By Aaron Neuman. On Monday, Governor Phil Murphy announced in a press conference that raising the minimum wage to $15 an hour is a top priority of his, along with legalizing marijuana in New Jersey. It makes sense that he mentioned those two initiatives together, considering that you’d need to be high to think that hiking the minimum wage to $15 is a good idea.
Although minimum wages need to be at a certain level to ensure that uneducated workers are not treated as expendable servants, making the minimum wage too high poses serious risks.
For one, it causes prices to increase overall. As business owners bring home less money due to paying their workers more, they raise the price of their goods to compensate for the increase in overhead costs. Just like a tax, a higher minimum wage doesn’t result in businesses making less – it just makes goods and services more expensive for consumers. A good example of this is in California, a state which has already enacted laws mandating a minimum wage of $15. It’s not working out well. The Los Angeles Times ran a report which showed that almost immediately following the minimum wage hike, prices for consumer goods soared. Even the workers whose wages went up are now paying more for everything, making the minimum wage hike a net negative for them. And for consumers who haven’t had their paychecks raised it is even more painful.
A second, perhaps more concerning, issue with raising the minimum wage is that businesses are incentivized to be faster in implementing automation so as to avoid paying any workers at all. Automation, while widespread, is still in it’s infancy, and the majority of companies have been holding off on automating all their processes. A minimum wage hike will change that. With every minimum wage worker’s rates almost doubled from New Jersey’s current rate of $8.60 an hour to $15, companies will begin automating far more quickly, with low-skilled workers getting the ultimate low-wage: $0 an hour, because they’ll be unemployed.
And third, raising the minimum wage has been shown to hurt the economy. A high percentage of people in the workforce is necessary to push economic growth forward. The higher the minimum wage, the lower the percentage of adults being employed is. This is basic economics. New Jersey has not been doing well economically. It was ranked dead last of all 50 states in economic growth in 2016, and is considered to be one of the least favorable states to do business in. Businesses have been fleeing New Jersey for years, costing the state billions in revenue and economic growth. Raising the minimum wage will compound the issue, making New Jersey’s economy lag even further behind the rest of the US.
I believe that Governor Murphy knows this; he just doesn’t care. Perhaps Murphy is of the same opinion as California’s Governor Jerry Brown, who said of raising the minimum wage in his state that “economically, minimum wages may not make sense. But morally, socially, and politically they make every sense”. What a silly notion to propagate.