The New Jersey State Senate just passed a bill to raise the state's minimum wage to over $15 an hour by 2021. The final approval of the bill depends on Republican Governor Chris Christie's signature. In the past, Christie has rejected the idea of a $15 minimum wage.
As I wrote for the Washington Examiner last summer, raising the minimum wage would increase income inequality, something that is usually a great concern to proponents of a minimum wage hike.
It is no surprise that proposals to raise the minimum wage are popular with the public. Who in their right mind would reject a raise? Unfortunately, reality brings negative consequences to both businesses and workers.
While some workers will get a raise if the minimum wage is increased, this will come at the expense of cutting off opportunity for the young. Unsurprisingly, because the minimum wage makes it effectively illegal for employers to hire the least-skilled workers, the unemployment rates for teens in high-minimum wage states are higher than those in low-minimum wage states. The real minimum wage is $0 an hour, because employers always have the choice to let employees go, or not hire them at all.'
Minimum Wage Leads To Maximum Unemployment
If New Jersey follows the course of other U.S. states and cities that set their minimum wages at or above $15, its minimum wage will be among the highest in the world.
Once the minimum wage increases in Seattle, San Francisco, Los Angeles, and New York are fully phased-in, their levels will be higher than any other country's minimum wage--meaning these cities are moving into uncharted territory. After adjusting for purchasing power, the highest international minimum wages are in France ($10.70) and Australia ($10.50). Instead of offering entry-level jobs, employers who can stay in business after they are forced to pay these wages will rely on increased automation or skilled workers.
Despite the narrative that families all across America are struggling to survive on the current federal minimum wage of $7.25 , this is simply not the case. Only 3 percent of American workers earn the minimum wage, and over half of them are between 16 and 24 years old.
If New Jersey raises its minimum wage, young people who need jobs will be hurt the most. Minimum wage jobs are not careers. They act as stepping stones to higher paying jobs by providing valuable work experience. If the first stone is moved further out, it only makes getting to the second one even harder. From my Washington Examiner article:
For these reasons, Gov. Christie should think twice before signing New Jersey's recently passed minimum wage bill. It is the best choice for workers, businesses, and New Jersey's economy as a whole.
This piece originally appeared on Epic Times
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Jared Meyer is a fellow at the Manhattan Institute's Economics21. Follow him on Twitter here.
This piece originally appeared in Epic Times