Category: Report

New Immigration Rule Will Have Chilling Effect on New Jersey’s Mixed-Status Families

Posted on by Erika J Nava

To read a PDF version of this report, click here. 

A drastic change in the “public charge” rule proposed by the Trump administration would restrict access to green cards and various types of visas for immigrants who are not already comparatively well-off. This “Trump Rule” fundamentally changes our approach to immigration, making family income and potential use of health care, nutrition or housing programs a central consideration in whether or not to offer people an opportunity to make their lives in this country. The Trump Rule takes an existing standard and proposes to make it vastly more restrictive.

The Chilling Effect

The direct effect of the Trump Rule would fall primarily on people applying for a green card through a family-based petition,where public charge is relevant. Similar standards would also apply to people seeking to extend or change their temporary non-immigrant status in the United States. The rule change would likely lead to the denial of green cards to hundreds of thousands of otherwise eligible applicants for family-based and employment visas.

Beyond that, if implemented the Trump Rule is also expected—and perhaps intended—to have a widespread chilling effect. Even people who already have a green card, or who are exempt from the rule, such as refugees or asylees, are expected to be frightened and confused about the potential consequences of applying for food, health, and housing supports they are eligible to receive.

We estimate that 24 million people in the United States would be affected by the chilling effect of the Trump Rule, including 700,000 New Jerseyans. Not all will face a public charge determination, but all are likely to be nervous about applying for benefits, and some portion will in fact disenroll from benefit programs.

Our estimate of the population who may experience a chilling effect includes anyone in a family that has received any food, health, or housing supports, and where at least one member of the family is a non-citizen. Based on past experience, there is good reason to believe that when there are changes around immigration and public benefits even people who are not directly targeted by this rule will be affected. Indeed, there is already evidence that significant numbers of immigrants are withdrawing from Women, Infants, Children, known as WIC, despite the fact that the program is not included in the Trump Rule and the rule has not yet been implemented.[1]

The Trump Rule Goes Too Far

The Trump Rule uses the public charge designation as a way to unilaterally change immigration policy, without input from Congress, fundamentally redefining how we think about who an “acceptable” immigrant is and undercutting the very idea of the American Dream.

The pre-existing public charge rule has required immigration officers to evaluate the overall circumstances of immigrants to determine whether they can support themselves in the United States or whether they are likely to rely primarily on the government for support. Under longstanding policy, this has meant showing an applicant will not become primarily dependent on the government—relying, for example, on cash aid from Temporary Assistance for Needy Families, Supplemental Security Income, or General Assistance for their monthly income, or on long-term institutional care.

The Trump Rule aggressively reinterprets this longstanding policy. While continuing to look at the overall circumstances of a family, the Trump Rule would deem immigrants potentially unacceptable if they have received, or are considered likely to receive, even a modest amount of support from any one of a number of non-cashsupports: Medicaid, food stamps (SNAP), housing supports, and subsidies for Medicare Part D to reduce the cost of prescription drugs. It would also—for the first time—make a specific income threshold a central issue in immigration decisions. Having an income of under $15,000 for a single person or $31,000 for a family of four would be weighed negatively and could lead to a denial. Indeed, the rule proposes to weigh a range of factors negatively. The only factor weighed as “heavily positive” is if an applicant has an income or resources of over $30,000 for a single person or $63,000 for a family of four. By way of comparison, the median household income in the United States is $60,000.[2]

As noted, only some non-citizens currently in the United States will face this Trump Rule; many will not. But what would it look like if we applied the Trump Rule to all non-citizens?

The effect is extreme: in New Jersey State, 22 percent of non-citizens have benefited from health care, food, housing, or cash supports. That should come as no surprise: so have 25 percent of US-born New Jerseyans. The fact is, a large number of Americans—whether or not they are immigrants—make use of federal food, health, and housing programs in any given year to get through hard times and to advance to a better life.

Most of these programs are structured in significant measure as work supports, helping people with relatively low-wage jobs keep healthy, stay in their homes, and put food on the table. Discouraging families from making use of these programs only makes it harder for them to move up the economic ladder and fully contribute to the economy.

Further Inhumane Treatment of Kids to Pressure Families

The nation was outraged to find out that the Trump Administration has been using the forced separation of children from their parents as an inhumane tactic of immigration enforcement.[3] The redefinition of public charge doubles down on this strategy by inflicting harm on children, whether intentionally or as a side effect of the Trump Rule.

Some children will themselves be subject to the Trump Rule.[4] A far greater number live in families that will likely experience a chilling effect. In New Jersey, 250,000 children under 18 years old live in families with at least one non-citizen family member and that have received one of the benefits specified by the Trump Rule. The large majority or 84 percent, 210,000 of the 250,000 are United States citizens.

It also pushes parents to make heart-wrenching decisions for their families. The stakes are unbearably high. As a parent, if you apply for SNAP or Medicaid, you may fear losing the chance to stay in this country with your kids. Yet, not applying may mean seeing your family go hungry or not being able to see a doctor when you are sick.

If the Trump Rule is put into effect, advocates and service providers will need to work strenuously to clarify which individuals may be directly impacted and which may be relatively safe. But confusion and fear will undoubtedly spread well beyond the directly targeted population.

Helping children in immigrant families do well is not only the right thing to do, it’s also a sound investment in our state and the nation’s future. One of the clearest and most striking findings in a major study of the National Academy of Sciences is that the children of immigrants, once grown, become among the strongest contributors to the country’s economy.[5]

An Economic Loss for New Jersey

To measure the economic impact on New Jersey, we modeled the impact of two of the biggest supports the Trump Rule would affect: SNAP and Medicaid. We provide estimates of the impacts if 15, 25, and 35 percent of people currently receiving benefits who experience the chilling effect feel compelled to disenroll from programs for which they qualify. This range of disenrollment is derived from studies of comparable policy changes that similarly created a chilling effect for immigrants, such as welfare reform in the 1990s.[6] The middle-level estimate shows a loss of $425 million in direct federal dollars coming into the state.

If money on this scale is withdrawn from the New Jersey economy, there would be predictable ripple effects to local businesses and workers. Withdrawal of SNAP funding means a reduction in spending in grocery stores and supermarkets. When families lose health insurance, hospitals and doctors lose income.[7] And some spending would be reduced in other areas as families struggle to pay food and health costs. Our mid-level estimate shows a potential loss of $709 million due to the ripple effects of this lost spending.[8]

Further, when businesses have less revenue, they lay off workers. Translating the job loss implied by an economic loss of this magnitude, based on the number of jobs implied per dollar of gross domestic product, New Jersey stands potentially to lose as many as 4,800 jobs under our middle estimate as a result of this reduction in federal funding coming to the state.[9] The economic impact would vary depending on where the country is in the business cycle. Because these programs serve as an important economic stabilizer, they create a bigger stimulus during an economic downturn and less in a period of high growth.

At the lower level, with just 15 percent of people receiving benefits disenrolling, the modeled loss of federal dollars to New Jersey State is $ 220 million, the potential economic ripple effects are $425 million, and the potential job loss is 2,900. At the higher estimate, with 35 percent disenrollment, the loss of federal funds in New Jersey is $514 million, the potential ripple effects are $992 million, and there could be as many as 6,800 jobs lost.

Conclusion

From the beginning, the United States has been a place where immigrants have come to make a new life. In this country, many immigrants and US-born workers alike have climbed from the lowest rungs of the economic ladder into the middle class and beyond. It was the opportunities America provided—and often enough the supports they needed to get started or make it through hard times—that allowed them to succeed. This is the story of the American Dream. And it is the story engraved in poetry on the Statue of Liberty.

The Trump Rule sees America’s story differently, as one governed by barriers and fear of newcomers. By suggesting that only immigrants who are already above a certain income threshold are welcome, the Trump Rule shows a disturbing lack of faith in our country and the opportunities it provides.

Methodology

  1. Estimating the Population That Would Experience a Chilling Effect

We define the population that would experience a chilling effect as those who might be nervous and confused by the new rule and might feel like they need to make a choice between applying for needed benefits and avoiding putting their family at risk. As noted in the body of this paper most of the people experiencing a chilling effect are people who will not have to go through a public charge determination.

In order to estimate the size of the population experiencing a chilling effect, the Fiscal Policy Institute uses estimates provided by the Center on Budget and Policy Priorities (CBPP) of the number of people living in families where at least one person is a non-citizen, and where someone in that family has received one of the public benefits named in the proposed public charge rule. The analysis uses the Current Population Survey and corrects for underreporting of SNAP, TANF and SSI receipt in the Census survey using data from the Department of Health and Human Services/Urban Institute Transfer Income Model (TRIM). These TRIM corrections take into account program eligibility rules by immigration status. Three years of data are combined in order to increase sample size and improve the reliability of the state-level estimates: 2013 to 2015, the most recent for which the TRIM-adjusted data are available. National level estimates are based on data just from 2015.

CBPP’s calculations of program participation include the newly considered programs —Medicaid, SNAP, and housing benefits—as well as those already considered—TANF, SSI, and General Assistance. The Census data for Medicaid used by CBPP also include the closely intertwined Children’s Health Insurance Program (CHIP). Most participants can be expected to have a very hard time distinguishing between a program funded by Medicaid and one funded by CHIP. The proposed rule does not presently include CHIP, but the notice announcing the proposal explains that the administration is considering including it. Medicare Part D low-income subsidies are included in the proposed rule but were not included in CBPP’s estimates due to a lack of a Census variable that identifies those participants. To model the current public charge benefit related test, CBPP looked at those people who get more than half of their income from TANF, SSI, and General Assistance.

  1. Estimating the Economic Loss to New Jersey

Among the people who experience a chilling effect, some portion would go so far as to disenroll from programs for which they are eligible.

The estimate of the direct loss to New Jerseyans from disenrollment from these programs begins with SNAP, Medicaid and CHIP federal funding data. The estimates use administrative and survey data to approximate the amount of benefits received by families that include a non-citizen. This is the population that due to fear or confusion could forgo benefits even though most of them are themselves not likely to be subject to a public-charge determination. In estimating the economic consequences of the Trump Rule, we assume that only a portion of this group will actually disenroll from these food, health, housing, or cash supports. While a lot is at stake for people in families with a non-citizen immigrant if they fear running afoul of the public charge rule, there is also a lot at stake in not applying and having your family go hungry or lack health insurance. Again, we include CHIP in our estimates.

In our estimates, we assume a range of 15 to 35 percent of the people experiencing a chilling effect will disenroll from SNAP and Medicaid. We provide estimates of the economic effects of the higher and lower disenrollment rates as well as the midpoint of 25 percent. In doing this, we follow the Kaiser Family Fund’s paper of February, 2018, “Proposed Changes to ‘Public Charge’ Policies for Immigrants: Implications for Health Coverage,” which provides a review of the literature leading to this estimate range.[10] We do not attempt to simulate the consequences of adverse selection—for instance, that healthier people may be more likely to withdraw from health care coverage than less healthy people. The 15, 25, and 35 percent disenrollment rates are already a broad range and not a precise prediction.

To estimate the economic ripple effects, the Fiscal Policy Institute uses an analysis provided to us by Josh Biven of the Economic Policy Institute. The analysis takes the direct benefit loss as calculated above and applies to it an output multiplier for SNAP of 1.6, in line with estimates Bivens summarizes in a 2011 paper.[11] The Medicaid multiplier is 2.0 and is drawn from an analysis of the effects of the American Recovery and Reinvestment Act.[12]

After calculating the effect of benefit reductions on output, the output was divided by $146,880 to obtain an estimate of the effect on employment, on a full-time equivalent (FTE) basis. This employment multiplier was obtained by dividing U.S. gross domestic product in 2017 by the number of FTEs in that year.[13]

 The economic impact can be expected to vary with the state of the economy. The economic and job loss of the Trump Rule will be greater in times of high unemployment, and lower in times of full employment. Since the Trump Rule is proposed to be permanent, the effect could be expected to vary.

Endnotes

[1] See Helena Bottemiller Evich, “Immigrants, Fearing Trump Crackdown, Drop Out of Nutrition Programs,” Politico, September 3, 2018.

[2] The rule gives a family income of below 125 percent of the federal poverty level as a negatively weighing factor, and above 250 percent of the poverty level as a positively weighing factor. We translate those into dollar figures for different family sizes using the 2018 poverty level. Household income is a Fiscal Policy Institute analysis of the 2017 American Community Survey 1-year data. Household income includes individuals of varying size including households of just one person.

[3] As Attorney General Jeff Sessions put it: “we will prosecute you, and that child will be separated from you as required by law. If you don’t like that, then don’t smuggle children over our border.”[iii]See Rafael Carranza and Daniel González, “AG Sessions Vows to Separate Kids from Parents, Prosecute All Illegal Border-Crossers,” The Republic, May 8, 2018.

[4] Disturbingly, for those children who do apply for status that requires a public charge designation, the Trump Rule penalizes children by weighing their age negatively. The theory, presumably, is that children do not adequately contribute to the economy.

[5] National Academies of Sciences, Engineering, and Medicine, The Economic and Fiscal Consequences of Immigration. Washington, DC: The National Academies Press, 2017. For a brief synopsis of major findings, see the press release at http://www8.nationalacademies.org/onpinews/newsitem.aspx?RecordID=23550.

[6] Our estimate of disenrollment follows the analysis of “Proposed Changes to ‘Public Charge’ Policies for Immigrants: Implications for Health Coverage,” Kaiser Family Foundation, September 24, 2018. That report cites: Neeraj Kaushal and Robert Kaestner, “Welfare Reform and Health Insurance of Immigrants,” Health Services Research,40(3), (June 2005), https://www.ncbi.nlm.nih.gov/pmc/articles/PMC1361164/; Michael Fix and Jeffrey Passel, Trends in Noncitizens’ and Citizens’ Use of Public Benefits Following Welfare Reform 1994-97 (Washington, DC: The Urban Institute, March 1, 1999) https://www.urban.org/sites/default/files/publication/69781/408086-Trends-in-Noncitizens-and-Citizens-Use-of-Public-Benefits-Following-Welfare-Reform.pdf; Namratha R. Kandula, et. al, “The Unintended Impact of Welfare Reform on the Medicaid Enrollment of Eligible Immigrants, Health Services Research, 39(5), (October 2004), https://www.ncbi.nlm.nih.gov/pmc/articles/PMC1361081/; and Rachel Benson Gold, Immigrants and Medicaid After Welfare Reform, (Washington, DC: The Guttmacher Institute, May 1, 2003), https://www.guttmacher.org/gpr/2003/05/immigrants-and-medicaid-after-welfare-reform.

[7]  Uncompensated care funds must also be replenished to make up for losses in emergency care of people without health insurance, but this cost is not included in our analysis of the economic impacts.

[8]The extent of employment impact depends on the state of the overall economy, with a higher impact during times of high overall unemployment, when these programs serve as both a safety net and an automatic economic stabilizer. Since the Trump Rule would be a permanent measure, there would be periods in the economic cycle the predicted economic impact would be higher and when it would be lower.

[9] The analysis of direct loss to New Jersey was performed by Danilo Trisi of the Center on Budget and Policy Priorities, and the analysis of economic ripple effects was performed by Josh Bivens of the Economic Policy Institute. See Methology section for more details.

