The hourly pay for New Jersey workers earning the minimum wage increases Thursday by 13 cents to $8.38.
Under a voter-approved initiative, the rate is set to rise each year in tandem with the consumer price index, a marker of inflation.
The hike in 2015 is a 1.59 percent increase over last year's rate, which increased to $8.25 from $7.25 after voters approved the 2013 initiative pushed by the Democratic-controlled legislature. The initiative succeeded despite stout opposition from business groups and Republican Gov. Chris Christie. Debate continues over the effects of raising the minimum wage.
How Higher Wage Helps
The New Jersey Policy Perspective, a liberal think tank, says raising the rate has buoyed the state's minimum wage earners as well as the economy. The group predicts the 2015 wage increase will result in nearly $35 million in new economic activity and will affect some 176,000 people in the state.
Alan Krueger, former chairman of President Barack Obama's Council of Economic Advisers and an economics professor at Princeton, said New Jersey's minimum wage helps the state's lowest-paid workers keep up with the cost of living and that tying the wage to other costs frees policymakers to focus on other issues. He disputes the idea that a higher wage affects hiring.
"A large body of research has found that modest minimum wage increases do not have an adverse effect on employment, and I would expect increases that result from indexing the minimum wage to inflation to have no meaningful effect on employment in New Jersey," he said in an email.
How Higher Wage Hurts
Business groups say minimum wage hikes, including New Jersey's, have resulted in hiring freezes. Laurie Ehlbeck, the New Jersey director of the National Federation of Independent Businesses, said she's spoken to many of the group's 8,000 to 9,000 members who run small businesses.
"They're putting on hold any hiring until they see how they recover from this increase," she said. "So rather than lost jobs, at this point I would say there's no growth."
Ehlbeck also said the unknown amount of the wage increase every year because it depends on the index, which makes planning a challenge.