Yesterday was the deadline for New Jersey Governor Chris Christie to act on a minimum wage bill that the state legislature passed in December. Governor Christie did not sign the bill, which would have raised the state’s minimum wage from $7.25 to $8.50 per hour and adjusted it annually to keep pace with the rising cost of living. The Economic Policy Institute (EPI) estimates that the legislature’s bill would lift wages for over half a million New Jersey workers, 55 percent of them women. But these hardworking women and their families will have to wait longer for the raise they need, since Governor Christie issued a “conditional veto” — that is, he sent the bill back to the legislature with proposed changes.
Most of those changes would seriously weaken the bill that a majority of elected representatives in New Jersey already passed. Governor Christie’s proposal would raise New Jersey’s minimum wage to $8.25 per hour over three years, rather than to $8.50 in 2013. And once the wage reached $8.25, it would be stuck there until the legislature acted again to raise it, because Governor Christie’s proposal would eliminate the annual cost-of-living adjustments in future years.
New Jersey’s cost of living is among the highest in the country. Indexing the minimum wage for inflation is essential to help ensure that the buying power of the minimum wage does not erode as it has over the past decades; indeed, if the minimum wage had kept pace with inflation since the 1960s, it would be more than $10.50 per hour today. Perhaps that’s why a recent poll showed 76 percent of New Jerseyans support both raising the state’s minimum wage and tying the wage to inflation.
Governor Christie has argued that the minimum wage increase passed by the legislature would “jeopardize the economic recovery we all seek.” But study after study has shown that this argument simply does not hold up — and in fact, raising the minimum wage can provide a vital boost to a state’s economy. For example:
- Research indicates that for every $1 added to the minimum wage, low-wage worker households spent an additional $2,800 the following year.
- EPI estimates that raising New Jersey’s minimum wage to $8.50 per hour would spur $278 million in new economic activity in the state in the first year following the increase, leading to the creation of over 2,400 full-time jobs.
- According to EPI, the modest pay increases that took effect in January in the states that already index their minimum wages to inflation will benefit over 960,000 low-wage workers in these states and generate $180 million in new economic activity.
I will note that Governor Christie’s proposal does include one item that has my full support: an increase in the state’s Earned Income Tax Credit (EITC) from 20 percent to 25 percent of the federal EITC. (The EITC was set at 25 percent of the federal credit until Governor Christie signed a law cutting it to 20 percent in 2010… and vetoed bills to restore the 25 percent level in 2011 and 2012 because they were not accompanied by tax cuts for higher-income New Jerseyans.) The EITC provides crucial support for low-wage workers and their families — but a boost in New Jersey’s EITC should complement a robust minimum wage increase, not serve as a replacement for an inflation adjustment provision.
New Jersey Assembly Speaker Sheila Oliver and Senate President Steve Sweeney intend to proceed with a plan to raise and index the minimum wage through a constitutional amendment. The Assembly and the Senate passed such an amendment last year; if approved by the legislature again in 2013, it can be placed on the ballot in November and adopted by popular vote, without any action by the governor. Governor Christie has called this approach “truly ridiculous” — but now that he has rejected the proposal supported by a clear majority of his constituents and their representatives, he may find himself without much say in the matter.