Days before Gov. Phil Murphy signed a landmark bill to increase the state’s minimum wage to $15 an hour and as he and the state legislature’s top Democrats touted the measure, things turned awkward for lawmakers.
On Jan. 29, just after Murphy, Senate President Stephen Sweeney, D-3rd District, and Assembly Speaker Craig Coughlin, D-19th District, held a photo-op together at a Sayreville diner to highlight the bill, the owner admitted he was worried about the increase.
Teddy Lutas, owner of the Ocean Bay Diner on Route 35 South in Sayreville, told reporters immediately after the appearance that he would likely have to raise menu prices and could even go as far as closing his shop.
After the news broke out on Twitter and different media outlets, Lutas and Coughlin sat down to go over the ins and outs of the wage increase. It would not jump to $15 overnight as Lutas thought while talking to reporters – instead, the increase would be phased in over several years.
“I was not fully aware that the minimum wage increase will be phased in over five years. That’s why I’m so happy that Coughlin took the time to talk me through the plan,” Lutas said in a statement that afternoon.
“I do support paying my hard-working employees a wage that helps them make ends meet and makes the state more affordable for them,” Lutas added. “We have a very loyal customer base and I know they’ll continue to frequent my diner.”
Most important, Lutas in the statement said he had no concerns about having to close his diner.
But Lutas’ initial comments resonated with business owners and opponents of the minimum wage increase across the state.
Ian Whitfield, one of the owners of The British Chip Shop, located in Haddonfield, worried the restaurant could be hurt by workers being paid $15 an hour “all of a sudden.”
“They’re all going to be better off,” said Whitfield, who employs a dozen people. “[But] definitely I think it’s going to affect [us], I would have to pass that onto the consumer. We’re also a business.”
Murphy signed the bill on Feb. 4 in Elizabeth, in a crowded room packed with unions and labor activists, members of his own cabinet, Democratic
state lawmakers and members of the New Jersey Congressional delegation, in what became a loud and celebratory pep rally.
The majority of workers will see their wages increase from $8.85 to $10 an hour on July 1, and then to $11 an hour on Jan. 1, 2020, before finally topping out at $15 an hour in 2024.
Roughly 300,000 workers are earning the minimum wage, according to the Department of Labor and Workforce Development. An additional 1 million workers are earning less than $15 an hour, according to data the department cited from the progressive think-tank New Jersey Policy Perspective.
NJBIZ spoke with the owners of small and local businesses across the state and like Lutas, many were unclear about the details of the legislation.
Alex Kim, general manager at the Fort Lee-based BCD Tofu House, said when asked Feb. 4 that he was not aware Murphy would be signing the minimum wage bill that same day.
Business owners, whether or not they supported the increase, acknowledged they would likely have to increase their prices.
“We don’t pay minimum wage. I mean, we expect a lot from our employees and recognize that they’re the base of the business. They’re the people who are representing us to the public and to our customers,” said Stuart Josberger, one of the founding members of the Eatontown-based Stumpy’s Hatchet House.
Stumpy’s lets customers vent their frustrations by throwing hatchets at bullseye targets on a wall in front of them, and Josberger said that paying employees a minimum wage would mean they would get “minimum work” in return.
Still, Josberger said he has not ruled out price increases later as the statewide hourly rate nears $15 an hour.
“We’ll have to make adjustments, going up obviously,” Josberger said. “If the minimum wage goes up, does everybody’s salary rise in accordance?”
Marilyn Schlossbach, who owns several local businesses along the Asbury Park beachfront, says she also supports a minimum wage increase but worries about whether she would have to raise prices and find other ways to accommodate the eventual $15 an hour rate.
“I like that they’re looking at this as a gradual increase, not a hundred percent overnight, so it gives everybody time to acclimate,” Schlossbach said.
“But the customer is going to get affected by it,” she noted.
Under the minimum wage bill, the restaurant tipped work hourly rate will increase from $2.13 to $5.13 an hour on Jan. 1, 2022.
“People just don’t understand that the tipped wage is not the actual wage that people make, it’s just the base,” said Schlossbach, who is active in legislative advocacy of the New Jersey Restaurant and Hospitality Association.
“If say you have an employee and they work a lunch shift and they have one table and they only make $10, the employer has to pay the difference on that hourly wage. If they make $200 that shift, you’re only paying taxes on the $2.13,” Schlossbach said. “Now you’re going to pay taxes on the $5.13 plus they’re still going to make $200, so the difference is on your tax liability.”
Schlossbach said that she employs up to 150 people in all her businesses during the summer and down to 40 people during the off-season — none of them earn less than $11 an hour.
This coming summer, Schlossbach might have to cut costs by clamping down on how many employees work overtime. Many of the vendors she buys from will also have to increase their wages and as a result, the costs of their products.
But Schlossbach said she was glad the bill takes into account a provision for seasonal employees, whose minimum wage will increase to $15 an hour by 2026.
How small is “small”
Crafted to apply mainly to beach-related jobs along the Jersey Shore, seasonal workers are those employed only between May 1 and Sept. 30. But Schlossbach acknowledged that many winter and fall season employers, such as ski resorts, are not covered under the legislation.
In North Jersey, Jennifer Snyder, owner of The Little Daisy Bake Shop in Montclair, said the $15 an hour minimum wage could force her to raise the prices of the baked goods her shop sells.
“We’re a small business and we’re doing our best and I definitely love my employees and would like to pay them a lot more. But I’m trying to run a small business and it’s a lot of expenses,” Snyder said.
The bakery employs roughly 20 people, Snyder said. College and high school students work at the front dealing with customers — the high school students work after school and on weekends while college students work shifts that fit with their class schedules.
Many of the bakery’s employees start at a minimum wage, Snyder said, but work their way up the pay ladder.
“We use quality ingredients. Our ingredients are costly,” Snyder added. “We’re labor-intensive. We do custom work, custom cakes and cookies. I invest a lot in my labor and I love my team but that’s hard for small businesses.”
Snyder said she was surprised to learn the new law defines a small business as less than six employees. As with businesses that employ seasonal workers, small businesses will have a slower phase-in rate and reach $15 an hour by 2026.
“I mean, I feel like a small business owner. Our business is doing well, but I wouldn’t categorize us as a big business, a mega-company,” Snyder said.
John Pucket, owner of Main Street Bagel in Flemington, said he would also have to raise the wages for his eight employees, many of whom already make close to $15 because “that is what you get from working hard.”
“Nobody makes minimum wage, it’s unheard of. You can’t even get a 15-year-old to work for minimum wage,” Pucket said. “If the minimum wage almost doubles, I have to double their wage too, because I cannot have minimum wage workers, because everything is going to cost more.”