A bill to increase the New Jersey's minimum wage to $8.50 per hour from its current rate of $7.25, and index it to the Consumer Price Index to ensure annual adjustments that are in line with increases in the cost of living was approved by the Senate Labor Committee yesterday.

New Jersey's minimum wage last increased in 2009, when the federal minimum wage was increased to $7.25 per hour. Prior to that, state law enacted in 2005 shepherded in a three-year period of growth that saw the rate increase from $5.15 per hour to $7.15 per hour. That bill was signed by then-Governor Dick Codey, and was sponsored by now-State Senate President Steve Sweeney. Since that increase, the Minimum Wage Advisory Commission - created by the law to track the minimum wage's effectiveness - has recommended three times that the wage be increased to $8.50 and indexing the rate to the rate of inflation.

"An honest day's work must be rewarded with an honest day's pay, at a wage that is just not a token, but livable," says Codey who co-sponsors this latest measure. "Our current minimum wage is not a livable wage, and anyone who would tell you otherwise has never tried to live at it. We must take this step to not only help the families who most need it, but to ensure that they don't again fall backwards."

Mike Egenton with the New Jersey Chamber of Commerce opposes the bill. He says, "We're hearing from a lot of our members that they didn't even plan for this in their budgets for 2012 or 2013 so it's a big surprise to them if it goes through."

Sweeney is another of the measure's sponsors. He says, "Those working on the bottom rung of the economic ladder desperately need a minimum wage that doesn't condemn them to a minimum standard of living. While the cost of living has continually risen, workers earning the minimum wage have seen their incomes stagnate, keeping them farther and farther below even the poverty line. This is long overdue for those who most need it, and whose earnings will go directly back into the economy, spurring further economic growth."

Egenton says, "We believe sort of in that old school principle. If you're a good employee, you come to work, you show up, you do a good job and everything, the employer's going to take care of you. He feels the wage increase could lead to lay-offs or employers scaling back in hiring and he says there;s an unintended consequence.

Egenton explains, "If someone gets a raise from $7.25 to $8.50 and the guy working next to him who was making $9 and is still making $9, he going to want to know why he didn't get a raise too."

Codey understands the business community's concerns and says, "I would think a good compromise might be that we raise it to $8.50, but do away with the cost of living adjustment."

Nineteen states and the District of Columbia have higher minimum wages than New Jersey. Even much lower-cost-of-living states such as Florida, Arizona, Ohio, Illinois, and Montana have higher minimum wages. In Washington State, the minimum wage is $9.04. Arizona, Colorado, Montana, Ohio, Oregon, Vermont and Washington all increased their minimum wages this year.

Small businesses cannot absorb a 17 percent minimum wage increase in an economy where sales and profits are stagnant according to the New Jersey Business & Industry Association (NJBIA).

"If sales are not rising fast enough to accommodate forced wage hikes, employers will be forced to make tough personnel and operating decisions (such as reducing workers' hours or cutting other costs)," says NJBIA assistant vice president Stephanie Riehl. "Unfortunately, an automatic annual increase of wages does not mean an automatic annual increase in sales and revenue to cover the added labor costs."

New Jersey Policy Perspective president Deborah Howlett says, "This legislation is one of the most important actions elected officials in Trenton can take to immediately improve the lives of tens of thousands of working families struggling to make ends meet in New Jersey and at the same time improve the state's economy for every other resident……In a state with one of the highest median incomes in the nation and one of the highest costs of living, those at the bottom of the wage scale often find it a struggle to raise their families here. The increase may be only $1.25 an hour, but it could mean the difference in families paying a utility bill in full or buying new school clothes for their children."

Riehl explains, "New Jersey's minimum wage would be the third highest in the nation, behind only Washington and Oregon. Additionally, New Jersey would become only the second state in the region to establish an automatic-wage-increase index. Many New Jersey businesses are still struggling, and this proposal would put them at a further competitive disadvantage with their counterparts in 30 other states."