[10] That report cites as the underpinning for this range of estimates: Neeraj Kaushal and Robert Kaestner, “Welfare Reform and Health Insurance of Immigrants,” Health Services Research,40(3), June, 2005; Michael Fix and Jeffrey Passel, Trends in Noncitizens’ and Citizens’ Use of Public Benefits Following Welfare Reform 1994-97 (Washington, DC: The Urban Institute, March 1, 1999); Namratha R. Kandula, et. al, “The Unintended Impact of Welfare Reform on the Medicaid Enrollment of Eligible Immigrants, Health Services Research, 39(5), October 2004; and Rachel Benson Gold, Immigrants and Medicaid After Welfare Reform, (Washington, DC: The Guttmacher Institute, May 1, 2003).

[11] Josh Bivens, “Method Memo on Estimating the Jobs Impact of Various Policy Changes,” Economic Policy Institute, November 8, 2011.

[12] Any slowdown in the growth of aggregate demand caused by reductions in spending on these programs could in theory be neutralized by the Federal Reserve Bank lowering rates to spur growth. However, this does not change the size of the fiscal drag that benefit cuts would impose on the economy. These estimates are implicitly a measure of how much harder other macroeconomic policy tools would have to work to neutralize the demand drag stemming these cuts. Further, it is deeply uncertain whether other tools of macroeconomic policy have the ability to neutralize negative fiscal shocks. See Gabriel Chodorow-Reich, Laura Feiveson, Zachary Liscow, and William Gui Woolston, “Does State Fiscal Relief During Recessions Increase Employment?,” American Economic Journal: Economic Policy, August 2012, pp. 118-145.

[13] Data for the analysis come from tables 1.1.5 and 6.5 from the National Income and Product Accounts of the Bureau of Economic Analysis. The quotient was increased by the growth in its nominal value in 2017 to forecast what it would be in 2018.

New Jersey’s Individual Market Premiums to be Among the Lowest in the Nation

Posted on by Raymond Castro

To read a PDF version of this report, click here.

New Jersey’s ongoing efforts to protect the Affordable Care Act (ACA) are starting to pay off: all middle class New Jerseyans who purchase their insurance in the individual market will pay far less than they otherwise would have next year and for the foreseeable future. These major savings will be available to New Jerseyans who exceed the income cut-off for federal subsidies, which is $48,560 a year for an individual and $100,400 for a family of four. Time is of the essence as consumers can maximize saving by selecting a plan before the open enrollment period ends on December 15.

This relief could not occur at a better time since these same New Jerseyans were hit with a whopping 19 percent increase in their premiums this year as the Republican-led Congress and Trump administration worked tirelessly to undermine the individual market.[1] That made insurance unaffordable for many New Jerseyans and was one of the major reasons why the number of residents in the individual market decreased by about 40,000 in 2018.[2]

Thanks to the following actions taken by the state to reverse the federal ACA sabotage, consumers will be able to achieve major savings starting next year:

  • Establishing a reinsurance program that will reimburse insurers for individuals with unusually high medical costs, which will be mainly supported with federal funds.
  • Maintaining the federal individual mandate for New Jerseyans who can afford insurance.
  • Encouraging insurers to offer lower-cost Silver (mid-level) plans.
  • Launching a state outreach campaign, Get Covered New Jersey, that will result in healthier New Jerseyans obtaining insurance, and therefore a further reduction in premiums and the state’s uninsurance rate.

Middle-Class New Jerseyans Will Pay $3.3 Billion Less in Premiums Over Ten Years 

The New Jersey Department of Banking and Insurance (DOBI) estimates that the new reinsurance program will guarantee that premiums will be 15.1 percent less than they would have been otherwise. Maintaining the federal individual mandate will further reduce premiums by 6.8 percent, for a total reduction of 21.9 percent.[3] In 2019, the average consumer will pay a premium of $5,700 instead of $7,300,[4] a savings of $1,600 which will total at least $23,000 over 10 years (adjusting for inflation).[5]

All 140,000 middle class New Jerseyans in the current market will save a total of $3.2 billion over 10 years compared to what they would have paid.[6] This estimate is conservative as it does not consider an increase in the number of additional individuals who will obtain insurance because of the lower cost nor the savings that will be achieved from the other initiatives outlined in this report.

New Jersey Premiums Will Rank Fourth Lowest in the Nation

Remarkably, premiums for the Silver plan[7] (which is the most popular) will drop from 9th highest in 2014 to 47thin the nation in 2019. The main reason is the growth in premiums in New Jersey is the second lowest in the nation. New Jersey’s increase (9 percent) was eight times lower than the average for all states in the Marketplace (75 percent). Adjusting for inflation, there was essentially no increase in New Jersey. This is in stark contrast to premiums for employer-based insurance in New Jersey, which was fifth highest nationally in 2013 and increased to fourth highest in 2017.[8]

Whereas in 2014 premiums in New Jersey were 18 percent higher than the national average, next year they will be 26 percent lower. New Jersey’s average premium next year will be far less than its neighboring states: Delaware (94 percent less), Pennsylvania (38 percent less) and New York (61 percent less).

New Reduced Silver Plans Could Mean Even More Major Savings 

For the 2019 plan year, DOBI encouraged carriers to offer less expensive Silver plans which could prove to be a game changer for consumers. This year, Silver plans were kept artificially high because insurers had to factor in President Trump’s decision not to fund cost sharing reduction payments even though insurers were still required to maintain the reduction for policyholders. This did not affect consumers who received federal premium subsidies because those subsidies were increased to compensate for the higher premiums. However, consumers who were not eligible for premium subsidies had to pay for the full increase this year. That will not be the case for next year, which will result in several lower cost options. Seven new Silver plans have been added, two of which have the lowest Silver premiums.[9] Overall, the total number of plans off the Marketplace increased to 32 in 2019 from 28 in 2018 mainly due to the increase in Silver plans.

This will mean that the base rate for the lowest premium Silver plan will be reduced to $240 in 2019 from $312 in 2018, a 23 percent reduction.[10] For households that currently have the lowest Silver plans and want to switch plans to continue to have the lowest plans, the savings could be major. A family[11], 27-year-old single adult and 60-year-old single adult could see annual savings of $3,264, $792, and $1,944 respectively.[12] In addition, consumers who have higher cost Silver plans, or have Gold plans, may want to reconsider these new less expensive Silver plans next year even though the cost-sharing likely would be higher.

However, the two lowest cost plans, and three other higher cost Silver plans, will only be available to individuals who purchase insurance off the Marketplace.These plans will not even be listed in the Marketplace. These off the Marketplace options may be found at GetCovered.NJ.gov and purchased directly through carriers.

Premiums Reduced by 14 Percent or More in Half of Plans in Individual Market

DOBI estimates a 9.3 percent[13] average weighted reduction next year for all plans compared to this year. Of course, there will be some plans that exceed this average and those that fall below it. The table below shows the premium reduction in all current plans, which ranges between six and 22 percent, and that half of the plans exceed 14% or more.[14] Bronze plans had the least reduction (10 percent) and the Gold and Silver were similar (12 and 13 percent respectively). The good news is that premiums in the individual market for all middle class New Jerseyans should decrease this year unless their household situation changed. However, as is always the case, consumers should shop around for the best deal possible including new plans that are not listed below.

Endnotes

[1] KFF, Marketplace Average Benchmark Premiums, 2014-2019, https://www.kff.org/health-reform/state-indicator/marketplace-average-benchmark-premiums/?currentTimeframe=0&sortModel=%7B%22colId%22:%22Location%22,%22sort%22:%22asc%22%7D

[2] NJ DOBI, Total Lives Comparison, 2018 and 2019, https://www.state.nj.us/dobi/division_insurance/ihcseh/enroll/2018_1q_ihc_coveredcomparison.pdf

[3] Gov. Murphy’s Office, Governor Murphy Announces Impact of New Jersey’s Actions to Stabilize the Health Insurance Market, 2018. https://www.nj.gov/governor/news/news/562018/approved/20180907a.shtml

[4] The 21.9 percent premium reduction was applied to the projected baseline premium for 2019 in New Jersey Section 1332 State Innovation Waiver-Individual Reinsurance Program, Oliver Wyman, June 27, 2018

[5] Estimate is conservative because as individuals age their premiums go up which was not considered in the analysis.

[6] Same Section 1332 source as above but premium reduction was applied to each of the ten years.

[7] Based on second lowest benchmark Silver plan for a 40-year-old person, https://www.kff.org/health-reform/state-indicator/marketplace-average-benchmark-premiums/?currentTimeframe=0&sortModel=%7B%22colId%22:%22Location%22,%22sort%22:%22asc%22%7D

[8] KFF, Average AnnualSingle Premium per Enrolled Employee For Employer-Based Health Insurance, 2017https://www.kff.org/other/state-indicator/single-coverage/?currentTimeframe=0&sortModel=%7B%22colId%22:%22Employee%20Contribution%22,%22sort%22:%22desc%22%7D

[9] NJ DOBI, 2019 and 2018 New Jersey Individual Health Benefits Plans and Rates, https://www.state.nj.us/dobi/division_insurance/ihcseh/ihcrates_2018.pdfand https://www.state.nj.us/dobi/division_insurance/ihcseh/ihcrates_2019.pdf

[10] Ibid.

[11] Assumes both parents are age 35, one child at 3 and one at 15.

[12] NJ DOBI,  IHC Premium Calculator, https://www.state.nj.us/dobi/division_insurance/ihcseh/IHC_Calculator_2018/IHC.HTM

[13] Gov. Murphy’s Office, Ibid 

[14] Not weighted.

Working with ICE: A Costly Choice for New Jersey

Posted on by Erika J Nava

To read a PDF version of this report, click here. 

New Jerseyans born outside of the United States – both documented and undocumented – make up more than a fifth of the state’s population and are an enormous benefit to New Jersey’s economy and culture. Now, almost two years into the Trump administration, undocumented immigrants who have been living productive lives in the Garden State are at increased risk of being detained and deported by Immigration and Customs Enforcement (ICE), sometimes with the help of local law enforcement.

When immigrants come in contact with local and state law enforcement agencies, it is standard practice for their information to be shared with federal authorities at the FBI and ICE. This practice is known as “Secure Communities.”[1] ICE can then request a “detainer hold,” which asks the local or state law enforcement agency to detain an immigrant for up to 48 hours beyond their release date. If local and state law enforcement choose to honor the request, ICE does not guarantee that it will pick up the detained individuals.

After peaking in 2009, ICE detainers in New Jersey steadily declined through 2015, but they are increasing under the Trump administration. From 2016 to 2017, ICE’s issuance of detainers has increased by 87.5 percent in New Jersey, compared to 40 percent nationally.[2] New Jersey has voluntarily honored these detainer requests, or “immigration holds,” at least 63 percent of the time,[3] compared to 54 percent nationwide.[4] By honoring detainers, New Jersey allows ICE to use local resources, without bearing any of the cost, to imprison people without due process. In many cases immigrants are held without any charges pending. These detainers come with a significant cost – both social and in real dollars – to New Jersey.

New Jersey’s local law enforcement has paid at least $12 million to voluntarily honor ICE detainer requests and hold immigrants in police facilities and jails.[5] This calculation assumes that immigrants were detained for the legally allowed 48 hours, when in reality most were held much longer. It is estimated that, on average, immigrants on detainer holds are incarcerated for twenty-four days past their release date, translating to a total cost of $139 million to local law enforcement over the last decade.

In the same time period, people who have been detained, and by extension their families and the broader economy, have forgone $5 million in lost wages.[6] This is part of the human cost associated with immigration holds; families with immigrants suffer from lost wages, businesses lose customers, employers have to bear the costs associated with employee turnover, and children of detainees are saddled with the emotional burden of losing a parent.

Further, over 34,000 immigrants who were issued a detainer were held in police custody for longer than the 48 hours legally permitted. This represents more than 9 in 10 of the 36,290 detainers issued between ICE’s formation in 2003 and April 2018 when the latest data are available. The ramping up of immigration enforcement is also reflected in immigration arrests,[7] which have increased in New Jersey by 43 percent, from 2,315 in 2016 to 3,311 in 2017. This is almost double the national increase of 23 percent.[8]

The AG Directive

Almost all of New Jersey’s counties – 19 of 21 – honor warrantless detainer requests from ICE.[9] Only two, Burlington and Union, do not. In Middlesex and Ocean Counties, warrantless detainer requests are honored, but only in limited situations. It is important to note, however, that all law enforcement agencies notify ICE of arrests for DUIs and indictable offenses per New Jersey Attorney General Law Enforcement Directive 2007-3 (AG Directive).[10]

The AG Directive was issued under Governor Corzine’s administration by then-New Jersey Attorney General Anne Milgram. The policy outlines how local, county, and state police should interact with individuals who they have reason to believe are undocumented immigrants. The directive is notoriously vague, leaving it up to police officers to interpret when, where, and how they question the status of individuals they suspect to be undocumented.

Since 2007, immigrant rights groups have expressed concern that this discretion results in law enforcement infringing on the rights of New Jersey residents. A 2009 study by the Center for Social Justice at Seton Hall University Law School found evidence of “improper police questioning and arrest of the state’s non-criminal Latino drivers, passengers, pedestrians, and commuters.”

A new directive that reigns in how and when local law enforcement interacts with ICE has the potential to make New Jersey safer for all by restoring trust and cooperation with law enforcement in immigrant communities. By entangling police with immigration enforcement, the current system disincentivizes immigrants from reporting crimes or calling 9-1-1 if they are in danger. For taxpayers, a new directive will provide transparency, accountability, and a more responsible use of public funds that promotes safety instead of sowing racial division.

Now, over a decade since the AG Directive was issued, New Jersey has a prime opportunity to adopt a new policy that better reflects the immigration realities under the Trump administration. New Jersey Attorney General Gurbir Grewal, appointed only nine months ago, can and should adopt a new directive that recognizes the humanity of all New Jersey residents, ensures due process, and ends the practice of needlessly separating families.

Endnotes

[1] According to United States Immigration and Customs Enforcement, Secure Communities program, launched as a pilot program towards the end of the Bush administration and was expanded under the Obama administration, the goal was to cover all 3,181 jurisdictions within the nation and it did in 2013.

[2] New Jersey Policy Perspective analysis of Transactional Records Access Clearinghouse (TRAC) at Syracuse University on the Latest Data: Immigration and Customs Enforcement Detainers. Data used FY 2016-FY 2017.

[3] Note from TRAC: ICE recorded that the law enforcement agency refused to comply with the ICE I-247 request. TRAC notes that the field ICE uses to track law enforcement agency refusals is not a required field in ICE’s database. Rather, entry of information is optional. The field is used to record a variety of different reasons why ICE “lifted”—that is withdrew—a custody transfer request. These recorded “lift” reasons often disagree with other information ICE records on whether the individual was actually booked into its custody. For example, ICE sometimes records that an agency refused its transfer request even though ICE records it assumed custody of the individual.

[4] New Jersey Policy Perspective analysis of Transactional Records Access Clearinghouse (TRAC) at Syracuse University on the Latest Data: Immigration and Customs Enforcement Detainers. Data usedFY 2003 to April 2018.

[5] The total number of detainers from FY 2007-2017 was 31,171; we then multiply the cost per day, per inmate in 2015 from the Vera Institute’s report The Price of Prisons(https://www.vera.org/publications/price-of-prisons-2015-state-spending-trends/price-of-prisons-2015-state-spending-trends/price-of-prisons-2015-state-spending-trends-prison-spending), which calculates that NJ spends an average of $61,603 per inmate or about $169 a day. Then we multiply that by two days held.

