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The Conference Room: Wage Hike

by Kathleen A. Davis, Executive Vice President & COO, CCSNJ

The Conference Room
Wage Hike: One Increase Too Many

…From the pages of South Jersey Biz…

At a time when the economy is just starting to recover from one of the worst downturns in history, the Assembly speaker and Senate president are proposing to increase the minimum wage from $7.25 to $8.50 per hour, with future increases tied to the Consumer Price Index. The CCSNJ strongly opposes these bills, which have been released from the Assembly and Senate labor committees and are awaiting votes in their respective houses.

Research reflects a preponderance of evidence that a minimum wage increase results in job loss. In order to absorb a forced wage increase, businesses reduce workers and/or hours, or worse, close their doors. A real-life example was experienced by a chamber member in 2005—the last time the state increased the minimum wage.

Our member owned 29 Kentucky Fried Chicken restaurants and testified before the Senate Labor Committee that if the minimum wage was increased, he would be forced to immediately close six of his stores. Our member pointed out that when combined with increases in business taxes, insurance and other costs, the minimum wage increase would be the last nail in the coffin. And, it was. In November 2007, he closed all of his stores and left the state.

In a survey of our members on this issue, the No. 1 reason they oppose the minimum wage increase is the impact on the cost to the customer, because an increase in labor costs will force them to pass on the increase to their customers. Also, increases to the minimum wage push other wages upward to keep higher paid workers ahead of the entry level ones.

Further, businesses need the flexibility to utilize the minimum wage during initial training of an employee. Finally, as one member states, “I can’t pay employees more with sales still stagnant and other costs continuing to rise.”

New Jersey is an expensive state in which to live and in which to do business. If businesses’ costs increase, they cannot create jobs. While increasing the minimum wage will help some workers, it will not help the unemployed (some 9 percent of our state’s residents). It will not create jobs and will in fact decrease employment. Clearly, now is not the time to increase the minimum wage.

Published (and copyrighted) in South Jersey Biz, Volume 2, Issue 5 (May, 2012).
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