In New Jersey and across the country, the debate over a $15 minimum wage endures.
Over the course of the past few years, the fight for a $15 per hour minimum wage has been a point of contention among the right and left sides of the political spectrum. Thanks to Democratic candidate for governor Phil Murphy, who supports a $15 per hour minimum wage, New Jersey has joined states such as New York and California, both of which signed legislation to raise their minimum wages to $15 per hour, in that debate. His opponent in the race, current Lt. Gov. Kim Guadagno, who late last year famously said that “If we pass the $15 minimum wage, you’re pumping your own gas,” disagrees. The last time New Jersey’s minimum wage was raised was Jan. 1 of this year, from $8.38 to $8.44.
First, here’s some facts categorizing who minimum wage workers are, taken from the Bureau of Labor Statistics’ website:
• Age: About half of all minimum wage workers are under 25. Among employed teenagers (ages 16 to 19) paid by the hour, about 11 percent earned the minimum wage or less, compared with about 2 percent of workers age 25 and older.
• Occupation: Among major occupational groups, the highest percentage of hourly paid workers earning at or below the federal minimum wage was in service occupations, at about 9 percent. Almost two-thirds of workers earning the minimum wage or less in 2015 were employed in service occupations, mostly in food preparation and serving related jobs.
• Industry: The industry with the highest percentage of workers earning hourly wages at or below the federal minimum wage was leisure and hospitality (15 percent). Nearly three-fifths of all workers paid at or below the federal minimum wage were employed in this industry, the vast majority in restaurants and other food services. For many of these workers, tips may supplement the hourly wages received.
• Education: Among hourly paid workers age 16 and older, about 6 percent of those without a high school diploma earned the federal minimum wage or less, compared with about 3 percent of those who had a high school diploma (with no college), 3 percent of those with some college or an associate’s degree, and about 2 percent of college graduates.
• Full- and part-time status: About 7 percent of part-time workers, those who usually work fewer than 35 hours per week, were paid at or below the federal minimum wage, compared with about 2 percent of full-time workers.
• Gender: Among workers who were paid hourly rates in 2015, about 4 percent of women and about 3 percent of men had wages at or below the prevailing federal minimum.
Much of the minimum wage debate is centered around how its implementation would affect jobs. However, it’s more complicated than that; employment is merely one way of measuring an economy’s prosperity. For Murphy, a $15 per hour minimum wage is an attempt to “grow the economy is from the middle class out,” according to his campaign website. The website adds that “since the end of the Great Recession, New Jersey’s gains have gone to those at the top, with middle-class and working families getting even less than before,” displaying an alarming rate of income inequality.
According to the BLS, October 2009 was when both New Jersey and the entire United States had its highest levels of unemployment in the post 2008 financial crisis world — a whopping 10 percent for both. As of this August, those numbers are down to 4.1 percent for New Jersey, and 4.4 percent for the nation, according to the BLS. Considering that officials from the Federal Reserve are shooting for an unemployment rate of 4.7 percent in the long run, according to documents on the Federal Reserve’s website, both the country and New Jersey are actually at the point where they could afford slightly higher levels of unemployment.
To boot, there is considerable evidence that small increases in the minimum wage do not significantly hurt levels of employment. An extensive study was conducted in New Jersey in 1993, which is believed to be one of the first extensive studies on minimum wage. On April 1, 1992, New Jersey raised its minimum wage from $4.25 to $5.05 per hour, and economists David Card and Alan Kreuger studied how fast food workers in the state’s employment levels compared to that of neighboring Pennsylvania. They saw no increase in unemployment.
However, that was $4.25 to $5.05, which is not nearly as steep a jump from New Jersey’s current minimum wage, $8.44, to Murphy’s suggested $15. Sure, small increases in the minimum wage may not significantly hurt unemployment levels, but you could also make the argument that this isn’t a small jump. This is a big jump. Or at least, bigger than jumping from $4.25 to $5.05.
Income inequality, however, is in much worse shape. According a study conducted by University of California — Berkeley economics professor Emmanuel Saez, U.S. income inequality has been increasing steadily since the 1970s, and now has reached levels not seen since 1928 — right before the Great Depression.
Additionally, evidence shows that income inequality is an especially big problem in New Jersey. According to a study conducted by the Center on Budget and Policy Priorities, the richest 5 percent make on average 15.61 times more than the poorest 20 percent in New Jersey. That’s seventh highest in the nation.
All of this evidence shows that wealth inequality is a bigger problem than unemployment. But will a $15 per hour minimum wage help reduce that wealth gap? Let’s dig some more.
Consider the 1950s and 1960s, which were periods of sustained economic prosperity for the United States. Income was much more evenly distributed among the classes, and unemployment levels were still generally low.
According to the BLS’s CPI inflation calculator, the hourly minimum wage in August 1955 ($0.75) would be equivalent to $6.87 today. August 1960’s hourly minimum wage ($1), it would be worth $8.29 today and August 1965’s hourly minimum wage ($1.25) would be worth $9.71 in today’s dollars — all of which are significantly below the $15 mark. The closest it gets at any point in recent history was in February 1968 when that month’s $1.60 per hour minimum wage would be worth $11.49 in today’s dollars. For the record, the annual unemployment rate in 1968 was a mere 3.6 percent, according to the BLS.
But there’s still more to the story; according to a 2012 study conducted by the Center for Economic and Policy Research, if the minimum wage had continued to keep up with average productivity after 1968, it would have reached a whopping $21.72 per hour in 2012. In other words, productivity has gone way up, which has made businesses more money. But the businesses’ workers aren’t seeing any of that new wealth.
What other numbers could shed light upon the debate? Take Seattle, which recently signed legislation to raise its hourly minimum wage gradually to $15 from $9.47.
Since the minimum wage has gone up in Seattle (it is currently at $13, which it was raised to in 2016), two major studies have yielded two very different results — one from the University of Washington and one from the University of California — Berkeley.
According to the Berkeley study, the evidence collected suggested the minimum wage increase in Seattle did not harm unemployment. Also, it says, its “estimates of the wage increases are in line with the lion’s share of results in previous credible minimum wage studies.”
The University of Washington study, however, got pretty different results — not just from the Berkeley study, but most minimum wage studies in general. According to its evidence, “the minimum wage ordinance lowered low-wage employees’ earnings by an average of $125 per month in 2016.”
The anti-minimum wage argument is furthered by economists such as William Dunkelberg, who is the chief economist for the National Federation of Independent Business: “The economy adds 3 million new people every year,” he wrote in a column for Forbes last year. “This increases the demand for haircuts, pizzas etc. etc. But the available supply of workers has shrunk, resulting in over 80% of NFIB owners that are trying to hire reporting ‘few or no qualified applicants.’ As a result, compensation gains increase in frequency as employers compete for a shrinking pool of qualified workers.”
Numbers and economics aside, Guadagno doesn’t buy the argument that the minimum wage should be “a living wage.”
“Minimum wage was never intended, in my mind, to provide a living wage,” Guadagno said, according to a report from NorthJersey.com. “It won’t, not in New Jersey. So let’s make minimum wage what it’s supposed to be, and that is a stepping stone up.”