[6] The median individual wage for undocumented workers in the United States is $17,400 per year, according to an unpublished estimate from 2016 provided by Robert Warren, derived from his work published by the Center for Migration Studies. We estimate that it is 14% higher for undocumented immigrants in New Jersey, since the average family income for undocumented immigrants is 14 percent higher in New Jersey, according to an analysis by the Migration Policy Institute published by the Institute for Taxation and Economic Policy analysis in Undocumented Immigrants’ State and Local Tax Contributions. Thus, we calculate the estimate by multiplying 34,171 (total detainers from FY 2007 to 2017) by $77 (wages lost per day detained) by 2 (days detained).

[7] The data is limited to what ICE refers to as “interior arrests.” According to ICE, the data does not include arrests made by Customs and Border Protection (CBP) when the individual is transferred to ICE for detention and eventual removal.

[8] New Jersey Policy Perspective analysis of Transactional Records Access Clearinghouse (TRAC) at Syracuse University on the Latest Data: Immigration and Customs Enforcement Arrest.

[9] Ending Cooperation with Warrantless ICE Detainer Requests.ACLU sent letters to every New Jersey county jail and asked about their detainer policy. (https://www.aclu-nj.org/theissues/immigrantrights/detainer-map)

[10] New Jersey Attorney General Law Enforcement Directive No. 2007-3 (https://www.nj.gov/oag/dcj/directiv.htm)

 

Congressional Threats to Health Programs Could Harm Millions of New Jerseyans

Posted on by Raymond Castro

To read a PDF version of this report, click here.

For impact data by congressional district, click here. 

Heading into the midterm elections, polls have shown that the number one concern of Americans – both Democrats and Republicans – is health care. This concern is understandable, especially in a state like New Jersey, given the millions of people who would be affected by threatened changes in federal health policy, a renewed effort to repeal the Affordable Care Act (ACA), or a scaling back of entitlement programs that are the bedrock of the nation’s safety net. Because New Jersey made the right decision to expand Medicaid under the ACA, repeal of that provision alone would result in the loss of health coverage for 800,000 New Jerseyans. In addition, there are other major threats to Medicare and the entire Medicaid program, as well as to residents who have pre-existing conditions or are uninsured.

The purpose of this report is to provide the facts that show how many New Jersey residents participate in the programs that could potentially be affected by these proposed changes statewide and by congressional districts (attached) using the most recent US census data released last month.Many New Jerseyans in all congressional districts could be affected by all the proposed changes, but the number varies based in the program and the congressional district.

Up to 1.7 million New Jerseyans on Medicaid could lose part or all of their coverage  

Medicaid has already been on the chopping block for the last two years. In legislation to repeal the ACA that almost passed Congress, Medicaid expansion would have been phased out completely, resulting in a half million New Jerseyans losing health coverage. Even worse in the long term, overall funding for Medicaid would have been permanently capped, resulting in the loss of billions of dollars in New Jersey and threatening health coverage for everyone on Medicaid. Because about two-thirds of Medicaid funding is for seniors and people with disabilities, they would most likely have been affected the most by such a major cutback. Also, one out of four children in New Jersey are covered by Medicaid.

Health coverage is threatened for up to 330,000 New Jerseyans who purchased their insurance directly

About 330,000 New Jersey residents rely on the individual market to obtain health care coverage. About 240,000 of them purchased their insurance through the federal Marketplace. It is in this category where most of the federal cutbacks have been made, such as eliminating funding for cost-sharing subsidies, eliminating the individual mandate and a reduction in outreach funds. Repeal of the ACA would result in the loss of coverage for most of these individuals. About 80 percent of all New Jersey residents obtaining health coverage in the federal Marketplace receive federal subsidies which protect them from high premiums. However, about 140,000 New Jerseyans do not receive these subsidies and had to pay for the full twenty percent increase in premiums this year.  Not surprisingly, as a result of these cutbacks, the enrollment in all these plans decreased by about 40,000 over the past year.

Up to 3.8 million New Jerseyans are threatened by proposals to effectively eliminate current protections for preexisting conditions

Protections in the ACA for Americans who have preexisting conditions remains one of the most contentious health issues in Congress. Because polls have shown that this is the most popular provision in the ACA, some Republican members of Congress have been quick to point out that they support continuing this protection. However, most of these same Republicans have supported allowing insurers to exclude essential benefits that these individuals need or to charge any premium they want, which would have the same effect as repealing the protection since virtually no one but the wealthy could afford necessary coverage.  In addition, the Trump administration has recommended in a Texas federal district court case that it invalidate the ACA’s core protections for people with preexisting conditions and allow non-compliant plans that would eliminate the availability of affordable comprehensive coverage. If the Texas court made such an adverse decision, and the Supreme Court upheld it, only an act of Congress signed by President Trump could remedy this problem.

Proposed federal cutbacks in Medicare threaten health coverage for up to 1.5 million New Jerseyans

Medicare is at major risk for cutbacks to offset the massive federal tax cuts that were enacted last year. The tax overhaul, which mainly benefits the wealthy, will deplete the federal revenues required to meet the escalating costs of Medicare, as well as other programs, in the future. Funding for Medicare represents 15 percent of the federal budget; the only other category that is slightly larger is Medicaid. Right after passage of these tax cuts, Republican leaders in Congress began to insist that “entitlement reform” was necessary to make up for these lost revenues. House Speaker Paul Ryan specifically mentioned Medicare as the “the biggest entitlement we’ve got to reform.” Some Republicans have also proposed privatizing Medicare by converting it to a voucher program for new beneficiaries that would limit how much an individual could spend on health care. Democrats, on the other hand, have been very protective of Medicare as it is, and some of them are urging different versions of a “Medicare for All” policy that would greatly expand Medicare for current beneficiaries and make many more Americans eligible.

Many of the 688,000 New Jerseyans who are uninsured could lose any opportunity to obtain health coverage

Remarkably, the ACA reduced the number of New Jersey’s uninsured by about a third. However, that still leaves too many New Jerseyans who are uninsured. About half of the uninsured (338,000 New Jerseyans) are eligible for Medicaid or tax credits under the ACA but would not be if the ACA were repealed or became more restrictive. Many of these eligible New Jerseyans do not seek insurance under the ACA because they do not know they are eligible for subsidies. Under the Trump administration, the open enrollment period was shortened by half and funding for navigators who help the uninsured apply for assistance was cut by about two-thirds. Repeal of the ACA would mean that all of these New Jersey residents would lose any hope of obtaining health coverage and the number of uninsured in New Jersey would jump to about 1.2 million.

Opportunity Lost: Consequences and Shortcomings of the Fiscal Year 2019 Budget

Posted on by Sheila Reynertson

To read a PDF version of this report, click here.

New Jersey’s fiscal year 2019 budget, the first of Governor Murphy’s administration, signaled a much-needed reversal after nearly a decade of austere fiscal policy. After years of neglect, assets critical to New Jersey’s economic success, like K-12 schools, public transit, and county colleges all received modest increases in state funding. However, this year’s budget falls short in one key area that has plagued the state and its finances for three decades: there are simply not enough stable, long-term sources of new revenue to sustain these increased investments. Failing to implement adequate revenue streams is a missed opportunity that will make it more difficult for the state to meet its current and future obligations, including public employee pensions, corporate tax subsidy payouts, and payments to bondholders and debt service. This year’s budget could have – and should have – marked a new era for New Jersey’s finances, but it ended up kicking the proverbial can even farther down State Street and makes next year’s budget an even more dramatic test.

There’s one glaring difference between this year and next: in 2018, the elected officials participating in the budget process did not have to worry about a June primary or November general election. In 2019, every member of the General Assembly wanting to remain will be focused on re-election and less interested in making tough decisions to fund important investments. Instead, they’ll likely hope that the temporary hike in corporate tax rates (the most unpredictable and variable of the major taxes), accompanied by new taxes on ridesharing services, e-cigarettes, and what appears to be a surprisingly low tax rate on the proposed legalization of marijuana, will be adequate to meet New Jersey’s neglected needs. Revenue collections for the FY 2019 budget were above target in September, but lawmakers should not assume or rely upon such robust returns in the future.

Now that the dust has settled on New Jersey’s FY 2019 budget debate, one thing is certain: there is a lot more cleaning up to do. Though this year’s budget is the largest dollar amount ever, it is still a budget stretched thin. Many departments are making do with yet another year of flat funding and, even with the slightly increased budget surplus, New Jersey is still in no position to withstand another recession or extreme weather event like Hurricane Sandy. The state cannot afford to build another budget based on political convenience. There is simply too much at stake.

First the good news.

New Jersey’s FY 2019 budget is the most progressive document to come out of the state house in a decade. Despite significant compromises on funding sources, most of the policy initiatives championed by Governor Murphy during his gubernatorial campaign remain intact, and many of the progressive priorities of the legislature received support.

These top priorities include overdue investments into state assets that are proven to help economies grow. After years of financial neglect and passing operating costs onto commuters, New Jersey Transit got a boost of $242 million earmarked to improve services and the reputation of the state-run transportation network. New Jersey’s K-12 public schools received a $402 million increase in funding, and a noticeable overhaul of the school funding formula will help update how districts receive state assistance in response to changing demographics. By shifting additional funds to historically under-funded districts, New Jersey can support one of its most important assets – and the state’s children – in a more equitable way.

This year’s budget also acknowledges the importance of investing in New Jersey families by embracing progressive policies that lift up young children, young adults and working parents struggling to make ends meet. It includes an overdue expansion of pre-K education with an $57 million investment to enhance preschool programs for more than 4,000 3- and 4-year olds in qualifying districts.

For those entering college, there’s $27 million for a new tuition-free community college program, removing barriers to higher education for students in low-income households. Additionally, over 500,000 low-income workers will see the first of three annual increases in their Earned Income Tax Credit (EITC), one of the best policy tools for lifting families out of poverty. And approximately 70,000 New Jersey families who make below $60,000 are now eligible for a new tax credit to help offset the cost of child and dependent care, an enormous expense for working parents.

For those families who are struggling the most acutely, New Jersey has finally increased funding for its cash assistance program for the first time in 31 years. The program also dropped the punitive family cap provision, an outdated deterrent that only served to punish Temporary Assistance for Needy Families (TANF) recipients for having children while receiving cash assistance.

These investments were made possible with over $1.5 billion in additional revenue from a variety of new sources, including: a new 10.75 percent tax on multimillionaire income over $5 million (raising $280 million), a temporary corporate tax surcharge averaging 2 percent over the next four years ($425 million), expanding the sales tax to include internet purchases ($188 million), and a one-time general tax amnesty initiative ($200 million). A variety of new revenue streams, including new taxes on e-cigarettes, short-term housing rentals, and ride-sharing services, were also included in the budget, raising an additional $120 million. And a new rule that closes corporate tax loopholes will boost corporate business tax revenue by at least $110 million.

On the surface, these new revenue sources are an essential ingredient of Governor Murphy’s progressive vision. For example, in an era of runaway income inequality a new tax bracket on New Jersey’s earners with $5 million and more in annual income is long overdue. With $280 million more in income tax revenue, the state can provide a slight increase to its property tax relief programs which suffered in recent years from repeated cuts and delayed payments. Closing loopholes that multi-state corporations use to avoid taxation evens the playing field for all businesses operating in New Jersey. And a last-minute U.S. Supreme Court decision finally opens the door to taxing internet purchases made by New Jersey shoppers in other states, further modernizing the tax code. But because this funding package was built on a foundation of political horse-trading and compromise, it simply doesn’t have the durability and strength to help the state rebuild its key assets and invest in long-term initiatives.

Here’s why.

First, the new revenue sources lack the kind of long-term sustainability that New Jersey needs to face its neglected, underfunded obligations while also investing in assets and programs that support economic growth. To move away from instability and meaningfully combat inequality, New Jersey must think beyond temporary taxation and one-shot gimmicks.

Take, for example, the new income tax bracket of 10.75 percent on household earnings over $5 million. This new tax is much narrower in scope than the original proposal, which would have applied to households earning over $1 million and would have raised $765 million a year. The final policy spared approximately 31,000 wealthy households from a state income tax increase, even though these same households were just gifted unexpected federal tax breaks from Republicans in Congress on top of making outsized income gains since the end of the Great Recession.

The budget claims to address the generous federal tax breaks given to large corporations with an average two percentage point corporate business tax surcharge at the state level. The new tax is expected to raise $425 million the first year, improving the state’s ability to adequately fund the kinds of things that all businesses operating in the Garden State depend on: an educated workforce, public safety, and reliable transportation networks. But the tax policy has one fatal flaw – the surcharge expires in 4 years, opening the state to another large budget hole at precisely the moment New Jersey will begin paying off its flamboyant corporate tax subsidy program to the tune of $1 billion a year.

The rest of the budget’s new revenue sources consist of one-offs like the tax amnesty initiative and a mixed bag of smaller “sin” taxes on e-cigarettes, recreational marijuana and sports betting. These sources may bring in millions but, in the grand scheme of things, they are barely noticeable given New Jersey’s financial woes.

Major tax policy decisions made over the course of three decades contributed to this situation. To regain the stature of a state committed to paying for its obligations and fostering a fair and prosperous economic future, New Jersey must embrace meaningful and bold tax reform beyond short-term housing rentals and online sports betting.

Missed opportunities.

New Jersey could easily begin steering the ship back to safer waters by modernizing the state sales tax, a critical source for funding higher education, health care, public safety and other important public services that a thriving state economy requires. The state needs to both broaden the tax base to include more services, especially those used by higher income households, and return the sales tax rate to 7 percent. That gimmicky reduction passed in 2016 put an undetectable amount of extra cash into the pockets of most New Jersey working families. In exchange, it left an enormous hole in the state’s budget. The cost of the cut is about $600 million a year and is expected to reach $735 million by 2026.

For decades, New Jersey helped to close the wealth gap by levying both an estate tax and an inheritance tax and investing the resulting revenue in important assets like NJ Transit, public colleges and health care initiatives that benefit everyone. Unfortunately, state legislators agreed to phase out New Jersey’s estate tax as part of the 2016 gas tax deal. That change, which affected just 4 percent of estates, now costs New Jersey about $500 million a year, handicapping the state’s ability to make crucial investments while further enriching the heirs of New Jersey’s wealthiest families. Eliminating this tax gave estates that are valued at more than $5 million an average tax break of $1.1 million. Then, just one year later, the GOP tax plan lifted the threshold of the federal estate tax from $11 million to $22 million. Decades of uneven income and wealth growth have put the wealthiest residents miles ahead of everyone else. Now the tax code has only made it worse.

By restoring the estate tax with a higher threshold, New Jersey could regain the lion’s share of estate tax revenue it has collected while ensuring that the wealthiest heirs pay their fair share at the state level. For example, reinstating the tax on estates worth more than $1 million would recoup 93 percent of the tax revenue. However, if New Jersey is to depend on the inheritance tax as its only source of taxation of inherited wealth, then policymakers should make it fairer and more adequate by expanding the types of heirs required to pay the tax and ensuring that only New Jersey’s wealthiest heirs pay the tax. Creating an exemption up to $1 million would keep this tax fair and help guard against the deepening trend of concentrated wealth.

Policymakers ought to level the playing field and allow small businesses a better chance of competing with larger companies while raising the revenue necessary to help the entire economy thrive – not just the shareholder set. And federal changes that have drastically cut corporate taxes mean that New Jersey needs to do even more to ensure that all businesses have a fair shot while preventing larger corporations from gaming the system. New Jersey lawmakers should get creative while at the same time taking a defensive stance against tax breaks that hurt the state’s ability to provide public services and make investments that actually help the economy grow.

