Tag / Job market

by Frank Maduri

Minimum Wage Debate: A Six Month Review – Follow Up

The debate surrounding the minimum wage increase has been extraordinarily divisive among the American general public. I have covered this issue from a variety of aspects, particularly surrounding the referendum vote affirming a minimum wage increase in my home state of New Jersey in January.

 

Now, six months later, I will again follow up on this contentious subject and as I have done in the past, I will analyze the data available to measure the impact on the job market in those states which increased wages.

 

The Data: Six Months Later

 

The report from the Center for Economic & Policy Research is very promising. There were no job losses in most states which raised the minimum wage, and if you do not recall from my earlier coverage, 13 states raised that wage for the workers in their respective states.

 

In fact, all but 1 state of the 13 states saw job growth within the first 5 months of the passage of the minimum wage increase. The states that raised the minimum wage had better job growth than those that did not raise the minimum wage.

 

Furthermore, the top 10 states for job growth feature 4 states which raised the minimum wage: Florida, Washington, Oregon, and Colorado. This data is exciting for the proponents of the minimum wage increase and will help their cause to gain traction on the national level.

 

Conversely, the data in this report will be largely damaging to those factions which continue to oppose the increase in the minimum wage from being approved in other states or on the federal level.

 

However, the detractors will most probably point out that the economy needs to fill higher paying jobs at a much more prevalent rate in order to fully bounce back. This statement would be rather accurate given the current state of the economy.

 

The factions who strongly defend the minimum wage increase would argue that the economy and job growth usually always starts from the bottom and progresses up the salary chain. Therefore, the gains made in the minimum wage jobs, they would argue, are an indication of future job growth of higher paying positions. These factions would use the data from this report to illustrate a trend in overall job growth in the 13 states with raised minimum wages which have also seen stronger job growth across the salary spectrum.

 

The Garden State Blues

 

My home state, New Jersey, has the worst job growth of the states that raised the minimum wage and is the worst state overall for job performance with a decline in net hiring of .56%, according to the Center for Economic & Policy Research.

 

The national labor force participation rate is declining, and New Jersey has been impacted by that unfortunate pattern in the labor market as well. The labor force participation rate is the amount of people who live in a particular state who are within the legal working age and that are gainfully employed.

 

The labor force participation rate in New Jersey was 63% in January 2014, the lowest rate since June 1983, during that horrible recession. In New Jersey and across the nation the share of people in their prime earning years that are employed is declining.

 

New Jersey is suffering for multiple reasons, the taxes on businesses coupled with the high standard of living have caused companies to either leave the state or hire less people. The cutbacks in hiring are due to the fact that the labor force here needs higher wages in order to meet the cost of living. It creates a vicious cycle.

 

In another report I reviewed, a study of major metropolitan areas and their respective job growth versus population size, I found that both New York City and Philadelphia finished in the bottom for job growth given that measurement. New Jersey relies on both of those cities to employ large amounts of their residents, which is obvious when you look at the bedroom communities that have sprouted up in New Jersey near those two major cities in the past.

 

That metric, the labor force participation rate, has everyone, including the White House, concerned about the job market in the near term. A member of the White House staff confirmed that they have to do more to assist businesses to enable them to create more jobs that are higher paying to improve the participation rate.

 

Stigma

 

I poured through several reports and data, but the biggest issue with the labor force participation rate is the stigma involved in society over the perception of those who are long term unemployed.

 

The studies I reviewed displayed a growing misconception by hiring managers and large and small corporations that the members of the labor force who have been unemployed for a long period of time cannot adequately fulfill the duties of the respective job which is currently open.

 

Several labor market analysts and those within the federal government who analyze job market trends disagree with this assessment, and acknowledge that the American economy still has a huge issue with long term unemployed people who are in their prime earning years. That figure stands currently at 35%, so for all the news that the job market is improving, that statistic is particularly alarming and damaging to our economy.

 

The debate within these circles and within the federal and state governments will shift in the coming months into a new focus: how to reverse that mindset and reverse the downward trend in the stagnant hiring of the long term unemployed. Many options are being discussed including potentially incentivizing the process for companies that do hire those individuals who have been out of work for a prolonged period of time.

