Three Solutions to fix New Jersey’s Minimum Wage Bill
On Thursday, December 6th, 2018 New Jersey Assembly Speaker Coughlin introduced a bill to increase the minimum wage in New Jersey to $15 per hour by 2024. The bill includes exemptions for small businesses operating with less than ten employees, farm workers, teenagers, and seasonal workers, delaying the increase in minimum wage until 2029. The bill has come under fire from people both for and against a minimum wage increase. We know the data supports a minimum wage increase and while the bill is a step in the right direction, it offers no genuine solution. It teaches us that our legislators are approaching solving the minimum wage challenge from a limited perspective. I argue that with a bit of creativity we can have $15 minimum wage increase by 2023, free from carve-outs, and help small businesses at the same time.
The central problem surrounding the minimum wage bill is the conflict between protecting small businesses and empowering our fellow community members who need a minimum wage increase to better their lives. We are approaching the problem under the assumption that these two challenges are a balancing act. By doing one, we diminish the other.
The bill as written falls short of achieving the desired results of giving more people the ability to improve their lives. According to Brandon McKoy from New Jersey Policy Perspective “Assuming an annual inflation rate of 3 percent per year, a $15 minimum wage in 2029 will only be worth $10.73 in 2018-dollars. ” This bill would raise the real purchasing power of people receiving minimum wage approximately 19.4 cents per year for eleven years. Hardly an effort worth celebrating.
We should also consider the larger picture of how the carve-outs could impact our small business economy. The bill creates a scenario where firms with more than ten employees are required to pay more than those with less. The intention must have been to penalize large corporations, but I struggle with the logic behind choosing ten employees as a base line. It ignores professional firms that could make millions with a handful of employees while hurting businesses like restaurants and grocery stores which operate on razor-thin margins. More importantly, it creates a scenario where generic Mega-Corp is paying $15 per hour, and the neighborhood Pizza shop is only paying $10 per hour. Basic economic theory would lead us to believe that Mega-Corp will attract better talent because they are paying 33% more. The intangible impact of this bill will be to create an economic culture where the idea of working at a small business becomes an option of last resort. This exclusion creates the real possibility of significant talent drain. If this occurs, the resulting shift in how people view working at a small business won’t be fixed by a bill.
Understanding that this bill fails to meet the needs of both New Jersey residents and purposes genuine long-term threat to small businesses we must consider alternatives. Critics and supporters of the bill share a common theme, we all understand the value small businesses provide to our communities and want them to succeed. We must recognize that the nature of work is changing in the United States and small businesses may require assistance to rethink their strategies on how to prosper. I suggest that we consider the option of deeper government cooperation with small business owners to help with this transition.
#1 — Cooperative Competition
Our administration could work with small businesses owners in New Jersey to implement a more cooperative form of competition. We could facilitate regional purchasing cooperatives for similar industries. The state could provide the tools in the way of information resources, logistical resources, and a digital platform to help coordinate orders for small business owners in specific regions. If we use a Pizza shop as an example, collaborative purchasing would drive down resource costs such as flour, sauce, and cheese for the shop and increase their profitability per slice. This way small businesses can better focus on the things they do best, offering real and personal value in the experience.
#2 — Purchasing Reform
New Jersey could also implement policies and procedures to ensure that our significant spending power is directly locally. According to the Democracy Collaborative[1], implementing local purchasing projects such as the one implemented in Preston, England generate benefits such as growing local business revenues, reducing transportation costs and carbon emissions, reduces transit times allowing for more just-in-time inventory management (to further reduce small business overhead), and removes some of the burden from our national transportation infrastructure.
The first step to realize this plan would be to create clear purchasing goals that are shared with the public. Administratively we would either incentivize or require decision makers to buy locally. The state and our large non-profit institutions such as hospitals and schools would deepen cooperation with municipalities to conduct outreach to the firms with the intention of better understanding and supporting the capacity of our small businesses. Particular emphasis should be placed on outreach to small business owners who suffer from a systemic socioeconomic disadvantage.
#3 — Extend Access
The State could also extend credit in the form of access to advanced technologies and practice directly to small and emerging businesses. We could establish procedures to identify best practices within specific industries and then give them away to all companies within those industries. If we want to encourage start-up growth in our state, we could consider reorganizing corporate law to give innovative firms access to the most advanced forms of technology. Imagine a medical start-up working towards a creative, low-cost disease cure having access to the best technologies and techniques that our pharmaceutical conglomerates have to offer in opening ourselves up to new ways of approaching these problems we increase the probability of success for all involved. Depending on how we want to structure the arrangements the public could share in the benefits of success developed through this new program.
These solutions require reimagining the way we as New Jerseyans support small businesses. Each idea shares the common theme of creating revenue gains that, when recognized, would exceed the costs associated with an increased minimum wage. Let us never forget that the state is an extension of our collective population. Our ability to improve the lives of our fellow community members and create economic progress is limited only by our ideas.
In debating a $15 per hour minimum wage increase, we must reject the notion our choice is limited to a battle between low-wage workers and small business owners. We should work towards the betterment of our lowest earning community members and ensure our small business communities thrive. Governor Murphy and his administration are right to push for a solution to this problem. We don’t lack the will, just the imagination.
[1] Stimulating Economic Growth through Local Purchasing Democracy Collaborative https://democracycollaborative.org/sites/clone.community-wealth.org/files/Policy%20Brief_Purchasing_final.pdf
