It’s Been 4 Years Since The Last Minimum Wage Increase

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WASHINGTON, D.C. – July 24 is the fourth anniversary of the anniversary of the last increase to the federal minimum wage. In 2007, Congress passed legislation to increase the minimum wage from $5.15 per hour to $7.25 per hour in three stages. New Jersey was one of 31 states where minimum wage workers benefited from the increase.

The federal minimum wage has not kept pace with inflation.  According to the Bureau of Labor Statistics, $7.25 in 2009 had the same buying power as $7.89 does in 2013.  In 1980, all covered, non-exempt workers had to receive at least $3.10 per hour – $3.10 in 1980 had the same buying power as $8.78 in 2013.

In November, New Jersey voters will have a chance to raise the state’s minimum wage to $8.25 per hour and include annual cost-of-living adjustments based on the Consumer Price Index. Republican Gov. Chris Christie vetoed the state Legislature’s attempt to raise the minimum wage without a constitutional amendment earlier this year.

A full-time worker making the minimum wage would earn approximately $15,000 in one year – before taxes. While that’s above the federal poverty threshold for an individual – $11,490 in 2013 – it’s less than a person would need to meet their needs in most parts of the country.

Once viewed as the province of teenagers seeking entry-level experience in the working world, minimum wage jobs are being filled by older and more-educated workers on a growing basis. According to research by the Center for Economic and Policy Research, teens made up 27.2 percent of the low-wage workforce in 1979, but just 12.3 percent in 2012. The average age of a low-wage worker has increased from 32.3 to 34.9 in that time. In 1979, 40.9 percent of the low-wage workforce had not completed high school yet. In 2012, just 18.9 percent of low-wage workers fell into that category. Instead, 44.5 percent had at least some college education and 10.3 percent had degrees.

A study by Legal Services of New Jersey found that a family with two kids needs anywhere between $64,000 to $73,371 to get by in the Garden State, which ranks among the highest cost of living states in America. A couple working full-time at the proposed $8.25 per hour minimum wage would earn just $34,320 per year.

The proposed amendment had the support of an overwhelming majority of voters, including a majority of Republicans, in a Rutgers-Eagleton poll released last month. Just 18 percent said they would vote against it.

While opponents of a minimum wage hike argue that increasing business costs will cause a loss of jobs, However, a report released in May by New Jersey Policy Perspective estimated that 400,000 low-paid workers would benefit from the plan to increase the minimum wage, spurring more than $174 million in economic growth and creating 1,500 full-time jobs.

“Low-wage jobs are stunting New Jersey’s economic recovery at a time when the state needs more consumer spending and growth,” said Gordon MacInnes, president of New Jersey Policy Perspective. “Raising the minimum wage is a smart way to boost consumer spending while delivering much-needed assistance to working families in New Jersey.”

A paper released earlier this year, “Why Does the Minimum Wage Have No Discernible Effect on Employment?” by Center for Economic and Policy Research economist John Schmitt, concluded that businesses have many avenues available to them besides reducing their workforce to deal with the costs of a higher minimum wage. “[P]robably the most important channel of adjustment is through reductions in labor turnover, which yield significant cost savings to employers,” the paper notes.

 

 


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