First, rein in corporate subsidy programs. In the aftermath of the GOP tax law, New Jersey must seriously consider the repeal or reform of the 2011 business tax breaks, like restoring the minimum tax on large pass-through entities to offset the new federal tax credit. Finally, policymakers ought to enact a financial transaction tax. Taking these bold actions could raise over $300 million a year in new corporate business revenue, while relieving long-term budget pressures that will plague New Jersey for years to come if not addressed.

Strategically protecting and investing in assets is what drove New Jersey’s thriving economy for decades. But since the early 1990’s, that enterprising and stable environment has eroded as political leaders of both parties neglected to maintain those assets through fair and equitable taxation. Obviously one budget won’t fix this trend, but New Jersey’s economic and financial freefall can’t begin its reversal with a year-to-year band-aid approach either. It’s time to restore equity to the state’s tax code while raising the resources needed to invest in assets and opportunities that drive economic growth for all of New Jersey’s families and businesses.

Raising the Minimum Wage to $15 is Critical to Growing New Jersey's Economy

Posted on by Brandon McKoy

Increasing the minimum wage will boost the take home pay of over 1 million workers – but not if the Legislature stalls

To read a PDF version of this report, click here.

Increasing New Jersey’s minimum wage to $15 an hour by 2023 would boost the incomes of over 1 million workers and inject $3.9 billion into the state’s economy.[1] Raising the wage for all workers without significant delay is critically important to improving the economic conditions of families, businesses, and the state at large. While many believe that the state’s economy is stronger due to the reduced rate of unemployment – which has finally dropped below pre-recession levels – poverty still remains concerningly high, signaling a wage problem for low-income workers who aren’t paid enough to purchase their basic day-to-day needs.

Considering that lawmakers passed $15 minimum wage legislation that was inclusive of all workers in 2016, it is surprising and disappointing to see that – eight months into a new administration that supports raising the wage for all – a bill still hasn’t been introduced. There have been murmurs of extending the phase-in period beyond five years, leaving the tipped wage at its current paltry level of $2.13 per hour, and dividing the working class by excluding youth, seasonal, and farm workers from the increase. In an age where the federal government is actively attacking the economic security of the working class, it would be a terrible mistake for lawmakers to raise the wage but leave behind some of the state’s most vulnerable workers.

New Jersey’s recovery from the Great Recession has been one of the slowest and least robust in the nation. As we move further away from that economic crisis, it has become clear that even though the economy shows signs of increasing strength – unemployment levels lower than pre-recession levels, a booming stock market, and healthy GDP growth – the gains of the recovery have been funneled almost exclusively to the already wealthy and well-to-do. Wages have remained stagnant and low- and middle-income families continue to struggle to get by.

A recent survey by the Federal Reserve found that 40 percent of Americans cannot afford– or would have to sell possessions to cover the cost of – a surprise $400 expense. One in five adults say they can’t pay all of their current monthly bills. More than one in four adults report that they’ve forgone important medical care because they can’t afford it.[2] With such a significant share of the workforce still suffering from economic insecurity on a daily basis, it should be no surprise to anyone that inequality continues to grow as our economy lags behind the rest of the country. One can assume that the problem is broader and deeper in high-cost New Jersey.

Contrary to popular belief, the slow growth in wages and the consistent presence of higher poverty levels also has implications for the business community. Oftentimes, businesses don’t see low wages as a problem that hurts them, but the reality is that our economy is consumer-driven, meaning it relies on consumers (i.e. workers) being able to fulfill their demands and needs. When consumers don’t have the disposable income necessary to be full participants in the economy, that hurts businesses who are deprived of would-be customers.

Taking all of this into consideration, lawmakers should prioritize raising the minimum wage for all workers, and soon. When accounting for the cost of living, New Jersey’s $8.60 minimum wage falls $18.38 short of a living wage, ranking 5th worst in the country.[3] The longer this increase is delayed, the more the value of a $15 hourly wage erodes away and becomes insufficient to address the harmful issues it is meant to. Making sure that the most vulnerable workers in the Garden State are being paid a fair wage for their labor is critical to reducing poverty, reversing growing levels of income inequality, and strengthening our economy.

Opting to leave behind any portion of the workforce – as has been discussed recently by legislators in both houses – is unnecessary and cruel, and doing so fails to make our state stronger or fairer for those who suffer the most every single day. Coming to this conclusion isn’t difficult, all it requires is looking at the facts.

Poverty and Inequality Persist Amidst a Sluggish Recovery

While it is true that unemployment has dropped significantly in recent years – lowering to 5.3 percent in 2017 from 6 percent in 2016 and a high of 10.9 percent in 2011 – poverty rates are higher than they were before the recession. The official poverty rate in 2017 was 10 percent, up from 8.6 percent in 2007 and representing about 143,000 more people. However, considering the high cost of living in New Jersey, the 200 percent federal poverty level provides a more accurate picture of economic insecurity in our state.[4] Looking at this metric, the poverty rate in 2017 was a staggering 22.89 percent, up from 20.89 percent in 2007 and representing about 245,000 more people.

It is not surprising to see poverty remain higher as unemployment decreases considering the minimum wage is far below a livable wage. The Economic Policy Institute (EPI) has a useful tool called the “Family Budget Calculator” which helps measure the income a family needs “in order to attain a modest yet adequate standard of living.” The family budgets that the EPI calculator analyzes consists of seven areas: housing, food, transportation, child care, health care, taxes, and “other necessities” which includes things like clothes, basic household items, and school supplies.

According to EPI’s analysis there is no part of the state where a worker can reliably make ends meet on less than $15 per hour, not even a single adult with no children. For this type of worker, Camden county requires the lowest earnings at $17.84 per hour. Hunterdon County requires the highest earnings at $22.72 per hour. For families with two adults and one child, each parent would have to earn $17.32 per hour in Camden county and $22.26 per hour in Hunterdon County working full time.[5] Looking at the current minimum wage of $8.60, minimum wage workers in each county are earning less than half of what it takes to safely and reliably make ends meet.

As long as a significant portion of New Jersey’s workforce is unable to provide for themselves and their families, the state’s economy will continue to experience widening levels of inequality and sluggish economic growth. Fixing this problem is possible, but only if an increase in the minimum wage to $15 that is fully phased in by 2023 and includes all workers is enacted before the end of the year.

 

Raising the Wage Would Help a Diverse Array of Workers – Further Carve Outs Should Be Avoided and Youth, Farm and Tipped Workers Must Be Included

The number of workers who will benefit from increasing the minimum wage to $15 depends on how long the phase-in takes, but we reasonably assume that lawmakers would follow a phase-in schedule similar to the 2016 bill that was vetoed by Governor Christie. As such, we assume that the minimum wage would be increased to $10.10 an hour in the first step, on January 1, 2019, with four annual $1.25 increases to follow, bringing New Jersey’s minimum wage to $15.10 an hour by 2023.

Increasing the minimum wage to $15 by 2023 would result in a $3.9 billion raise for approximately 1,047,000 workers, representing 26.3 percent of the state’s total workforce. Of that group about 792,000 would be directly affected, meaning they currently make less than $14.53 (the current dollar equivalent of $15.10 in 2023). Another 256,000 would be indirectly affected, meaning they make slightly more than the new minimum and would likely see their pay also increase.

Of those who would benefit, 57.3 percent are women, 57.2 percent are people of color, 94 percent are adults, 29.2 percent have children, 49.7 percent have attended or graduated from college, and 64.3 percent are working full time.

Most of the New Jersey workers who would benefit from increasing the minimum wage to $15 are in the retail, health care, and food service industries.

 

Existing Exemptions in New Jersey’s Minimum Wage Law

Lawmakers are currently considering carving out youth, farm, and tipped workers from the minimum wage increase. Doing so would be misguided and actively harm these workers, preventing them from earning more for their work and becoming more economically secure. With regard to carve outs, there is a lot of misinformation and misunderstanding on what the current landscape is. There are already several carve outs that exist in New Jersey’s minimum wage law – for youth workers, employees at summer camps, college students, interns, school-to-work programs, tipped workers and farm workers:

  • Youth workers (under 18) are currently exempt from the state wage and hour law (see 12:56-3.2). However, the law provides a number of sectors where youth workers are explicitly included in the state minimum wage. Sectors where youth workers are explicitly included in the state minimum wage are: Mercantile occupations (12:57-3); Beauty culture occupations (12:57-4); Laundry, cleaning, and dyeing occupations (12:57-5); Light manufacturing and apparel occupations (12:57-6).
  • Employees of summer camps, which often includes many youth workers, are explicitly excluded from the state minimum wage. The minimum wage law is not applicable, “during the months of June, July, August or September of the year to summer camps, conferences and retreats operated by any nonprofit or religious corporation or association,” (34.11-56a4.1).
  • Concerning college students and interns, full time students employed by their university or college through a work study program may be paid 85% of the state’s minimum wage (12:56-3.2).
  • Interns or participants in “school-to-work” programs, regardless of age, may be excluded from the minimum wage. However, wage and hour regulations provide specific guidelines that must be followed to ensure that education is the primary objective of the position and that any productive labor is incidental to those educational goals (12:56-18).
  • Farm workers are currently required to be paid the state minimum wage, but they are not required to be paid overtime for any work over 40 hours per week, including piece work (34:11-5614).

Including as many workers as possible in the minimum wage increase is important to ensure that the most vulnerable workers in the state are better able to make ends meet. It would be wonderful to see lawmakers remove the carve outs that already exist but, at the very worst, they should not add to them.

Youth Workers

Carving out youth workers from a minimum wage increase is bad policy that unnecessarily puts teens at increased risk for poverty and other issues that come with economic insecurity.[6] Of all the workers that would benefit from increasing the minimum wage to $15 by 2023, six percent are under the age of 20, equaling 63,355 total teen workers.

There’s a common stereotype that young workers are simply using their earnings to pay for video games and movie tickets, but that couldn’t be further from the truth for many who are seriously contributing to their family’s income. For teen workers who come from families that earn less than $50,000 per year, they contribute over $9,300 on average, or 18.6 percent. For families of color, teen workers contribute over $9,600 on average, or 19.3 percent.[7] That’s a significant amount and it shouldn’t be discounted. Especially considering that many teen workers in low-income families are saving for the cost of college to help avoid student loans, it would be callous to carve them out from the increase to $15 per hour.

Proposing to carve out teen workers isn’t just a bad idea when you look at the facts, it would also be hypocritical for New Jersey to do so. Just this year, the state passed an equal pay amendment that required women and men to be paid the same amount of money for similar work. To say that pay discrimination against women isn’t ok but pay discrimination against teen workers is would be incredibly hypocritical. Either work is work that should be valued no matter who does it or it isn’t. Lawmakers have already stated that they want to stamp out pay discrimination and they should extend that value to all workers, including teens.

Farm Workers

Some of the most vulnerable workers in the state are farm workers. They are generally people of color and immigrants who perform demanding, physical labor in difficult conditions. Simply put, farm workers are some of the workers that inspired the Fight for $15 movement due to the low wages they earn. Historically, New Jersey has never carved out farm workers from a minimum wage increase before, and to do so now would be an incredible mistake.

An analysis by Professor Michael Reich – an economist and chair of the Center on Wage and Employment Dynamics at the University of California, Berkeley – found that New Jersey’s farm workers would benefit to the tune of a 20 percent increase in annual income.

Many have argued that farm workers must be carved out so that New Jersey can remain competitive in agricultural industries, believing that otherwise the state’s farms would be put at risk of closure. The analysis produced by Professor Reich shows that this opinion is false, concluding that food and produce prices wouldn’t have to increase significantly in order for farms to afford the rise in the minimum wage for their workers. Including farm workers in the increase would result in the price of a package of blueberries increasing just three cents a year annually. That is an incredibly insignificant change that is absolutely worth it to make sure farm workers can be included in the wage increase so they can better meet their needs and provide for their families.

Tipped Workers

New Jersey currently has about 193,000 tipped workers, of whom about 78,000 are waiters or bar staff and all of whom would benefit from increasing the tipped wage which is currently set at the federal level of $2.13 per hour.[8] If a worker doesn’t make the $6.47 in tips necessary to bring them to the state’s $8.60 an hour minimum wage, their employer is required to make up the shortfall – what is known as a “tip credit.” If an employee doesn’t earn enough in tips to make up the difference, the onus is unfortunately on them to ask their employer to bridge the gap – something that many tipped workers are hesitant to do for fear they could risk their job. There is significant evidence to show that tipped workers suffer from higher rates of wage theft than other workers.[9]

The federal $2.13 tipped wage has remained constant since 1991. Over those 27 years, its value has eroded by 46 percent to a value of just $1.15 in 1991 inflation-adjusted dollars, meaning it would have to be $3.94 in 2018 inflation-adjusted dollars to keep up with 1991’s purchasing power.

The gap between New Jersey’s tipped wage of $2.13 and minimum wage of $8.60 is already one of the largest in the country. To increase the minimum wage to $15 without increasing or completely phasing out the tipped wage would only make that gap larger and invite an increase in instances of wage theft.

Phasing out the tipped minimum wage would be smart policy for New Jersey to pursue. First, it would simplify regulations that owners of tipped businesses have to implement by eliminating the need to calculate wages owed to make up the gap between the tipped wage and the minimum wage. Second, it would make a tip a tip again. Tips would no longer serve as the primary source of income for workers, but represent a slight bonus awarded by the consumer for exceptional service. Besides, seven states – including the entire west coast of the United States – no longer have a tipped wage.[10] Alaska, California, Minnesota, Montana, Nevada, Oregon, and Washington have all decided that workers in traditional tipped industries should make at least the minimum wage like every other worker and, despite opposition claims to the contrary, their restaurant and food cultures haven’t become a wasteland of nothing but chain restaurants like Chili’s and Applebee’s.

Getting rid of the tipped wage would have the added benefit of reducing incidents of sexual harassment that female workers face in particular.[11] Because tipped workers are forced to rely on tips to make up the majority of their pay, they end up having to answer whatever whims – fair or otherwise – that customers or their bosses may want. The power dynamics present in these situations put the worker at a disadvantage, and many customers and owners fully exploit it. Phasing out the tipped wage would do away with those power dynamics and let workers focus on their jobs.

 

The Importance of $15 by 2023 – Further Delay Erodes Purchasing Power

The idea of a $15 minimum wage was introduced four years ago in 2014. Since then, the value of a $15 minimum wage has eroded significantly – $15 in 2014 is worth just $14.08 in 2018. If the original bill had been signed into law when it passed, the state would have reached a $15 minimum wage by 2019. Unfortunately, that didn’t happen, leaving low-wage workers in a lurch. Following recent remarks from legislative leaders that this issue may bleed over into 2019, there is real concern that by the time the wage gets to $15, it won’t be nearly as valuable to low-wage workers as intended.

If the same bill that the legislature passed in 2016 were to be signed this year to take effect in 2019, we would be looking at a scenario where the minimum wage doesn’t reach $15 until 2023. Due to inflation, the delay of 5 years – reaching $15 in 2023 instead of 2019 – adds up to a loss of about 6.5 percent in purchasing power for low-wage workers. In other words, $15 in 2019 would only be worth about $14.02 in 2023, reducing the amount of real income low-wage workers would receive as a result of the policy change from $31,200 a year to $29,161. That’s a loss of over $2,000 in annual earnings for workers and families where every dollar is absolutely critical, and that hurts businesses that are losing out on profits from customers who would have spent that $2,000 locally and immediately. It’s worth noting that these projections don’t take into account changes in current national trade and economic policy that could lead to an increase in inflation, which would result in the value of $15 eroding even further.

