M E M O R A N D U M

TO:                         Members of the New Jersey Senate

FROM:                   Christina M. Renna, Senior Vice President, CCSNJ

RE:                         Opposition to S-15


DATE:                    January 31, 2019

 

The Chamber of Commerce Southern New Jersey opposes S-15, which proposes to increase the minimum wage to $15 per hour over a several year period. This increase amounts to a nearly 60 percent increase over the current minimum wage of $8.85 and a nearly 25 percent increase in the next 11 months.

Raising the minimum wage to $15 per hour will exacerbate the already outsized cost of doing business in New Jersey.  Those costs put New Jersey last in the Tax Foundation’s 2019 Business Tax Climate Index, and second to last in the Small Business & Entrepreneurship Council’s “Small Business Policy Index of 2018.” 

Last year, we surveyed our members on the impact of a minimum wage increase to $15.00 per hour. Not surprising, 76 percent of our members oppose the increase.  Those who do not oppose the increase are primarily businesses that would not be impacted by the increase as they pay their professionals well above the minimum wage; yet they express concerns over the impact of the increase on cost of goods and services. 

An unspoken ramification of this drastic of a raise in the minimum wage is the joblessness that will inevitably result from it.  There are four classifications joblessness that are worth considering in the larger conversation: 

  • People who will not be able to get jobs: High school and college students for summer and part time jobs; and unskilled, less educated workers.  We have seen this borne out in the studies and it’s consistent with what we hear from our members.  American Legislative Exchange Council (ALEC) conclusion:  “Even if employers do not decrease hiring, they will respond to higher labor costs by replacing the lowest-skilled individuals with more highly-skilled employees, and inexperienced workers will be priced out of the market.” 
  • People who will be replaced by technology: This is already happening in our everyday lives.  In fact, Wendy’s recently announced that its franchisees will start using touch screen ordering. Airports are moving away from restaurants and to touch-screen ordering.  Other examples of technology include:  ATMs; self-checkout lines at retail establishments; and warehouse and distribution facilities that are using robotics to do jobs previously done by laborers. 
  • Fewer jobs added: Paying workers an artificially inflated wage will strain the resources of business who will not be able to add jobs (think of a salary line that will be 80% higher when the phase in is complete).
  • Labor cutbacks: Either by reducing hours, number of workers, or simply not replacing workers who leave -- and stagnant wages. 

In 2005, our Chamber testified before the Senate Labor Committee, along with a member of the Chamber’s Board of Directors, William Eubanks, III, President & CEO of Eubanks Enterprises, a franchisee of 29 Kentucky Fried Chicken restaurants.   In 2001, Mr. Eubanks decided to invest $15 million in our state and open twenty one restaurants, most of which were located in South Jersey.  At the time, his restaurants employed 650 people, a vast majority of whom were young workers earning minimum wage.   But, four short years later, instead of expanding in New Jersey, he was closing restaurants. 


Mr. Eubanks pointed out to the Committee members that increasing the minimum wage was just part of the overall picture of doing business in New Jersey.  At the time, he was faced with absorbing $17,000 more in corporate taxes because of the changes that were made to the corporation business tax in 2002; his workers’ compensation insurance increased 30 percent over three years; medical insurance, utility costs, and property and casualty insurance rates were also on the rise.  As a result of these increased costs, Mr. Eubanks was forced to close four of his restaurants. 


He predicted at the time that the immediate cost impact of increasing the minimum wage --  $200,000 – would force him to close six more of his restaurants, and as a result 120 to 150 employees would lose their jobs.  He also indicated that he would scrap his plans to invest further in the state. 


The end of the story:  Mr. Eubanks closed all of his stores and left the state in November 2007.  All 650 of his employees lost their jobs.

               

We understand that there appears to be public support for increasing the minimum wage, and that there are forces that truly believe doing so is the answer to providing people with a livable wage, for which the minimum wage was never intended.  It’s important, though, to keep in mind what the job creators are saying, as one needs to actually have a job in order to earn the minimum wage. 

We urge you to vote “no” on S-15.