National Minimum Wage Could Be on the Rise to Keep Up with Inflation

The debate over the national minimum wage looks to raise it from $7.25 to possibly $10.10 an hour. New Jersey, along with 19 other states and the District of Columbia, have minimum wages higher than the national minimum wage.

According to the Bureau of Labor Statistics minimum wage, if it kept up with the rising inflation would be at $10.74. This point along with a number of testimonies and deliberation has lead the US congress to consider a bill raising the federal minimum wage. Democrats would like to see the raise reach $10.10 by 2016. T

The President has been very vocal in his support for this change. Friday in Connecticut, President Obama said that higher wages will help, lift hard-working people out of poverty, giving them more money to spend and businesses, more customers and higher profits. He called it, “a virtuous cycle we can create.”

House Republicans have fought the plan, citing the negative effects such policy would have on the unemployment. The Congressional Budget Office release a report tuesday confirming fears of job loss close to .3 percent, or 500,000. The report has been criticized on Tuesday by multiple labor economists for its lack of specificity, putting the job loss range from zero to one million, and for overstating the bill’s effect on the job market. Economist Lawrence Katz of Harvard, said that the CBO used, “a lot of off the shelf estimates”, and he believes the findings would have been more realistic adhering to some higher quality studies.

Junior Eryn Siddall, a psychology major said, “I think it’s good that the minimum wage was raised because no one can live on $7.25/hour. I think students at Monmouth will see bigger paychecks but also be required to have more work to do in their jobs possibly. Employers may take this pay increase as an opportunity to give their workers more responsibility. Honestly I can’t complain about any amount of increase in pay.”

Eryn added, “Well, there may be a greater workload.” she continued, “Also it may not be fair for some jobs that usually get paid more.  For example I always got paid $8.25 at my job but I didn’t get bumped to $8.25. So I’m doing more work at my job than some other on campus jobs but getting paid the same amount” 

Kelsey Rineer, junior health studies and physical education Major, thought that the raise was necessary because students have to work two jobs usually to get paid as if they were working full time hours. With the busy life juggling work and classes it is hard for a student to reach the benefits of full time employment. Not to mention most jobs have cut down on full time employment opportunities. She finished by saying, there are negative consequences, “inflation of food prices would go up because of the increase.” She added, “It’s a little much to have someone flipping a burger for $10 an hour.”

On Jan. 2nd, 2014 the minimum wage in New Jersey went from the federal minimum of $7.25 to $8.25. The increase will continually rise annually for workers in New Jersey to account for inflation. With a movement sweeping the country, the Federal minimum wage may also be raised a possible $3.85.

Originally a bill was passed by New Jersey legislature to raise the minimum wage to $8.50, and also included the annual inflation adjustment. Governor Christie vetoed this bill and proposed a compromise of $8.25, without the inflation adjustment. Congressional Democrats used poll questions to get the annual inflation adjustment passed as a constitutional amendment.

New Jersey voters took to the polls last November, and approved the ballot question of raising the minimum wage, and to have it match the cost of living. According to poll reports, 61 percent of those who voted approved the questions. Approval was highest in Hudson County with over 80 percent approval. Camden and Essex County followed with over 70 percent.

Dr. Steve Pressman, professor of economics and finance, divulged on the topic, to shed some light on New Jersey’s minimum wage increase.

In his article “A Pay Hike for Jersey Workers,” in the Two River Times he gave an purely economic perspective to the legislation.

He points to two main figures of economics to help understand the effects of the raise. Two lessons; one via Adam Smith, regarded as the father of Economics, that incentives matter because they drive individual behavior.

The second from, John Maynard Keynes, on the necessity of spending; that spending is crucial “to keep our economy functioning.”

Pressman wrote, “having to pay more to workers is a disincentive to hire workers and an incentive to replace them…or get by with fewer workers.”

He continued, “In contrast…a higher minimum wage adds money to the weekly paycheck of many workers.” He poses that the pay will not just increase for minimum wage workers, but the assistant managers and retail clerks will see raise to coincide with the low-wage workers.

Pressman added, that the higher minimum wage will lead to restaurants lessening their workforce, but with more money to be spent these higher wages will help boost the economy and in return create more jobs.

As for its specific effect in New Jersey Pressman pointed out a study done by economists David Card and Akan Kruger. They studied fast food restaurants in New Jersey, in comparison to the restaurants in bordering Pennsylvania, the last time NJ raised the minimum wage above the federal minimum in 1992. They found, “It‘s positive effect (more spending creating more jobs) balanced out the negative effect (higher employment costs exerting downward pressure on hiring.” Pressman showed that this and others facts support the view that the net result economically is zero when minimum wage is raised. He concludes that, “Accounting for everything, a higher minimum wage should produce large net benefits for the state. Not Only will low-wage workers gain, all New Jersey should have a happier New Year.