If lawmakers hold off passing the $15 minimum wage legislation this year, the erosion from inflation will only significantly reduce what workers ultimately take home. To avoid that affect, it’s worth considering either reducing the phase-in period from 5 years to 4 years or less, or increasing the wage level beyond $15 to make up for lost time, or some combination of the two. The bottom line is that getting to $15 after 2023 dilutes the positive impact of the policy so significantly that simply tying wage increases to inflation after 2023 would be insufficient. Raising the wage to $15 by 2024 – eight years after the Christie veto– and claiming it will address issues of income inequality and poverty would be a dire mistake and a false promise.

 

While New Jersey Waits, States and Cities Across the Nation Make Progress

In recent years, several states and cities have passed $15 minimum wage legislation in response to the difficult and damaging economic realities that their residents are facing. Seattle voted to increase the wage to $15 in 2014, with the phase-in culminating in 2021 for all workers – employees at large companies started receiving $15 in 2017.[12] Los Angeles voted for its increase in 2015, with all workers receiving $15 by 2020.[13]

In 2016, California passed legislation that would see the state get to $15 by 2022.[14] In the same year, New York signed into law a bill that would increase the wage to $15 for all workers across all industries by approximately 2023 – large business in Manhattan had to get to $15 by 2018 and most workers will reach $15 by 2021.[15]

There are several more places that have voted to increase their wages, but the latest example is Massachusetts, which earlier this year became the third state to vote for a $15 minimum wage.[16] The Bay State opted to get to $15 by 2023, and in doing so included youth workers and increased the tipped wage from 30 percent of the state minimum to 45 percent. It is important to mention that while many view minimum wage increases as a campaign important only to Democrats, the Governor of Massachusetts is a Republican. For their legislation to get to $15 by 2023 and do so without carving out vulnerable workers goes to show that people of all political stripes can understand and support the need for all workers to benefit from this important policy change.

New Jersey is often compared to New York, Massachusetts, and California due to the characteristics we share of being a high-cost state but also having a highly educated workforce, median household income on the upper end of the spectrum, and a diverse population that benefits from vibrant immigrant communities. While New Jersey continues to drag its feet on raising the minimum wage, our contemporaries are moving forward with strength and taking the steps necessary to improve their economies for all of their workers, residents, and businesses.

Beyond economic considerations, there’s significant research to show that increasing the minimum wage helps lead to reductions in recidivism,[17] reductions in domestic violence and child abuse,[18] and reductions in teen pregnancy rates.[19] It is an important determinant of health outcomes and the American Public Health Association notes that income shapes one’s access to other important determinants of health like housing, education, and employment opportunities.[20]

Worries about job losses are belied not only by our own recorded history – when New Jersey last increased the minimum wage through the ballot in 2013 opponents said we’d lose 30,000 jobs[21] and instead we gained 90,000[22] – but also the experiences of business owners in states that have already increased their wage to $15.

Take for instance the story of Tom Douglas, a notable restaurateur in Seattle who owned 15 restaurants prior to the increase and strongly opposed the change, predicting that he would “lose maybe a quarter” of his restaurants in the city. Fast forward to post-increase, more restaurants were opening in the city than in previous years[23] and Douglas himself recanted his previous position as he not only didn’t have to close any restaurants but ended up opening a few new ones. There’s the California fast food CEO who, much like Douglas, thought the increase to $15 would destroy his business but now says it has provided an important boost.[24]

And rigorous research continues to show that increasing the minimum wage is good policy. A new report by the Center on Wage and Employment Dynamics at the University of California, Berkeley, examined the effect of minimum wage increases in six cities – Chicago, Washington, D.C., Oakland, San Francisco, San Jose, and Seattle – and found stronger private sector growth than comparable economies along with no significant negative effect on employment.[25] There’s also a recent report by the U.S. Census Bureau which, looking at 20 years of government- collected data, finds that raising the minimum wage increases worker earnings over the short and long-term without significant declines in employment.[26]

At the end of the day, there are simply too much data and recorded experiences showing that increasing the minimum wage works. For New Jersey to continue to delay action at this point would require ignoring what we know to be true and opting to believe rhetoric and myth over fact and rigorous research. We’ve already suffered significant setbacks, being one of the last states to emerge from the Great Recession, and our economy continues to struggle with poverty rates that are higher than they should be at this stage in our recovery. If we continue to talk about “next year” for increasing the minimum wage to $15, we’ll be left in the dust with no one to blame but ourselves yet again.

The opportunity in front of us is clear – raising the wage will benefit over a million workers, help businesses by providing them with more consumers who can purchase the services and products they offer, and improve the local economy in communities all across the state. There is no reason to hesitate any further, it is time to do what we know is both the right and smart thing to do. It’s time to pass and sign legislation that raises the minimum wage to $15 for all workers, and the time to do it is now.

 

Endnotes

[1] Economic Policy Institute analysis of Current Population Survey Outgoing Rotation Group microdata (2017) and CBO Economic Projections (January 2016)

[2] Report on the Economic Well-Being of U.S. Households in 2017, Board of Governors of the Federal Reserve System, May 2018. https://www.federalreserve.gov/publications/files/2017-report-economic-well-being-us-households-201805.pdf

[3] NJPP Analysis of data from the Massachusetts Institute of Technology Living Wage Calculator

[4] The official poverty rate – 100% FPL – registers at an annual income of $24,600 for a family of four. In a high cost state like New Jersey, it makes no sense to limit real poverty to such a low level of income.200% FPL is more appropriate and registers at an annual income of $49,200 for a family of four.

[5] Economic Policy Institute, March 2018. Budgets are in 2017 dollars.

[6] National Employment Law Project, Excluding Young New Jersey Workers From A $15 Minimum Wage Is Bad Policy, September 2018. https://www.nelp.org/publication/excluding-young-new-jersey-workers-15-minimum-wage-bad-policy/

[7] National Employment Law Project analysis of U.S. Census Bureau, American Community Survey Public Use Microdata Sample, 2012-2016

[8] National Employment Law Project analysis of May 2017 Occupational Employment Statistics data.

[9] Economic Policy Institute, Twenty-Three Years and Still Waiting for Change, July 2014. https://www.epi.org/publication/waiting-for-change-tipped-minimum-wage/

[10] New Jersey Policy Perspective Raising the Tipped Minimum Wage Would Increase the Economic Security of Many Hard-Working New Jerseyans, July 2014. https://www.njpp.org/reports/raising-the-tipped-minimum-wage-would-increase-the-economic-security-of-many-hard-working-new-jerseyans

[11] Restaurant Opportunities Center United, Better Wages, Better Tips: Restaurants Flourish With One Fair Wage, February 2018. http://rocunited.org/2018/02/new-report-better-wages-better-tips-restaurants-flourish-one-fair-wage/

[12] Office of the Mayor, Seattle, Washington,$15 Minimum Wage. http://murray.seattle.gov/minimumwage/#sthash.wJiTvFbp.dpbs

[13] Los Angeles Times, Los Angeles’ minimum wage on track to go up to $15 by 2020, May 2015. http://www.latimes.com/local/lanow/la-me-ln-minimum-wage-hike-20150518-story.html

[14] The Sacramento Bee, Jerry Brown signs $15 minimum wage in California, April 2016. https://www.sacbee.com/news/politics-government/capitol-alert/article69842317.html

[15] New York State, Governor Cuomo Signs $15 Minimum Wage Plan and 12 Week Paid Family Leave Policy into Law, April 2016. https://www.governor.ny.gov/news/governor-cuomo-signs-15-minimum-wage-plan-and-12-week-paid-family-leave-policy-law

[16] National Employment Law Project, Massachusetts Joins New York and California in Adopting $15 Minimum Wage, June 2018. https://www.nelp.org/news-releases/massachusetts-joins-new-york-california-adopting-15-minimum-wage/

[17] Agan, A. Y. and Makowsky, M. D., The Minimum Wage, EITC, and Criminal Recidivism, January 2018. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3097203

[18] Raissian, K. M., Bullinger, L. R.,Money matters: Does the minimum wage affect child maltreatment rates?, January 2017. http://www.sciencedirect.com/science/article/pii/S0190740916303139?via%3Dihub#!

[19] Bullinger, L. R., The Effect of Minimum Wages on Adolescent Fertility: A Nationwide Analysis, March 2017. https://www.ncbi.nlm.nih.gov/pubmed/28103069

[20] American Public Health Association, Improving Health by Increasing the Minimum Wage, November 2016. https://www.apha.org/policies-and-advocacy/public-health-policy-statements/policy-database/2017/01/18/improving-health-by-increasing-minimum-wage

[21] Watchdog, New Jersey’s minimum-wage question poses maximum complexity, October 2013. https://www.watchdog.org/new_jersey/new-jersey-s-minimum-wage-question-poses-maximum-complexity/article_3e1f3a4a-a943-549c-8568-e5639189b72d.html

[22] NJPP analysis of data from the Bureau of Labor Statistics. State and Area Employment, Hours, and Earnings, New Jersey, Total Non-Farm, 2013-2015

[23] Puget Sound Business Journal, Apocalypse Not: $15 and the cuts that never came, October 2015. https://www.bizjournals.com/seattle/print-edition/2015/10/23/apocolypse-not-15-and-the-cuts-that-never-came.html

[24] KQED News, Fast Food CEO Says Higher Minimum Wage Boosts Business, January 2017. https://www.kqed.org/news/11245110/minimum-wage-goes-up-and-so-does-business-thats-what-this-fast-food-ceo-says-happened

[25] Allegretto, Godoey, Nadler and Reich, The New Wave of Local Minimum Wage Policies: Evidence from Six Cities, September 2018. http://irle.berkeley.edu/files/2018/09/The-New-Wave-of-Local-Minimum-Wage-Policies.pdf

[26] Rinz, K., Voorheis, J., The Distributional Effects of Minimum Wages: Evidence from Linked Survey and Administrative Data, March 2018. https://www.census.gov/library/working-papers/2018/adrm/carra-wp-2018-02.html

Raising the Minimum Wage to $15 is Critical to Growing New Jersey’s Economy

Posted on by Brandon McKoy

Increasing the minimum wage will boost the take home pay of over 1 million workers – but not if the Legislature stalls

To read a PDF version of this report, click here.

Increasing New Jersey’s minimum wage to $15 an hour by 2023 would boost the incomes of over 1 million workers and inject $3.9 billion into the state’s economy.[1] Raising the wage for all workers without significant delay is critically important to improving the economic conditions of families, businesses, and the state at large. While many believe that the state’s economy is stronger due to the reduced rate of unemployment – which has finally dropped below pre-recession levels – poverty still remains concerningly high, signaling a wage problem for low-income workers who aren’t paid enough to purchase their basic day-to-day needs.

Considering that lawmakers passed $15 minimum wage legislation that was inclusive of all workers in 2016, it is surprising and disappointing to see that – eight months into a new administration that supports raising the wage for all – a bill still hasn’t been introduced. There have been murmurs of extending the phase-in period beyond five years, leaving the tipped wage at its current paltry level of $2.13 per hour, and dividing the working class by excluding youth, seasonal, and farm workers from the increase. In an age where the federal government is actively attacking the economic security of the working class, it would be a terrible mistake for lawmakers to raise the wage but leave behind some of the state’s most vulnerable workers.

New Jersey’s recovery from the Great Recession has been one of the slowest and least robust in the nation. As we move further away from that economic crisis, it has become clear that even though the economy shows signs of increasing strength – unemployment levels lower than pre-recession levels, a booming stock market, and healthy GDP growth – the gains of the recovery have been funneled almost exclusively to the already wealthy and well-to-do. Wages have remained stagnant and low- and middle-income families continue to struggle to get by.

A recent survey by the Federal Reserve found that 40 percent of Americans cannot afford– or would have to sell possessions to cover the cost of – a surprise $400 expense. One in five adults say they can’t pay all of their current monthly bills. More than one in four adults report that they’ve forgone important medical care because they can’t afford it.[2] With such a significant share of the workforce still suffering from economic insecurity on a daily basis, it should be no surprise to anyone that inequality continues to grow as our economy lags behind the rest of the country. One can assume that the problem is broader and deeper in high-cost New Jersey.

Contrary to popular belief, the slow growth in wages and the consistent presence of higher poverty levels also has implications for the business community. Oftentimes, businesses don’t see low wages as a problem that hurts them, but the reality is that our economy is consumer-driven, meaning it relies on consumers (i.e. workers) being able to fulfill their demands and needs. When consumers don’t have the disposable income necessary to be full participants in the economy, that hurts businesses who are deprived of would-be customers.

Taking all of this into consideration, lawmakers should prioritize raising the minimum wage for all workers, and soon. When accounting for the cost of living, New Jersey’s $8.60 minimum wage falls $18.38 short of a living wage, ranking 5th worst in the country.[3] The longer this increase is delayed, the more the value of a $15 hourly wage erodes away and becomes insufficient to address the harmful issues it is meant to. Making sure that the most vulnerable workers in the Garden State are being paid a fair wage for their labor is critical to reducing poverty, reversing growing levels of income inequality, and strengthening our economy.

Opting to leave behind any portion of the workforce – as has been discussed recently by legislators in both houses – is unnecessary and cruel, and doing so fails to make our state stronger or fairer for those who suffer the most every single day. Coming to this conclusion isn’t difficult, all it requires is looking at the facts.

Poverty and Inequality Persist Amidst a Sluggish Recovery

While it is true that unemployment has dropped significantly in recent years – lowering to 5.3 percent in 2017 from 6 percent in 2016 and a high of 10.9 percent in 2011 – poverty rates are higher than they were before the recession. The official poverty rate in 2017 was 10 percent, up from 8.6 percent in 2007 and representing about 143,000 more people. However, considering the high cost of living in New Jersey, the 200 percent federal poverty level provides a more accurate picture of economic insecurity in our state.[4] Looking at this metric, the poverty rate in 2017 was a staggering 22.89 percent, up from 20.89 percent in 2007 and representing about 245,000 more people.

It is not surprising to see poverty remain higher as unemployment decreases considering the minimum wage is far below a livable wage. The Economic Policy Institute (EPI) has a useful tool called the “Family Budget Calculator” which helps measure the income a family needs “in order to attain a modest yet adequate standard of living.” The family budgets that the EPI calculator analyzes consists of seven areas: housing, food, transportation, child care, health care, taxes, and “other necessities” which includes things like clothes, basic household items, and school supplies.

According to EPI’s analysis there is no part of the state where a worker can reliably make ends meet on less than $15 per hour, not even a single adult with no children. For this type of worker, Camden county requires the lowest earnings at $17.84 per hour. Hunterdon County requires the highest earnings at $22.72 per hour. For families with two adults and one child, each parent would have to earn $17.32 per hour in Camden county and $22.26 per hour in Hunterdon County working full time.[5] Looking at the current minimum wage of $8.60, minimum wage workers in each county are earning less than half of what it takes to safely and reliably make ends meet.

As long as a significant portion of New Jersey’s workforce is unable to provide for themselves and their families, the state’s economy will continue to experience widening levels of inequality and sluggish economic growth. Fixing this problem is possible, but only if an increase in the minimum wage to $15 that is fully phased in by 2023 and includes all workers is enacted before the end of the year.

 

Raising the Wage Would Help a Diverse Array of Workers – Further Carve Outs Should Be Avoided and Youth, Farm and Tipped Workers Must Be Included

The number of workers who will benefit from increasing the minimum wage to $15 depends on how long the phase-in takes, but we reasonably assume that lawmakers would follow a phase-in schedule similar to the 2016 bill that was vetoed by Governor Christie. As such, we assume that the minimum wage would be increased to $10.10 an hour in the first step, on January 1, 2019, with four annual $1.25 increases to follow, bringing New Jersey’s minimum wage to $15.10 an hour by 2023.

