wisdom, the fast food restaurants in New Jersey who had been affected by the wage change actually increased employment by 13 percent relative to similar restaurants in Pennsylvania.

Other studies have produced similar results. For example, this 2018 study found that minimum wage increases had very little effect on low wage employment rates.

Still, other academic studies have found that minimum wage increases can cause a lot of job loss. A 2018 study from economists Paul Beaudry, David A. Green, and Ben M. Sand found that minimum wage increases cause job loss in the long term, mainly due to businesses closing down. They propose that this type of job loss can’t be measured in the immediate term, which is why other studies might not have found any difference in employment rates one year after a minimum wage increase. Firm closings take some time, which is why these job losses are best measured after a significant period of time.

A few older studies, like this one and this one, also found that employment rates for younger, less skilled workers dropped when minimum wages went up. Often, the reason for the increase in unemployment is that some firms had to shut down because they could no longer afford labor costs.

The bottom line is, it’s difficult to know exactly how this will affect small businesses. Most likely, it will depend a lot on each individual business’ circumstances and industry.