Michael Saltsman / N.J. plan wrong on minimum wage - pressofAtlanticCity.com: Commentary

Michael Saltsman / N.J. plan wrong on minimum wage - pressofAtlanticCity.com: Commentary

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Michael Saltsman / N.J. plan wrong on minimum wage

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Posted: Friday, July 26, 2013 12:01 am

Earlier this year, Democrats in the Legislature and Gov. Chris Christie agreed to increase the state's minimum wage. This bipartisan coalition didn't hold up for long: Christie objected to a provision to put future hikes on autopilot, and asked for a phased-in approach.

This compromise proved too much for Trenton's career politicians, so they advanced a radical alternative to alter the state constitution to put the minimum wage on autopilot, linking regular increases to the rate of inflation.

This is the worst way to pursue an already-debatable policy.

New Jersey is currently one of the most difficult states for an entry-level employee to find work. Teens face a 27 percent unemployment rate; for black teens, the rate is 35.5 percent. Creating more barriers to a job for these young people by regularly raising the cost to hire and train them would be catastrophic. Yet that's exactly what the constitutional amendment would accomplish.

A closer look at the businesses that hire employees at the minimum wage helps explain why the policy hurts young people. Half of New Jerseyans affected by the proposed wage hike work in either the retail industry (28 percent) or at businesses like restaurants and hotels (22 percent). These employers can't absorb a new mandate that regularly raises the cost of their entry-level workforce.

Employers would be forced to figure out new ways to provide the same service at the same original cost. At a restaurant, that could mean having servers bus their own tables instead of hiring bus boys; at a grocery store, it might mean installing self-service lanes where you can scan and bag your own groceries. The end result is fewer jobs for the young people who need them.

Proponents of altering the constitution to raise the minimum wage have cited a 1994 study of New Jersey's fast-food industry in defense of the proposal. This study claimed that an increase in the state's minimum wage had increased restaurant industry employment. But six years later, the New Jersey study was debunked in the same academic journal that originally published it - something the activists fail to note.

The study was horribly flawed. Student research assistants had called restaurants with an ambiguous set of questions and reported implausibly large changes in employment. When independent economists from the Federal Reserve Board and Michigan State University analyzed actual payroll data from these restaurants, the results flipped. Far from increasing employment in the fast-food industry, New Jersey's minimum-wage hike reduced it - a consequence that would be repeated statewide on a regular basis should the constitution be altered to put the minimum wage on autopilot.

Even supporters of a higher minimum wage have reason to be leery of using the constitution to address the minimum wage. For instance, the president of New Jersey Policy Perspective - the state's liberal think tank - wrote in The Record last year that "the constitution is no place to settle issues like the minimum wage."

The debate will continue about the merits of the minimum wage and the best way to boost the paychecks of the state's working poor - as it should. But altering the state constitution should have no part in this discussion.

Michael Saltsman is the research director at the Employment Policies Institute in Washington.

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