Increasing the minimum wage to $15 by 2023 would result in a $3.9 billion raise for approximately 1,047,000 workers, representing 26.3 percent of the state’s total workforce. Of that group about 792,000 would be directly affected, meaning they currently make less than $14.53 (the current dollar equivalent of $15.10 in 2023). Another 256,000 would be indirectly affected, meaning they make slightly more than the new minimum and would likely see their pay also increase.

Of those who would benefit, 57.3 percent are women, 57.2 percent are people of color, 94 percent are adults, 29.2 percent have children, 49.7 percent have attended or graduated from college, and 64.3 percent are working full time.

Most of the New Jersey workers who would benefit from increasing the minimum wage to $15 are in the retail, health care, and food service industries.

 

Existing Exemptions in New Jersey’s Minimum Wage Law

Lawmakers are currently considering carving out youth, farm, and tipped workers from the minimum wage increase. Doing so would be misguided and actively harm these workers, preventing them from earning more for their work and becoming more economically secure. With regard to carve outs, there is a lot of misinformation and misunderstanding on what the current landscape is. There are already several carve outs that exist in New Jersey’s minimum wage law – for youth workers, employees at summer camps, college students, interns, school-to-work programs, tipped workers and farm workers:

  • Youth workers (under 18) are currently exempt from the state wage and hour law (see 12:56-3.2). However, the law provides a number of sectors where youth workers are explicitly included in the state minimum wage. Sectors where youth workers are explicitly included in the state minimum wage are: Mercantile occupations (12:57-3); Beauty culture occupations (12:57-4); Laundry, cleaning, and dyeing occupations (12:57-5); Light manufacturing and apparel occupations (12:57-6).
  • Employees of summer camps, which often includes many youth workers, are explicitly excluded from the state minimum wage. The minimum wage law is not applicable, “during the months of June, July, August or September of the year to summer camps, conferences and retreats operated by any nonprofit or religious corporation or association,” (34.11-56a4.1).
  • Concerning college students and interns, full time students employed by their university or college through a work study program may be paid 85% of the state’s minimum wage (12:56-3.2).
  • Interns or participants in “school-to-work” programs, regardless of age, may be excluded from the minimum wage. However, wage and hour regulations provide specific guidelines that must be followed to ensure that education is the primary objective of the position and that any productive labor is incidental to those educational goals (12:56-18).
  • Farm workers are currently required to be paid the state minimum wage, but they are not required to be paid overtime for any work over 40 hours per week, including piece work (34:11-5614).

Including as many workers as possible in the minimum wage increase is important to ensure that the most vulnerable workers in the state are better able to make ends meet. It would be wonderful to see lawmakers remove the carve outs that already exist but, at the very worst, they should not add to them.

Youth Workers

Carving out youth workers from a minimum wage increase is bad policy that unnecessarily puts teens at increased risk for poverty and other issues that come with economic insecurity.[6] Of all the workers that would benefit from increasing the minimum wage to $15 by 2023, six percent are under the age of 20, equaling 63,355 total teen workers.

There’s a common stereotype that young workers are simply using their earnings to pay for video games and movie tickets, but that couldn’t be further from the truth for many who are seriously contributing to their family’s income. For teen workers who come from families that earn less than $50,000 per year, they contribute over $9,300 on average, or 18.6 percent. For families of color, teen workers contribute over $9,600 on average, or 19.3 percent.[7] That’s a significant amount and it shouldn’t be discounted. Especially considering that many teen workers in low-income families are saving for the cost of college to help avoid student loans, it would be callous to carve them out from the increase to $15 per hour.

Proposing to carve out teen workers isn’t just a bad idea when you look at the facts, it would also be hypocritical for New Jersey to do so. Just this year, the state passed an equal pay amendment that required women and men to be paid the same amount of money for similar work. To say that pay discrimination against women isn’t ok but pay discrimination against teen workers is would be incredibly hypocritical. Either work is work that should be valued no matter who does it or it isn’t. Lawmakers have already stated that they want to stamp out pay discrimination and they should extend that value to all workers, including teens.

Farm Workers

Some of the most vulnerable workers in the state are farm workers. They are generally people of color and immigrants who perform demanding, physical labor in difficult conditions. Simply put, farm workers are some of the workers that inspired the Fight for $15 movement due to the low wages they earn. Historically, New Jersey has never carved out farm workers from a minimum wage increase before, and to do so now would be an incredible mistake.

An analysis by Professor Michael Reich – an economist and chair of the Center on Wage and Employment Dynamics at the University of California, Berkeley – found that New Jersey’s farm workers would benefit to the tune of a 20 percent increase in annual income.

Many have argued that farm workers must be carved out so that New Jersey can remain competitive in agricultural industries, believing that otherwise the state’s farms would be put at risk of closure. The analysis produced by Professor Reich shows that this opinion is false, concluding that food and produce prices wouldn’t have to increase significantly in order for farms to afford the rise in the minimum wage for their workers. Including farm workers in the increase would result in the price of a package of blueberries increasing just three cents a year annually. That is an incredibly insignificant change that is absolutely worth it to make sure farm workers can be included in the wage increase so they can better meet their needs and provide for their families.

Tipped Workers

New Jersey currently has about 193,000 tipped workers, of whom about 78,000 are waiters or bar staff and all of whom would benefit from increasing the tipped wage which is currently set at the federal level of $2.13 per hour.[8] If a worker doesn’t make the $6.47 in tips necessary to bring them to the state’s $8.60 an hour minimum wage, their employer is required to make up the shortfall – what is known as a “tip credit.” If an employee doesn’t earn enough in tips to make up the difference, the onus is unfortunately on them to ask their employer to bridge the gap – something that many tipped workers are hesitant to do for fear they could risk their job. There is significant evidence to show that tipped workers suffer from higher rates of wage theft than other workers.[9]

The federal $2.13 tipped wage has remained constant since 1991. Over those 27 years, its value has eroded by 46 percent to a value of just $1.15 in 1991 inflation-adjusted dollars, meaning it would have to be $3.94 in 2018 inflation-adjusted dollars to keep up with 1991’s purchasing power.

The gap between New Jersey’s tipped wage of $2.13 and minimum wage of $8.60 is already one of the largest in the country. To increase the minimum wage to $15 without increasing or completely phasing out the tipped wage would only make that gap larger and invite an increase in instances of wage theft.

Phasing out the tipped minimum wage would be smart policy for New Jersey to pursue. First, it would simplify regulations that owners of tipped businesses have to implement by eliminating the need to calculate wages owed to make up the gap between the tipped wage and the minimum wage. Second, it would make a tip a tip again. Tips would no longer serve as the primary source of income for workers, but represent a slight bonus awarded by the consumer for exceptional service. Besides, seven states – including the entire west coast of the United States – no longer have a tipped wage.[10] Alaska, California, Minnesota, Montana, Nevada, Oregon, and Washington have all decided that workers in traditional tipped industries should make at least the minimum wage like every other worker and, despite opposition claims to the contrary, their restaurant and food cultures haven’t become a wasteland of nothing but chain restaurants like Chili’s and Applebee’s.

Getting rid of the tipped wage would have the added benefit of reducing incidents of sexual harassment that female workers face in particular.[11] Because tipped workers are forced to rely on tips to make up the majority of their pay, they end up having to answer whatever whims – fair or otherwise – that customers or their bosses may want. The power dynamics present in these situations put the worker at a disadvantage, and many customers and owners fully exploit it. Phasing out the tipped wage would do away with those power dynamics and let workers focus on their jobs.

 

The Importance of $15 by 2023 – Further Delay Erodes Purchasing Power

The idea of a $15 minimum wage was introduced four years ago in 2014. Since then, the value of a $15 minimum wage has eroded significantly – $15 in 2014 is worth just $14.08 in 2018. If the original bill had been signed into law when it passed, the state would have reached a $15 minimum wage by 2019. Unfortunately, that didn’t happen, leaving low-wage workers in a lurch. Following recent remarks from legislative leaders that this issue may bleed over into 2019, there is real concern that by the time the wage gets to $15, it won’t be nearly as valuable to low-wage workers as intended.

If the same bill that the legislature passed in 2016 were to be signed this year to take effect in 2019, we would be looking at a scenario where the minimum wage doesn’t reach $15 until 2023. Due to inflation, the delay of 5 years – reaching $15 in 2023 instead of 2019 – adds up to a loss of about 6.5 percent in purchasing power for low-wage workers. In other words, $15 in 2019 would only be worth about $14.02 in 2023, reducing the amount of real income low-wage workers would receive as a result of the policy change from $31,200 a year to $29,161. That’s a loss of over $2,000 in annual earnings for workers and families where every dollar is absolutely critical, and that hurts businesses that are losing out on profits from customers who would have spent that $2,000 locally and immediately. It’s worth noting that these projections don’t take into account changes in current national trade and economic policy that could lead to an increase in inflation, which would result in the value of $15 eroding even further.

If lawmakers hold off passing the $15 minimum wage legislation this year, the erosion from inflation will only significantly reduce what workers ultimately take home. To avoid that affect, it’s worth considering either reducing the phase-in period from 5 years to 4 years or less, or increasing the wage level beyond $15 to make up for lost time, or some combination of the two. The bottom line is that getting to $15 after 2023 dilutes the positive impact of the policy so significantly that simply tying wage increases to inflation after 2023 would be insufficient. Raising the wage to $15 by 2024 – eight years after the Christie veto– and claiming it will address issues of income inequality and poverty would be a dire mistake and a false promise.

 

While New Jersey Waits, States and Cities Across the Nation Make Progress

In recent years, several states and cities have passed $15 minimum wage legislation in response to the difficult and damaging economic realities that their residents are facing. Seattle voted to increase the wage to $15 in 2014, with the phase-in culminating in 2021 for all workers – employees at large companies started receiving $15 in 2017.[12] Los Angeles voted for its increase in 2015, with all workers receiving $15 by 2020.[13]

In 2016, California passed legislation that would see the state get to $15 by 2022.[14] In the same year, New York signed into law a bill that would increase the wage to $15 for all workers across all industries by approximately 2023 – large business in Manhattan had to get to $15 by 2018 and most workers will reach $15 by 2021.[15]

There are several more places that have voted to increase their wages, but the latest example is Massachusetts, which earlier this year became the third state to vote for a $15 minimum wage.[16] The Bay State opted to get to $15 by 2023, and in doing so included youth workers and increased the tipped wage from 30 percent of the state minimum to 45 percent. It is important to mention that while many view minimum wage increases as a campaign important only to Democrats, the Governor of Massachusetts is a Republican. For their legislation to get to $15 by 2023 and do so without carving out vulnerable workers goes to show that people of all political stripes can understand and support the need for all workers to benefit from this important policy change.

New Jersey is often compared to New York, Massachusetts, and California due to the characteristics we share of being a high-cost state but also having a highly educated workforce, median household income on the upper end of the spectrum, and a diverse population that benefits from vibrant immigrant communities. While New Jersey continues to drag its feet on raising the minimum wage, our contemporaries are moving forward with strength and taking the steps necessary to improve their economies for all of their workers, residents, and businesses.

Beyond economic considerations, there’s significant research to show that increasing the minimum wage helps lead to reductions in recidivism,[17] reductions in domestic violence and child abuse,[18] and reductions in teen pregnancy rates.[19] It is an important determinant of health outcomes and the American Public Health Association notes that income shapes one’s access to other important determinants of health like housing, education, and employment opportunities.[20]

Worries about job losses are belied not only by our own recorded history – when New Jersey last increased the minimum wage through the ballot in 2013 opponents said we’d lose 30,000 jobs[21] and instead we gained 90,000[22] – but also the experiences of business owners in states that have already increased their wage to $15.

Take for instance the story of Tom Douglas, a notable restaurateur in Seattle who owned 15 restaurants prior to the increase and strongly opposed the change, predicting that he would “lose maybe a quarter” of his restaurants in the city. Fast forward to post-increase, more restaurants were opening in the city than in previous years[23] and Douglas himself recanted his previous position as he not only didn’t have to close any restaurants but ended up opening a few new ones. There’s the California fast food CEO who, much like Douglas, thought the increase to $15 would destroy his business but now says it has provided an important boost.[24]

And rigorous research continues to show that increasing the minimum wage is good policy. A new report by the Center on Wage and Employment Dynamics at the University of California, Berkeley, examined the effect of minimum wage increases in six cities – Chicago, Washington, D.C., Oakland, San Francisco, San Jose, and Seattle – and found stronger private sector growth than comparable economies along with no significant negative effect on employment.[25] There’s also a recent report by the U.S. Census Bureau which, looking at 20 years of government- collected data, finds that raising the minimum wage increases worker earnings over the short and long-term without significant declines in employment.[26]

At the end of the day, there are simply too much data and recorded experiences showing that increasing the minimum wage works. For New Jersey to continue to delay action at this point would require ignoring what we know to be true and opting to believe rhetoric and myth over fact and rigorous research. We’ve already suffered significant setbacks, being one of the last states to emerge from the Great Recession, and our economy continues to struggle with poverty rates that are higher than they should be at this stage in our recovery. If we continue to talk about “next year” for increasing the minimum wage to $15, we’ll be left in the dust with no one to blame but ourselves yet again.

The opportunity in front of us is clear – raising the wage will benefit over a million workers, help businesses by providing them with more consumers who can purchase the services and products they offer, and improve the local economy in communities all across the state. There is no reason to hesitate any further, it is time to do what we know is both the right and smart thing to do. It’s time to pass and sign legislation that raises the minimum wage to $15 for all workers, and the time to do it is now.

 

Endnotes

[1] Economic Policy Institute analysis of Current Population Survey Outgoing Rotation Group microdata (2017) and CBO Economic Projections (January 2016)

[2] Report on the Economic Well-Being of U.S. Households in 2017, Board of Governors of the Federal Reserve System, May 2018. https://www.federalreserve.gov/publications/files/2017-report-economic-well-being-us-households-201805.pdf

[3] NJPP Analysis of data from the Massachusetts Institute of Technology Living Wage Calculator

[4] The official poverty rate – 100% FPL – registers at an annual income of $24,600 for a family of four. In a high cost state like New Jersey, it makes no sense to limit real poverty to such a low level of income.200% FPL is more appropriate and registers at an annual income of $49,200 for a family of four.

[5] Economic Policy Institute, March 2018. Budgets are in 2017 dollars.

[6] National Employment Law Project, Excluding Young New Jersey Workers From A $15 Minimum Wage Is Bad Policy, September 2018. https://www.nelp.org/publication/excluding-young-new-jersey-workers-15-minimum-wage-bad-policy/

[7] National Employment Law Project analysis of U.S. Census Bureau, American Community Survey Public Use Microdata Sample, 2012-2016

[8] National Employment Law Project analysis of May 2017 Occupational Employment Statistics data.