 

Outlook

 

This report on the minimum wage increase certainly casts some light on the Congressional Budget Office (CBO) report which I think was too quick to “jump the gun” on the effects of the minimum wage on job growth. That report, in summary, basically maintains that minimum wage increases would have little to no positive impact on the creation of jobs.

 

The outlook for the proponents of the cause to get the federal government to raise the minimum wage is, in my opinion, strengthened by the data in the report from the Center for Economic & Policy Research. The groups in favor of this measure have a petition launched on the White House website if you would like to lend your support to this cause.

 

The growth of jobs overall is obviously the much larger issue here, and it will be interesting to see how the government and the business community will address the labor force participation issue in the future. It is becoming increasingly clear that something has to be done to employ more people in the prime of their respective careers, the overall improvement of our economy depends upon it.

 

(Statistics, rankings, and some background information courtesy of the Congressional Budget Office, Office of Management & Budget, Center for Economic & Policy Research, The Fiscal Times, and Forbes.com )

 

 

 

 

 

 

 

by Frank Maduri

Follow Up: Minimum Wage Increase & Jobs

In a follow up story to recent coverage on the topic of the minimum wage increase and its impact on employment, some positive news made headlines today. The Center for Economic and Policy Research issued a report that in 13 states where the minimum wage was increased, after two months of data, the number of jobs increased in those states.

 

These findings have caused the proponents of the minimum wage increase to basically say “I told you so”; and that it is evidence that the correlation between the slight increase in wages and a negative impact on jobs is a weak argument.

 

Conversely, the detractors have stated that this report is based on too short a sample window (two months) and that the increase in minimum wage will have a “ripple effect” on the rest of the economy and the overall jobs market.

 

In my home state, New Jersey, where this has been a very “hot button” issue, and where residents just approved a minimum wage hike which came into law in January, the employment numbers decreased slightly. This data could fuel the detractors of the minimum wage increase here in The Garden State.

 

However of the 13 states with the increased minimum wage, only New Jersey, Connecticut, and West Virginia had either decreased or flat job level changes. The sampling may be small, but the main message here is that the increase in the minimum wage is not the devastating blow to job creation that the detractors were making it out to be during the implementation of these changes in January.

 

Minimum Wage Workers

The report also provided some information on the minimum wage worker in the United States. The percentage of the work force making minimum wage is 3 percent, so this increase does not effect a huge group of the overall labor market.

 

However, the industry groups such as the National Restaurant Association, the large fast food chains, and other groups are still strongly against the increase in the minimum wage in states that have yet to make a change.

 

In my earlier writing on this subject, particularly on the fast food workers, I described the protests of the worker and their rallying cry “We can’t survive on $7.25” alluding to the current minimum wage in some states. I factored out that hourly wage to approximately $15,000.00 per year, and this report also notes that figure and ties it to the national poverty level figure of $22,282.00 for a family of four.

 

Many of these workers have dependents, and they also now have to pay into the exchanges for their own health care or family health care coverage. This is all very difficult to achieve on the current level of $7.25 or $7.40 per hour depending on what state you reside within.

 

Moving forward

 

This report is just the first of many that will be commissioned by the government, research groups, or other interested parties in this very controversial matter. The initial data shows that the increase in minimum wage levels had a more constructive overall impact on job creation than what was initially forecasted.

 

The overall issue moving forward I think is not to focus on the minimum wage effort, I think those workers deserve higher wages and I agree with the federal increase to the $10.00 per hour level. The bigger issue is the examination of much larger methods with regard to government regulation and corporate tax structures which could be revised to create a climate capable of fostering job growth across the rest of the labor market.

 

Increases in minimum wage jobs are great, but it is only representative of a very small amount of the work force. The American public, the government, and the business community should be much more concerned about job creation for the other 97% of the work force.

 

The Federal Reserve Chair, Janet Yellen, said this week, and I am paraphrasing, that the recovery of the U.S. economy still feels like a recession to the majority of Americans. That is where our focus should be and not on the increase of a few dollars per hour for a very small, but hard working segment of our work force.

 

 

(Statistics courtesy of The Center for Economic & Policy Research and CBS News. Additional financial market data and background information courtesy of The Wall Street Journal -www.wsj.com)