The current lowest minimum wage is set by law at $5.15/hr. In NJ, it is higher.
As an entrepreneur, I know (because I’m the one writing the checks) that an employer’s costs for an employee are twice that employee’s salary because of benefits, insurance, payroll taxes, and other items. Hold that thought for a moment while you read this post.
Here is the truth about minimum wage.
From the U.S. Department of Labor:
- According to Current Population Survey estimates for 2005, 75.6 million American workers were paid at hourly rates, 479,000 (or .6%) were reported as earning exactly $5.15
- About one-fourth of workers earning at or below the minimum wage were age 16-19
- The industry with the highest proportion of workers with reported hourly wages at or below $5.15 was leisure and hospitality (about 14 percent). About three-fifths of all workers paid at or below the Federal minimum wage were employed in this industry, primarily in the food services and drinking places component. For many of these workers, tips and commissions supplement the hourly wages received.
…With less then 1% of Americans currently working on the books earning the minimum wage, and the majority of those being under the age of 25, it is clear that a hike in the minimum wage will not do much to bolster most household incomes.
On the contrary, employers who are currently hiring young adults for entry level positions which start at the minimum wage during the training period, may now have to dissolve those positions or be forced to raise the prices they charge the consumer in order to cover their inflated cost of business.
Sigmund, Carl and Alfred‘s also looking at the minimum wage this morning. He notices that:
It is important to understand that no state is bound by federal minimum wage laws. Each state has the right to determine their own minimum wage laws, taking into account local economic conditions.
There is no federal legislation that forces employers to pay minimum wage- in fact, almost 90% of all hourly workers are paid above either state or federal minimum wage.
Why then, is federal minimum wage legislation such a priority for the democrats?
The answer is simple: Union support and union votes.
Many union collective bargaining wage agreements are based on the federal minimum wage. In many industries, union wages are calculated as multiples of the federal minimum wage.
Suppose the minimum wage is $7.00 an hour. If the collective bargaining agreement calls for a 3 times minimum wage base, that means the union employee would be paid $21.00 an hour.
If the minimum wage is raised to $8.00 an hour, the same union employee would see his or her wage raised to $24.00 per hour. The additional cost to the employer union would be $6,000 per year for each employee. There are many union employee contracts that call for wages at 5 and even 6 times federal minimum wage levels.
This article realizes that (emphasis added)
Raising the minimum wage to $7.25 an hour from $5.15 will placate the Democrats’ union bosses, but won’t do much to raise the quality of life for Americans.
First, the claim that minimum wage employees are mostly the working poor struggling to raise families is a myth. The average minimum wage worker lives in a household with an income above $50,000 a year, suggesting that most are teen-agers and college students. Fewer than 20 percent live below the poverty line.
And a minimum wage hike will restrict the number of entry-level jobs, as employers reduce the workforce to control payroll costs.
As this chart shows (via SC&A), the minimum salary in New Jersey is $7.15, and you are eligible for overtime pay (1 1/2 x basic pay) after working 40 hrs/week. This is such a high amount that law-abiding small businesses are leaving NJ for cheaper pastures.
In the Princeton area, the much-maligned Wal-Mart (which is actually in Lawrenceville and whose employees come from much poorer Trenton – all in Mercer County), hires unskilled labor for non-unionized jobs with starting salaries at almost twice the minimum wage.
For comparable jobs, Wal-Mart is competitive with much more prestigious employers, among them the many colleges and universities in the area (including Princeton U). Likewise, other stores in the Nassau Park Shopping Center (Wegman’s Supermarket, Target, Kohls, Home Depot, Sam’s Club and others) hire inexperienced unskilled labor at similar wages.
However, the one factor depressing unskilled labor pay is not the minimum wage. In this area, the one single factor depressing pay for unskilled labor is the sizeable numbers of illegal aliens working at cash-only jobs. Those businesses and those employees are breaking the law.