[9] Economic Policy Institute, Twenty-Three Years and Still Waiting for Change, July 2014. https://www.epi.org/publication/waiting-for-change-tipped-minimum-wage/

[10] New Jersey Policy Perspective Raising the Tipped Minimum Wage Would Increase the Economic Security of Many Hard-Working New Jerseyans, July 2014. https://www.njpp.org/reports/raising-the-tipped-minimum-wage-would-increase-the-economic-security-of-many-hard-working-new-jerseyans

[11] Restaurant Opportunities Center United, Better Wages, Better Tips: Restaurants Flourish With One Fair Wage, February 2018. http://rocunited.org/2018/02/new-report-better-wages-better-tips-restaurants-flourish-one-fair-wage/

[12] Office of the Mayor, Seattle, Washington,$15 Minimum Wage. http://murray.seattle.gov/minimumwage/#sthash.wJiTvFbp.dpbs

[13] Los Angeles Times, Los Angeles’ minimum wage on track to go up to $15 by 2020, May 2015. http://www.latimes.com/local/lanow/la-me-ln-minimum-wage-hike-20150518-story.html

[14] The Sacramento Bee, Jerry Brown signs $15 minimum wage in California, April 2016. https://www.sacbee.com/news/politics-government/capitol-alert/article69842317.html

[15] New York State, Governor Cuomo Signs $15 Minimum Wage Plan and 12 Week Paid Family Leave Policy into Law, April 2016. https://www.governor.ny.gov/news/governor-cuomo-signs-15-minimum-wage-plan-and-12-week-paid-family-leave-policy-law

[16] National Employment Law Project, Massachusetts Joins New York and California in Adopting $15 Minimum Wage, June 2018. https://www.nelp.org/news-releases/massachusetts-joins-new-york-california-adopting-15-minimum-wage/

[17] Agan, A. Y. and Makowsky, M. D., The Minimum Wage, EITC, and Criminal Recidivism, January 2018. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3097203

[18] Raissian, K. M., Bullinger, L. R.,Money matters: Does the minimum wage affect child maltreatment rates?, January 2017. http://www.sciencedirect.com/science/article/pii/S0190740916303139?via%3Dihub#!

[19] Bullinger, L. R., The Effect of Minimum Wages on Adolescent Fertility: A Nationwide Analysis, March 2017. https://www.ncbi.nlm.nih.gov/pubmed/28103069

[20] American Public Health Association, Improving Health by Increasing the Minimum Wage, November 2016. https://www.apha.org/policies-and-advocacy/public-health-policy-statements/policy-database/2017/01/18/improving-health-by-increasing-minimum-wage

[21] Watchdog, New Jersey’s minimum-wage question poses maximum complexity, October 2013. https://www.watchdog.org/new_jersey/new-jersey-s-minimum-wage-question-poses-maximum-complexity/article_3e1f3a4a-a943-549c-8568-e5639189b72d.html

[22] NJPP analysis of data from the Bureau of Labor Statistics. State and Area Employment, Hours, and Earnings, New Jersey, Total Non-Farm, 2013-2015

[23] Puget Sound Business Journal, Apocalypse Not: $15 and the cuts that never came, October 2015. https://www.bizjournals.com/seattle/print-edition/2015/10/23/apocolypse-not-15-and-the-cuts-that-never-came.html

[24] KQED News, Fast Food CEO Says Higher Minimum Wage Boosts Business, January 2017. https://www.kqed.org/news/11245110/minimum-wage-goes-up-and-so-does-business-thats-what-this-fast-food-ceo-says-happened

[25] Allegretto, Godoey, Nadler and Reich, The New Wave of Local Minimum Wage Policies: Evidence from Six Cities, September 2018. http://irle.berkeley.edu/files/2018/09/The-New-Wave-of-Local-Minimum-Wage-Policies.pdf

[26] Rinz, K., Voorheis, J., The Distributional Effects of Minimum Wages: Evidence from Linked Survey and Administrative Data, March 2018. https://www.census.gov/library/working-papers/2018/adrm/carra-wp-2018-02.html

Trump's ACA Sabotage: Bad Medicine for New Jersey

Posted on by Raymond Castro

To read a PDF version of this report, click here.
For a “By the Numbers” breakdown, click here.

President Trump and the Republican leadership in Congress have caused great harm to New Jersey with their efforts to undermine the Affordable Care Act (ACA). Their systematic sabotage of the health care marketplace has not only affected thousands of New Jerseyans but the economy as well. For the first time since ACA was implemented, there are decreases in both the individual market and Medicaid, which this year amounted to 62,000 fewer New Jerseyans obtaining this coverage.[1] There is also concern that the uninsurance rate in New Jersey may be increasing again. The most recent preliminary national survey found an uninsurance rate of 10.6 percent in 2016 and 11.8 percent in 2017 for ages 18-65 in New Jersey.[2]

The decrease in enrollment this year in the Marketplace and Medicaid has resulted in up to $150 million in lost federal funds in New Jersey which will affect the economy.[3] In addition­­­, 137,000 middle class New Jerseyans who are not eligible for federal premium subsidies in the individual market paid approximately $125 million more for their insurance this year.[4] It is also estimated that there was a decrease of 22 percent in the number of Hispanics who are obtaining plans in the Marketplace due to Trump’s anti-immigrant policies.[5]

ACA Undermined in Almost Every Way Possible by Trump Administration

Congress may have been unsuccessful in their attempts to repeal and replace the ACA, but that hasn’t stopped the Trump administration from taking steps to undermine the landmark health care legislation. While it is difficult to keep track of all the attempts to undermine the ACA, the Trump administration has taken at least eighteen actions to deny health care to New Jerseyans. This includes slashing funding for navigators and advertising even though 35 percent of uninsured adults did not know about the Marketplace last year.[6] The President successfully persuaded Congress to repeal the individual mandate and eliminated cost sharing reduction payments to insurers which contributed to a spike in premiums for middle class New Jerseyans. His administration is also allowing states to sell association and junk insurance plans that do not include essential benefits that are especially needed for people with preexisting conditions. Through the Attorney General’s office, the administration is also urging a Texas court to allow states to charge higher premiums for Americans with pre-existing conditions, and the President wants to nominate a judge to the Supreme Court who would uphold such a decision.

Unprecedented Drop in Individual Market Enrollment

Enrollment in the individual market (which consists of New Jerseyans purchasing their insurance through the federal Marketplace website and those who purchase their plans directly)decreased to 329,000 from 369,000 in 2017, a drop of 39,858 New Jerseyans. This is the first decrease in enrollment since the Marketplace was established, wiping out the last two years of gains. This is especially disturbing as there are an estimated 149,000 New Jerseyans who are currently uninsured and eligible for premium subsidies.[7]

Insurance Has Become Unaffordable for Many Struggling New Jerseyans 

There was a greater decrease in the enrollment rate (14 percent) this year in the off-Marketplace than there was in the Marketplace (9.6 percent) because those New Jerseyans in the off-Marketplace must pay the full cost for their premiums, whereas 80 percent of New Jerseyans in the Marketplace receive federal subsidies.[8] The income limits for subsidies – $48,240 for an individual and $98,400 for a family of four – are modest given New Jersey’s high cost of living, especially with the recent increases in premiums. The full cost of average premiums for the standard plan in the Marketplace increased 19 percent in 2018, which is seven times the average rate of the previous three years of 2.5 percent. Much of that increase was caused by the expected elimination of the individual mandate and cost sharing reduction payments.

The 137,000 New Jerseyans who did not receive subsidies paid, on average, $900 more this year in premiums for a single individual and $3,600 for a family of four compared to the average premium over the last three years.[9] Given that premiums for a family of that size were typically over $20,000 per year before the Trump administration’s sabotage of the ACA, this year’s premium increase simply made insurance unaffordable for many New Jersey families.[10]

Family Enrollment in Medicaid Decreases for the First Time

For the first time since the start of its expansion in 2014, Medicaid enrollment decreased in fiscal year 2018 for parents and children. The sabotage of the Marketplace appears to be at least one of the causes for this decrease. About one quarter of everyone who enrolls in Medicaid does so through the Marketplace even though they can apply directly.[11] Up to 140,000 of these consumers are children and parents who were already eligible for Medicaid before the ACA but were unaware until they applied for assistance in the Marketplace. This exemplifies how cutbacks in outreach and advertisement for the Marketplace also affect Medicaid enrollment.

Before the Trump administration’s efforts to sabotage the ACA, New Jersey had projected an increase in Medicaid enrollment for 2018. Instead, 14,814 fewer residents enrolled between 2018. and 2017. Taking the state’s projections into account, there were 22,290 fewer parents and kids enrolled in 2018 than was expected. As the number of unemployed New Jerseyans has remained largely flat during this period, this decrease cannot be explained by economic factors.[12]

Trumps Anti-Immigrant Policies Suppress Enrollment in Medicaid and the Marketplace  

President Trump’s anti-immigrant rhetoric, federal policies, and proposals have done serious harm to Medicaid enrollment, especially in New Jersey, which has the fourth highest share of unauthorized immigrants in the nation.[13] The Trump administration’s overly aggressive actions to deport millions of unauthorized immigrants and its proposal to deny citizenship to legal immigrants if they or their child are on Medicaid discourages all legal immigrants from applying for Medicaid. This is especially true for undocumented parents who are afraid to enroll their citizen child because they fear the information will be shared with ICE and the parent will be deported. In New Jersey, one in six children have an unauthorized parent.[14] This problem is also leading to anecdotal reports that unauthorized parents are disenrolling their children in Medicaid. In 2016 there were an estimated 150,000 children covered by Medicaid/CHIP who had unauthorized parents.[15]

New Jerseyin Better Position than Most States, but Much More to Do to Achieve Universal Health Coverage

 Looking into the future, New Jersey is ahead of most states in working toward universal, affordable health coverage. New Jersey already has policies in place that prohibit the sale of junk plans, and the state recently enacted legislation that restores the individual mandate and establishes a reinsurance plan that will largely offset the hike in premiums caused by the Trump administration. Governor Murphy is also formulating an outreach plan that will maximize existing state resources, although it is unclear if funding will be restored for community-based organizations to perform the same functions as navigators.

While New Jersey has taken admirable steps to defend against attacks on the ACA, the state and its congressional representatives should not lose sight of the ultimate goal to provide universal health coverage. New Jersey’s uninsured decreased by about a third due to the ACA, but there are still approximately 700,000 New Jerseyans who are uninsured, and this number may be increasing again. It will be critical that the New Jersey’s congressional delegation reverse the Trump administration’s anti-ACA actions and improve the ACA to assist more people with more affordable coverage at all income levels.

New Jersey is limited in its ability to meet this challenge by itself, but there are realistic steps it can take to reduce the uninsured in New Jersey and reversethe Trump sabotage. It can start by passing legislation to fulfill the governor’s promise to cover all the remaining uninsured kids in New Jersey. This is achievable as approximately 95 percent of all children already have health insurance. The state should also consider a state takeover of the Marketplace, so it can extend the open enrollment period and make other improvements as other state Marketplaces have done. In addition, the state will need to vigorously advertise that New Jersey has replaced the federal individual mandate with a state mandate. New Jersey will also need to tackle the biggest challenge of all: how to reduce health costs while maintaining quality and access. Recent state enactment of surprise billing legislation that also eliminates inappropriate out-of-network costs and pending bills to limit prescription drugs are good first steps Over the last six months, New Jersey has been a model for stabilizing the health insurance market, but further bold action will be necessary to combat the Trump administration’s attempts to unravel the ACA.

 

Endnotes

[1] Decrease in enrollment in the individual market is from New Jersey Department of Banking and Insurance website and Medicaid enrollment is calculated from the SFY 2018 governor’s budget.

[2] Robin A. Cohen, Ph.D., Emily P. Zammitti, M.P.H., and Michael E. Martinez, M.P.H., M.H.S.A, National Health Interview Survey Early Release Program, Health Insurance Coverage: Early Release of Estimates From the National Health Interview Survey, 2017, https://www.cdc.gov/nchs/data/nhis/earlyrelease/insur201805.pdf

[3] The calculations for the lost Medicaid funding are explained in the table in the report. The lost funding in the Marketplace was calculated by multiplying the average premium subsidy in 2018 by the difference in the marketplace enrolment with subsidies in 2018 and 2017.  See average premiums at Kaiser Family Foundation website at https://www.kff.org/health-reform/state-indicator/marketplace-average-premiums-and-average-advanced-premium-tax-credit-aptc/?currentTimeframe=0&sortModel=%7B%22colId%22:%22Location%22,%22sort%22:%22asc%22%7D

[4] Calculated by inflating the premium in 2017 in the marketplace by the average increase over the previous three years and comparing that to what was the actual increase in 2018 multiplied by everyone who did not receive a subsidy.

[5] Karina Wagnerman, New Study Finds Evidence of a “Chilling Effect” in 2016 Marketplace Enrollment,July 19, 2018, https://ccf.georgetown.edu/2018/07/19/new-study-finds-evidence-of-a-chilling-effect-in-2016-marketplace-enrollment/

[6] Halley Cloud, In Latest Sabotage Administration Nearly Eliminates Marketplace Enrollment Assistance Funds, July 13, 2018, https://www.cbpp.org/blog/in-latest-aca-sabotage-administration-nearly-eliminates-marketplace-enrollment-assistance-funds

[7] Kaiser Family Foundation, Distribution of Non-Elderly Uninsured Individuals,https://www.kff.org/health-reform/state-indicator/distribution-of-nonelderly-uninsured-individuals-who-are-ineligible-for-financial-assistance-due-to-income-offer-of-employer-coverage-or-citizenship-status/?dataView=1&currentTimeframe=0&sortModel=%7B%22colId%22:%22Location%22,%22sort%22:%22asc%22%7D

[8] Kaiser Family Foundation, Effectuated Marketplace Enrollment and Financial Assistance, https://www.kff.org/other/state-indicator/effectuated-marketplace-enrollment-and-financial-assistance/?currentTimeframe=0&sortModel=%7B%22colId%22:%22Location%22,%22sort%22:%22asc%22%7D

[9] See note 5. Divided total increase in premiums by everyone who did not receive a subsidy.

[10] NJPP analysis of plans in Healthcare.gov for 2018.

[11] DMAHS email responding to OPRA request by NJPP, December 12, 2017. The period is December 2006 to November 2017. Through marketplace: 134,761; Direct: 277,679.

[12] NJ Department of Labor, Major Indicators of Labor Market Activity for New Jersey Seasonally Adjusted 2017 Benchmark, https://www.nj.gov/labor/forms_pdfs/lwdhome/press/2018/20180719UITABLES.pdf

[13] Pew Research Center, U.S. Unauthorized Immigration Population Estimates, November 3, 2016, http://www.pewhispanic.org/interactives/unauthorized-immigrants/ https://www.njpp.org/wp-content/uploads/2018/02/NJPPCoverAllKidsJan2018.pdf

[14] Samantha Artiga, Kaiser Family Foundation, Potential Effects of Public Charge Changes On Health Coverage For Citizen Children, March 2018, https://www.kff.org/disparities-policy/issue-brief/potential-effects-of-public-charge-changes-on-health-coverage-for-citizen-children/

[15] Ibid.

 

Trump’s ACA Sabotage: Bad Medicine for New Jersey

Posted on by Raymond Castro

To read a PDF version of this report, click here.
For a “By the Numbers” breakdown, click here.

