Minimum wage increase would get workers to spend more

December 10. 2012 3:00AM


Except for Warren Buffett and a few select others, no American thinks that their taxes are too low. And, no surprise, there are few in the business world who — given a choice — opt for higher costs for anything. Hence, the suggestion that full-time, 52-weeks-a-year New Jersey workers are entitled to earn more than $15,080 a year meets near-universal opposition from those who employ them.

The rationale? “It’s bad for business.”

But raising the minimum wage would only be “bad for business” in the narrow sense that many business groups fight tooth and nail against any form of government regulation. When one actually looks at the facts at hand, it’s clear that raising the minimum wage would be good for most businesses.

It may sound counterintuitive, but consider this.

Business owners themselves say they are worried about poor sales, not high wages. Far more of the businesses that comprise the membership of one of the wage increase’s most strident opponents ­— the National Federation of Independent Business ­— consistently identify “poor sales” as the most important problem facing their business. Meanwhile, “cost of labor” is always near the bottom of a list of problems cited by NFIB members. In the most recent survey available, 22 percent of NFIB respondents were most concerned about poor sales; only 3 percent were most concerned about labor costs.

The real problem facing businesses is not that low-wage workers earn too much; it is that their customers earn too little.

How, then, to stimulate sales locally? For starters, how about putting money directly in the pockets of New Jersey residents who spend almost all of it immediately and locally at New Jersey businesses? That’s what increasing the minimum wage would do — to the tune of a $278 million GDP bump in the first year alone.

The over half-million New Jersey workers who would see a boost from raising the wage don’t stash the money in offshore accounts, or save it for a rainy day. And most don’t use it for extra spending cash or to upgrade their cell phones, either, because contrary to popular mythology an overwhelming majority of the state’s low-wage workers are adults, not teenagers working part-time. In fact, 85 percent of the affected workers are 20 years old or older — and about one in four have children. If a higher wage gives these folks extra cash, they are going to spend it, and New Jersey’s small businesses are going to be the key beneficiaries.

Would a wage increase cause some businesses to lay off workers, or temporarily hold off on expansion plans? Maybe. But on the whole, minimum-wage increases have no effect on job growth, as shown by decades of real-world impact studies. And the evidence from this year is no different: the eight states that increased their minimum wages on Jan. 1 have had more robust job growth than states in which there was no wage increase.

Gordon MacInnes, president

New Jersey Policy Perspective

Trenton


www.NJBIZ.com