Inflation will push New Jersey’s minimum wage above $14 in January

Surging prices will prompt a first-of-its-kind inflation adjustment to New Jersey’s minimum wage in January, pushing the state’s wage floor a few pennies above the $14-an-hour minimum that had been scheduled to go into effect.

But while the inflation adjustment, which was written into the 2019 law that will hike the minimum wage to $15 an hour in 2024, will help some very low-income residents keep up with rising prices, it won’t raise their purchasing power past where it was at the start of this year.

Under the 2019 law, New Jersey’s wage floor was set to increase by $1 per year until it reached $15 per hour on Jan. 1, 2024, but the law provides for larger annual increases if an inflation adjustment would put the wage floor above the next stepped increase. That provision will come into effect for the first time this year and force New Jersey’s $13-per-hour minimum wage to rise by at least $1.13.

“We’re ensuring that they’re not going to be worse off year after year, but as noted, that doesn’t necessarily mean that their standard of living is rising,” said David Cooper, director of the Economic Analysis and Research Network coordinated by the Economic Policy Institute.

Most other states that index their wage floor to inflation make inflation adjustments only after the minimum wage is fully phased in, according to Cooper, who called New Jersey’s approach unique.

While it will keep the wage floor in line with inflation, the adjustment will only give workers a small pay increase. An employee making minimum wage who works 52 40-hour weeks would make about $270 more for the entire year.

The final amount of New Jersey’s next minimum wage increase will be higher, as the final level of the inflation adjustment won’t become clear until mid-October. Only nine of the 12 months of Consumer Price Index figures used to calculate the inflation adjustment are available. Monthly inflation figures for July will be released on Aug. 10.

Figures released in June showed prices jumping 9.1% compared to last year.

The inflationary surge has prompted some advocates to take up new calls for increases to the state’s minimum wage.

“Raising the minimum wage to account for inflation would help low-paid workers keep up with the rising costs of basic necessities,” said Nicole Rodriguez, president of New Jersey Policy Perspective, a Trenton-based progressive think tank. “Whether it’s rent, groceries, or kids’ clothing, it costs more to live in New Jersey today than it did just a few years ago when the $15 minimum wage bill was signed into law.”

At the least, Rodriguez said, lawmakers should consider adjusting wage floor schedules for farm and tipped workers.

The minimum wage for farm workers is $11.05, and under existing law, it won’t reach $15 an hour until January 2027. The tipped worker minimum wage is $5.13, though if their tips and hourly earnings are less than the $13-an-hour minimum wage, employers must cover the difference.

Some other states have seen a push to increase wage floors beyond $15 per hour. Hawaii Gov. David Ige in June signed a bill that will take the state’s minimum wage to $18 by 2028.

Lawmakers in New York have proposed legislation that would raise the state’s wage floors to between $16.35 and $21.25 by 2026 (New York has three regional minimum wages). The highest of the three applies to New York City, which has a $15 minimum wage.

And in California, voters will decide in November 2024 whether the state’s minimum wage should increase to $18 by 2026.

New Jersey legislators don’t appear pressed to push the wage floor upward.

Assembly Speaker Craig Coughlin, who was the prime Assembly sponsor on the 2019 minimum wage bill, declined to say whether lawmakers should make further adjustments.

“I am concerned by increasing inflation, which is raising the price of everyday goods, forcing hardworking New Jerseyans to stretch their family budgets,” Coughlin (D-Middlesex) said in a statement. “Our work in Trenton has successfully focused on affordability and brought $2 billion in property tax relief to working families and seniors.”

Gov. Phil Murphy declined to comment through a spokesperson.

New Jersey’s minimum wage bill passed both legislative chambers with narrow margins in 2019 amid concerns from industry groups that the added costs would push some employers out of business. The bill increased the state’s minimum wage from $8.85 to $10 in January 2020 and annual $1 dollar increases followed.

But changes to market conditions could defray those concerns in the face of another minimum wage increase, Cooper said, noting particularly that a pandemic-fueled hiring crunch has already pushed pay upward for many traditional minimum wage jobs.

“That makes this a really good time to be raising the minimum wage because it doesn’t really affect business practices that much in this moment because they’re probably raising their wages anyway,” he said.

Tom Bracken, president and CEO of the New Jersey Chamber of Commerce, said many of his organization’s members have raised pay to hire or retain workers, but noted those still paying minimum wage had likely factored in the expected $1 increase, if not the inflation adjustment. Another 13 cents is unlikely to break the camel’s back, he said, but larger increases could.

“To do anything on top of that, at this point in time, it’s going to be just an additional financial aggravation that could pose some serious problems,” Bracken said. “This is not the time to start to look more increases for more people because we haven’t really begun to feel the effects of a recession if we get there.”