The Legislation New Jersey Needs Part IV: A Defined Cost of Living Methodology

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On November 5th, 2013, New Jersey voters approved the New Jersey Minimum Wage Increase Amendment, Public Question 2, which was designed to do two tasks. The first task has been implemented problem-free, and set the minimum wage to $8.25 as of January 1, 2014. The second, though, seems to need refinement and better definition. The second task is to annually adjust New Jersey’s minimum wage to the cost of living as of January 1, 2015.  Here is the exact language as it appeared on the voting ballot: “Do you approve amending the State Constitution to set a State minimum wage rate of $8.25 per hour? The amendment also requires annual increases in that rate if there are annual increases in the cost of living.”

The issue that has stemmed from the language of the referendum came to life on September 30, 2014, when the Department of Labor and Workforce Development released a notice of administrative change to the minimum wage in accordance to the referendum. The New Jersey Department of Labor says, “based on any percentage increase during the one-year period of August of the prior year through August of the current year of the consumer price index (CPI) for all urban wage earners and clerical workers (CPI-W, U.S. City Average), as released by the United States Department of Labor, Bureau of Labor Statistics” is reason to implement an hourly wage of $8.38 as of January 1, 2015.  In other words, the New Jersey Department of Labor is not actually adhering to the referendum that voters approved.

The New Jersey Department of Labor was wrong to adjust the 2015 minimum wage to the Consumer Price Index for three reasons. (1) The Consumer Price Index is a national tool that does not adequately apply to New Jersey. New Jersey is the fifth most expensive state to live in throughout the country, so a formula that generalizes expenses for the entire nation does not adequately account for costs in New Jersey. Even though in this case there was an increase of 13 cents, this methodology could eventually decrease the minimum wage and harm the New Jersey economy since it takes account of 45 other states that are less expensive to live in. (2) The United States Department of Labor clearly elicits a difference between the cost of living and the consumer price index. There is an entire paragraph on their webpage dedicated to distinguishing a difference between the two. (3) With such clear language within the referendum which requires an increase to the minimum wage coherent to increases in the cost of living, it is surprising that the New Jersey Department of Labor is attempting to adhere to the referendum by implementing a wage that would leave New Jersey families $6,419.60 below the National Poverty Threshold. The voters did not approve of annual minimum wage increases based upon the consumer price index.

Aside from the New Jersey voters not getting what they democratically voted for, they are also losing out financially. There are two academic institutions that have created tools and methodologies to calculate an hourly wage coherent to the cost of living in New Jersey. From MIT, Dr. Amy Glasmeier‘s data suggests that an hourly wage coherent to the cost of living in New Jersey would be $11.13. The Legal Services of New Jersey suggest an hourly wage of $13.75. Even though both of the academic projections themselves vary greatly, it is still important to acknowledge how much they differ from the New Jersey Department of Labor’s interpretation of the referendum. These academic projections average a $4.06 difference in hourly pay from the New Jersey Department of Labor’s use of an increase in the Consumer Price Index. The MIT projection would place a New Jersey family $700 below of the National Poverty Threshold, and the projection by The Legal Services of New Jersey would place a New Jersey family $4,750 above the National Poverty Threshold. Overall, both of the academic projections do a better job in supporting New Jersey families than a wage that leaves them $6,419.60 below the poverty line.

I highly anticipate this topic becoming the focus of future litigation in the Garden State. Going forward, New Jersey lawmakers need to realize the difference between the Consumer Price Index and the Cost of Living. Also, New Jersey needs to adopt a methodological format to calculate the State’s cost of living in order to annually change the minimum wage. Currently, New Jersey does not have any cost of living methodologies within its constitution, and it is clear that the purpose of the referendum is being left unfulfilled because of that.

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