New Jersey is one of the few states in the US that successfully reached and surpassed the target of a $15 per hour minimum wage for most employees by 2024. Governor Murphy signed legislation in February 2019 with the intention of enhancing the quality of life and economic security of low-wage workers. However, this policy change faced resistance from some sectors, especially the fast-food industry, which relies heavily on low-wage labor. In this article, we will explore the impact of the minimum wage increase on the fast-food sector in New Jersey and examine the potential implications for its future.

Impact on Employment

One of the main arguments against raising the minimum wage is that it would lead to job losses, as businesses would struggle to cope with higher labor costs. However, several studies have challenged this notion, showing that raising the minimum wage does not necessarily reduce employment. For instance, the influential work of Nobel Prize-winning economist David Card and Alan Krueger, conducted in the early 1990s, analyzed over 400 fast-food restaurants in New Jersey and eastern Pennsylvania, demonstrating that the minimum wage hike did not lead to a decrease in employment.

A more recent study by economists from Princeton University and the University of California, Berkeley, covering the period from 2013 to 2019, also supported this finding, revealing no adverse effects on employment or hours in the fast-food industry.

Impact on Compensation

While the minimum wage increase did not necessarily affect employment, it did have an impact on other aspects of workers’ compensation. A recent study examining the effects of minimum wage increases in Seattle found that, on average, workers in stores subject to the hike experienced reduced weekly hours, less access to benefits, and less predictable schedules.

This resulted in an average 11.6% decrease in total compensation for every $1 increase in the minimum wage. Tipped workers, such as servers and delivery drivers, also faced unique challenges. In New Jersey, the minimum cash wage for tipped workers is $5.26 per hour, with a tip credit of $9.87. However, if the total falls below the state minimum wage, employers must bridge the gap. This situation may limit the benefits tipped workers derive from the minimum wage hike, potentially leading to reduced tips.

The Future Landscape

The consequences of the minimum wage increase in New Jersey for the fast-food industry are a mix of positive outcomes, such as increased wages and employment, and negative impacts on compensation and tips. Looking ahead, the long-term effects remain uncertain, as the minimum wage will continue to rise annually based on the Consumer Price Index. Furthermore, the industry faces additional challenges such as heightened competition, evolving consumer preferences, and technological innovations such as automation. In adapting to these changes, some fast-food chains may turn to automation, employing self-ordering kiosks, mobile apps, and robots to enhance efficiency and cut labor costs.

Conclusion

The minimum wage hike in New Jersey has been a controversial policy that has sparked debate among economists, policymakers, and business owners. While the policy aims to improve the living standards and economic security of low-wage workers, it also poses challenges for the fast-food industry, which depends on cheap labor. The impact of the policy on the fast-food sector is complex and multifaceted, involving trade-offs between employment, compensation, and productivity. The future of the industry will depend on how well it can adapt to the changing economic and technological environment, as well as the preferences and demands of consumers.