President Trump and the Republican leadership in Congress have caused great harm to New Jersey with their efforts to undermine the Affordable Care Act (ACA). Their systematic sabotage of the health care marketplace has not only affected thousands of New Jerseyans but the economy as well. For the first time since ACA was implemented, there are decreases in both the individual market and Medicaid, which this year amounted to 62,000 fewer New Jerseyans obtaining this coverage.[1] There is also concern that the uninsurance rate in New Jersey may be increasing again. The most recent preliminary national survey found an uninsurance rate of 10.6 percent in 2016 and 11.8 percent in 2017 for ages 18-65 in New Jersey.[2]

The decrease in enrollment this year in the Marketplace and Medicaid has resulted in up to $150 million in lost federal funds in New Jersey which will affect the economy.[3] In addition­­­, 137,000 middle class New Jerseyans who are not eligible for federal premium subsidies in the individual market paid approximately $125 million more for their insurance this year.[4] It is also estimated that there was a decrease of 22 percent in the number of Hispanics who are obtaining plans in the Marketplace due to Trump’s anti-immigrant policies.[5]

ACA Undermined in Almost Every Way Possible by Trump Administration

Congress may have been unsuccessful in their attempts to repeal and replace the ACA, but that hasn’t stopped the Trump administration from taking steps to undermine the landmark health care legislation. While it is difficult to keep track of all the attempts to undermine the ACA, the Trump administration has taken at least eighteen actions to deny health care to New Jerseyans. This includes slashing funding for navigators and advertising even though 35 percent of uninsured adults did not know about the Marketplace last year.[6] The President successfully persuaded Congress to repeal the individual mandate and eliminated cost sharing reduction payments to insurers which contributed to a spike in premiums for middle class New Jerseyans. His administration is also allowing states to sell association and junk insurance plans that do not include essential benefits that are especially needed for people with preexisting conditions. Through the Attorney General’s office, the administration is also urging a Texas court to allow states to charge higher premiums for Americans with pre-existing conditions, and the President wants to nominate a judge to the Supreme Court who would uphold such a decision.

Unprecedented Drop in Individual Market Enrollment

Enrollment in the individual market (which consists of New Jerseyans purchasing their insurance through the federal Marketplace website and those who purchase their plans directly)decreased to 329,000 from 369,000 in 2017, a drop of 39,858 New Jerseyans. This is the first decrease in enrollment since the Marketplace was established, wiping out the last two years of gains. This is especially disturbing as there are an estimated 149,000 New Jerseyans who are currently uninsured and eligible for premium subsidies.[7]

Insurance Has Become Unaffordable for Many Struggling New Jerseyans 

There was a greater decrease in the enrollment rate (14 percent) this year in the off-Marketplace than there was in the Marketplace (9.6 percent) because those New Jerseyans in the off-Marketplace must pay the full cost for their premiums, whereas 80 percent of New Jerseyans in the Marketplace receive federal subsidies.[8] The income limits for subsidies – $48,240 for an individual and $98,400 for a family of four – are modest given New Jersey’s high cost of living, especially with the recent increases in premiums. The full cost of average premiums for the standard plan in the Marketplace increased 19 percent in 2018, which is seven times the average rate of the previous three years of 2.5 percent. Much of that increase was caused by the expected elimination of the individual mandate and cost sharing reduction payments.

The 137,000 New Jerseyans who did not receive subsidies paid, on average, $900 more this year in premiums for a single individual and $3,600 for a family of four compared to the average premium over the last three years.[9] Given that premiums for a family of that size were typically over $20,000 per year before the Trump administration’s sabotage of the ACA, this year’s premium increase simply made insurance unaffordable for many New Jersey families.[10]

Family Enrollment in Medicaid Decreases for the First Time

For the first time since the start of its expansion in 2014, Medicaid enrollment decreased in fiscal year 2018 for parents and children. The sabotage of the Marketplace appears to be at least one of the causes for this decrease. About one quarter of everyone who enrolls in Medicaid does so through the Marketplace even though they can apply directly.[11] Up to 140,000 of these consumers are children and parents who were already eligible for Medicaid before the ACA but were unaware until they applied for assistance in the Marketplace. This exemplifies how cutbacks in outreach and advertisement for the Marketplace also affect Medicaid enrollment.

Before the Trump administration’s efforts to sabotage the ACA, New Jersey had projected an increase in Medicaid enrollment for 2018. Instead, 14,814 fewer residents enrolled between 2018. and 2017. Taking the state’s projections into account, there were 22,290 fewer parents and kids enrolled in 2018 than was expected. As the number of unemployed New Jerseyans has remained largely flat during this period, this decrease cannot be explained by economic factors.[12]

Trumps Anti-Immigrant Policies Suppress Enrollment in Medicaid and the Marketplace  

President Trump’s anti-immigrant rhetoric, federal policies, and proposals have done serious harm to Medicaid enrollment, especially in New Jersey, which has the fourth highest share of unauthorized immigrants in the nation.[13] The Trump administration’s overly aggressive actions to deport millions of unauthorized immigrants and its proposal to deny citizenship to legal immigrants if they or their child are on Medicaid discourages all legal immigrants from applying for Medicaid. This is especially true for undocumented parents who are afraid to enroll their citizen child because they fear the information will be shared with ICE and the parent will be deported. In New Jersey, one in six children have an unauthorized parent.[14] This problem is also leading to anecdotal reports that unauthorized parents are disenrolling their children in Medicaid. In 2016 there were an estimated 150,000 children covered by Medicaid/CHIP who had unauthorized parents.[15]

New Jerseyin Better Position than Most States, but Much More to Do to Achieve Universal Health Coverage

 Looking into the future, New Jersey is ahead of most states in working toward universal, affordable health coverage. New Jersey already has policies in place that prohibit the sale of junk plans, and the state recently enacted legislation that restores the individual mandate and establishes a reinsurance plan that will largely offset the hike in premiums caused by the Trump administration. Governor Murphy is also formulating an outreach plan that will maximize existing state resources, although it is unclear if funding will be restored for community-based organizations to perform the same functions as navigators.

While New Jersey has taken admirable steps to defend against attacks on the ACA, the state and its congressional representatives should not lose sight of the ultimate goal to provide universal health coverage. New Jersey’s uninsured decreased by about a third due to the ACA, but there are still approximately 700,000 New Jerseyans who are uninsured, and this number may be increasing again. It will be critical that the New Jersey’s congressional delegation reverse the Trump administration’s anti-ACA actions and improve the ACA to assist more people with more affordable coverage at all income levels.

New Jersey is limited in its ability to meet this challenge by itself, but there are realistic steps it can take to reduce the uninsured in New Jersey and reversethe Trump sabotage. It can start by passing legislation to fulfill the governor’s promise to cover all the remaining uninsured kids in New Jersey. This is achievable as approximately 95 percent of all children already have health insurance. The state should also consider a state takeover of the Marketplace, so it can extend the open enrollment period and make other improvements as other state Marketplaces have done. In addition, the state will need to vigorously advertise that New Jersey has replaced the federal individual mandate with a state mandate. New Jersey will also need to tackle the biggest challenge of all: how to reduce health costs while maintaining quality and access. Recent state enactment of surprise billing legislation that also eliminates inappropriate out-of-network costs and pending bills to limit prescription drugs are good first steps Over the last six months, New Jersey has been a model for stabilizing the health insurance market, but further bold action will be necessary to combat the Trump administration’s attempts to unravel the ACA.

 

Endnotes

[1] Decrease in enrollment in the individual market is from New Jersey Department of Banking and Insurance website and Medicaid enrollment is calculated from the SFY 2018 governor’s budget.

[2] Robin A. Cohen, Ph.D., Emily P. Zammitti, M.P.H., and Michael E. Martinez, M.P.H., M.H.S.A, National Health Interview Survey Early Release Program, Health Insurance Coverage: Early Release of Estimates From the National Health Interview Survey, 2017, https://www.cdc.gov/nchs/data/nhis/earlyrelease/insur201805.pdf

[3] The calculations for the lost Medicaid funding are explained in the table in the report. The lost funding in the Marketplace was calculated by multiplying the average premium subsidy in 2018 by the difference in the marketplace enrolment with subsidies in 2018 and 2017.  See average premiums at Kaiser Family Foundation website at https://www.kff.org/health-reform/state-indicator/marketplace-average-premiums-and-average-advanced-premium-tax-credit-aptc/?currentTimeframe=0&sortModel=%7B%22colId%22:%22Location%22,%22sort%22:%22asc%22%7D

[4] Calculated by inflating the premium in 2017 in the marketplace by the average increase over the previous three years and comparing that to what was the actual increase in 2018 multiplied by everyone who did not receive a subsidy.

[5] Karina Wagnerman, New Study Finds Evidence of a “Chilling Effect” in 2016 Marketplace Enrollment,July 19, 2018, https://ccf.georgetown.edu/2018/07/19/new-study-finds-evidence-of-a-chilling-effect-in-2016-marketplace-enrollment/

[6] Halley Cloud, In Latest Sabotage Administration Nearly Eliminates Marketplace Enrollment Assistance Funds, July 13, 2018, https://www.cbpp.org/blog/in-latest-aca-sabotage-administration-nearly-eliminates-marketplace-enrollment-assistance-funds

[7] Kaiser Family Foundation, Distribution of Non-Elderly Uninsured Individuals,https://www.kff.org/health-reform/state-indicator/distribution-of-nonelderly-uninsured-individuals-who-are-ineligible-for-financial-assistance-due-to-income-offer-of-employer-coverage-or-citizenship-status/?dataView=1&currentTimeframe=0&sortModel=%7B%22colId%22:%22Location%22,%22sort%22:%22asc%22%7D

[8] Kaiser Family Foundation, Effectuated Marketplace Enrollment and Financial Assistance, https://www.kff.org/other/state-indicator/effectuated-marketplace-enrollment-and-financial-assistance/?currentTimeframe=0&sortModel=%7B%22colId%22:%22Location%22,%22sort%22:%22asc%22%7D

[9] See note 5. Divided total increase in premiums by everyone who did not receive a subsidy.

[10] NJPP analysis of plans in Healthcare.gov for 2018.

[11] DMAHS email responding to OPRA request by NJPP, December 12, 2017. The period is December 2006 to November 2017. Through marketplace: 134,761; Direct: 277,679.

[12] NJ Department of Labor, Major Indicators of Labor Market Activity for New Jersey Seasonally Adjusted 2017 Benchmark, https://www.nj.gov/labor/forms_pdfs/lwdhome/press/2018/20180719UITABLES.pdf

[13] Pew Research Center, U.S. Unauthorized Immigration Population Estimates, November 3, 2016, http://www.pewhispanic.org/interactives/unauthorized-immigrants/ http://www.njpp.org/wp-content/uploads/2018/02/NJPPCoverAllKidsJan2018.pdf

[14] Samantha Artiga, Kaiser Family Foundation, Potential Effects of Public Charge Changes On Health Coverage For Citizen Children, March 2018, https://www.kff.org/disparities-policy/issue-brief/potential-effects-of-public-charge-changes-on-health-coverage-for-citizen-children/

[15] Ibid.

 

Newest Trump Sabotage of Obamacare Could Make Health Insurance Unaffordable for Many New Jerseyans

Posted on by Raymond Castro

To read a PDF version of this report, click here. 

Despite recent progress made by New Jersey to keep health care coverage more affordable, the Trump administration continues to come up with new and harmful ways to do just the opposite. In New Jersey, premiums have already increased by about 20 percent in 2018 and enrollment in the individual market dropped by an unprecedented 40,000 residents. These newest actions would further undermine the health care marketplace, make insurance unaffordable for many more New Jerseyans, and could even increase the uninsured rate, which has dropped by about a third due to the Affordable Care Act (ACA).

There is a long list of actions the Trump administration has already taken to sabotage the ACA, but the most recent include the following:

1. Payments for New Jerseyans with the most serious health conditions in the individual and small employer market are halted

The Trump administration indefinitely suspended $64 million in payments to insurers in New Jersey to defray the cost of covering consumers with high health costs in 2017 in the individual and small (employer) group markets. The decision by the Centers of Medicare and Medicaid Services (CMS) not to redistribute funds to insurers for high need consumers, who often have preexisting conditions, is based on their refusal to challenge or remedy a court decision in New Mexico that invalidated their methodology for distributing “risk adjustment” payments. Those payments were to be made to insurers to compensate them for consumers who are, on average, unhealthier and therefore have higher medical costs. The federal government does not save any money for halting these payments because they are paid by other insurers that have healthier consumers.

Risk adjustment payments are necessary as the ACA requires that insurers accept anyone with pre-existing conditions. Because some insurers end up assisting more of these and other, sicker consumers than other insurers, they need additional compensation for those higher costs. These payments are crucial as they are the only remaining mechanism to compensate insurers for higher than usual consumer costs. Reinsurance ended in 2016 and Republicans in Congress defunded the risk corridor program in 2013.

While a system without risk adjustment payments creates winners and losers in the short term, all insurers lose in the long run because those insurers that have relatively healthy consumers in one year may have more unhealthy consumers in subsequent years. Because of the uncertainly of these payments, there will be pressure on all insurers to increase premiums next year. Ironically, in the CMS announcement about halting the payments, it praised the effectiveness of risk adjustment which has been in operation for three years. By suspending the payments indefinitely, CMS has caused more uncertainty in the individual and small group (employer) market which will lead to higher premiums unless this matter is resolved.

2. Federal funds for outreach slashed to near nothing

A few days after announcing the suspension of the risk adjustment payments, CMS announced that they were also slashing funding for navigators who help New Jerseyans with signing up for insurance and outreach. New Jersey’s funding was already cut 61 percent last year, decreasing the state’s allotment from $1.9 million to $720,000, one of the steepest declines in the nation. CMS’s decision to lower national funding next year by another 70 percent would result in New Jersey only receiving about $400,000. In effect, this would result in no meaningful outreach and assistance statewide.

3. Trump’s Nominee for the Supreme Court could end protections for pre-existing conditions for most New Jerseyans

Because of the ACA, there are 3.8 million New Jerseyans with pre-existing conditions who cannot be charged more if they lose their employer-based coverage and need to purchase insurance in the individual or small group market. However, the Trump administration has argued in a case filed in Texas that because Congress eliminated the individual mandate, the court should allow insurers to charge consumers based on their pre-existing conditions as they did in the past. This would price many consumers out of the market. This threat has become even more serious given that President Trump will appoint a conservative justice to the Supreme Court where this case could ultimately be decided if it is upheld in lower courts. Should the administration get its way on eliminating protections for pre-existing conditions, it could finally unravel the ACA.

New Jersey has taken major actions to protect consumers, but more help will be needed

Thanks to Gov. Murphy and the Legislature, New Jersey was the first state to restore the individual mandate after Republicans in Congress repealed it. This was needed to avoid individuals gaming the system by waiting until they were very ill before purchasing insurance, which would drive up the premiums for everyone else to defray their additional cost. It also discourages individuals from not obtaining insurance and instead going to an emergency room, which would be paid for by taxpayers in the form of charity care payments to hospitals. Most low-income individuals who seek insurance in the marketplace find that their premiums are greatly reduced by federal subsidies and, if they are eligible for Medicaid, there is no cost at all.

New Jersey is also the only state to use the revenues from the individual mandate to help fund a reinsurance program to reduce premiums for middle class families who receive no federal premium subsidies. It has also submitted a waiver to the federal government that would secure $244 million in federal savings starting in the first year and increase thereafter over five years. The combination of these two initiatives would reduce premiums by an impressive 15 percent from what they would be otherwise.

In addition, one of the first acts of Governor Murphy was to sign an executive order requiring all state entities that interact with the public “to provide information to the public regarding the Affordable Care Act and ways to enroll,” subject to budgetary constraints and law. Such a plan to achieve this objective is being prepared by the governor’s office.

These laudatory pursuits will significantly reduce the impact of Republican efforts to undermine the marketplace, but they will not totally eliminate all the harm that will occur. This sabotage would still result in an increase in premiums from what they would otherwise be and possibly more uninsured people. The most effective strategy is for the state and New Jersey’s Congressional delegation to continue to strongly oppose these federal efforts to disrupt the marketplace. However, if that opposition is not successful, the state will need to come up with even more new and creative ways to protect New Jerseyans.

 

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