By Murray Sabrin
On Feb. 4, Gov. Phil Murphy fulfilled his 2017 campaign promise when he signed the bill that would raise the state’s minimum-wage, in increments, to $15 an hour by 2024. This year the state’s minimum wage would increase to $10 an hour in July and increase by one dollar every January 1 until it reached $15 per hour. Not all workers, however, would see the legal mandated minimum wage increase to $15 per hour. In short, some workers apparently are not deserving of being treated equally.
The governor signed the bill surrounded by Democratic leaders, union workers and other supporters at the headquarters of Make the Road New Jersey, an immigrant advocacy group based in Elizabeth.
The front-page article in The Record, “Raise Praised,” on Feb. 5, captured two moments during the event in separate photos -- supporters cheering enthusiastically with their hands raised and Gov. Murphy with both arms pointing to the sky; beneath him at the podium there was a placard with the statement, “A $15 Minimum Wage: A Path to the Middle Class.”
Although The Record article labels the ceremony as more of a “political rally” than just a landmark bill signing, the event had all the hallmarks of a big tent evangelical meeting reminiscent of the 1960 movie, “Elmer Gantry,” who was portrayed brilliantly by Burt Lancaster.
Gantry was a con man who joins a “roadside revivalist,” Sister Sharon, to preach in rural areas of the Midwest. Without going into the plot of the movie, suffice it to say the passion of Murphy and his chief acolytes in the Legislature, Senate President Sweeney and Assembly Speaker Coughlin as well as the Democrats who like the attendees of the Gantry/Sister Sharon revival meetings are true believers of the nation’s unofficial “religion”— statism.
Statism “is the belief that the state should control either economic or social policy, or both, to some degree.” Even Republicans around the country embrace some element of statism. In New Jersey, for example, the Republican leadership offered an alternative to Murphy's minimum wage proposal, namely to increase the minimum wage to “only” $13 per hour.
In other words, Republicans support statism but not as strongly as Democrats.
Proponents of a higher minimum wage assert that this would help low income workers eventually reach the middle class, and provide more income for minimum wage earners to help pay for the high cost of living in New Jersey. Employees whose incomes increase because of the minimum wage will undoubtedly have more money in their pockets. However, the costs of a higher minimum wage are virtually ignored by Murphy, Sweeney, Coughlin and others.
Let’s say a small business owner will now have to pay an additional $1,000 per month because of the higher minimum wage. The business owner will also have to pay additional Social Security and Medicare taxes on the higher wages of his workers -- as will the workers. So, the real cost to the employer is more than just the minimum wage hike.
In addition, the business owner now would have less income for his/her family, thus reducing their living standards. But there is more potential downside to a higher minimum wage. The business owner will now have less cash flow to pay for repairs and other business needs as well as less money to put aside for his/her retirement.
In other words, there is no “free lunch” for the economy as a whole when the government imposes a minimum wage on employers.
A government-imposed minimum wage not only should not be raised but also abolished, in the final analysis. Why? In a free society, voluntary exchange is not only the most effective way to “balance” the needs and demands of both employers and employees, but also a moral imperative.
There is one sure fire way for low-income earners to receive higher wages; they should obtain skills that make their work more valuable than the minimum wage to employers. A government mandated minimum wage is not a “path to the middle class.” More education, more skills, more knowledge is the path for workers to enter the middle class.
Murray Sabrin is a professor of Finance at Ramapo College of New Jersey.