Another $15/hour Minimum Wage?

November 30, 2017

 

In case you're not from the tri-state area, that gentleman on the left is Phil Murphy, the man New Jersey just selected to be their governor, succeeding Chris Christie. New Jersey had gotten used to dealing with some pretty conservative behavior in Christie while he toyed with some national aspirations, despite being a pretty blue state, so while the population was looking for minimum wage hikes and bans on gestation crates, they got the exact opposite out of their governor. Their response was to repudiate the lieutenant governor and elect Murphy, a pretty liberal guy who has promised to legalize marijuana in his first 100 days and, he has just announced, raise the minimum wage to $15 per hour.

 

Whoa. That's a pretty big jump from the current $8.44 per hour. I coached a lot of client's through New York's minimum wage hike (also currently rising to $15 per hour), so I've got some experience on what it feels like and what we'll go through, so here are some observations that I'd like to pass on:

 

1. Business hates this. Quite frankly, I don't blame business. They are frequently told by politicians that rising wages translates directly to greater spending and stimulated growth, but business always responds that they don't raise wages before growth happens, but rather as a response to it. I get that. It's tough to spend money before you actually get it in your coffers. Conversely, your customers won't come to your stores and buy before they have it, either. In New York, the minimum wage hike has not been in effect long enough, and in fact has not yet hit $15, for us to be able to study its full effects. In Seattle, it has been in effect for a bit longer, and some studies are coming out, but the results are quite mixed.

 

2. We don't yet know how this would be implemented. The first assumption, that it would be passed at all, seems to be a pretty safe one. The democratic state legislature already put a $15 minimum wage bill on Governor Christie's desk, which he vetoed. There's little doubt they'd happily put it on Murphy's desk, and quickly. What's in question is how quickly businesses would be expected to comply. In New York, a phased approach was used, and indeed much depended on where in the state you operated. Because of the huge disparity in economic circumstances between upstate and downstate companies, there were multiple phases and tiers. It got complicated. New Jersey is a much smaller state, and is economically similar throughout. We'll have to wait and see what the legislature decides, but for your perusal, here's the original bill

 

3. You have to make hard choices. In order to find the money to comply with the new minimum wage each year, particularly for smaller businesses, you have to find ways to make it work. Sometimes it means hiring another worker to make sure there's no overtime. Sometimes it's cutting staff to cut down on your fringe benefit spend. It might even mean delaying expansion somewhere else because you're suddenly spending more money on payroll when you didn't intend to. There's no getting around how much this particular aspect of the minimum wage increase stinks.

 

4. Not complying is a really bad idea. There is a handy mechanism for employees to make trouble for you if you're not complying, and it's the Wage and Hour Division of the Department of Labor. One little phone call and you could be dealing with an audit, and you better believe that the front-page news that Murphy just made with his announcement has everyone checking their pay stubs. Back wages, penalties and the lost time you'll spend responding to the audit are not worth it. By the way, it's almost the end of the year - are your labor law posters up to date?

 

As always, I'm interested in hearing your comments below. What do you think? If you're not from the area, what's going on with wages in your neck of the woods?

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