Maximizing The Minimum

New Mexico's minimum wage, currently set at the federal minimum of $5.15 an hour, will be one of the major topics dealt with during the 30-day State Legislative Session that began on Tuesday. Involved parties on both sides of the issue believe that an increase will pass. If speculators are correct, the minimum wage legislation will deal less with whether the wage will be increased, and more with how much it will be increased, as well as how a new wage mandate might be implemented.

Base Pay Background

It seems as though the minimum wage has always been an issue of contention. In 1933, the first American wage legislation was passed with the National Recovery Act, setting a minimum wage of $0.25 an hour ($3.50 by today’s standards, according to the Bureau of Labor Statistics). Yet, just two years later in 1935, the legislation was declared unconstitutional by the U.S. Supreme Court. The minimum wage was re-established, however, and in 1938 the Fair Labor Standards Act set it again at $0.25. Since then, a minimum wage has remained in place, although it has continued to garner controversy.

Proponents of a minimum wage tend to argue that it reduces worker exploitation, stimulates economies by increasing consumer-buying power and encourages employer investment in workers. Opponents, however, say it eliminates jobs, makes it hard to employ the unskilled or young, curbs economic growth by increasing the cost of labor, increases the cost of goods and services, encourages businesses to relocate and deters workers from gaining skills.

Evidence as to whether or not the minimum wage is of economic benefit has been mixed. In the Winter 2005 Journal of Economic Perspectives, a survey reports that two thirds of academic economists believe that “a minimum wage increases unemployment among the young and unskilled.” However, many proponents of the minimum wage cite the 1997 book Myth and Measurement: The New Economics of the Minimum Wage by David Card and Allan Krueger. Card and Krueger's empirical research concludes that there are some negative effects on employment that stem from a minimum wage, but that they only affect adolescents.

Recently, New Mexico Voices For Children and New Mexicans for a Fair Wage released their own collaborative study, which looked at increased minimum wages in 14 states as well as the District of Columbia between 2002 and 2005. The results concluded that of the 15 minimum wage increases, only two states showed job growth below the national average. The study also concludes that there have been no negative employment effects from Santa Fe's controversial minimum wage increase last July from $5.15 to $8.50. This month, Santa Fe's minimum wage was lifted to $9.50, the highest in the country.

The Near Future

Statewide, a large group of organizations, such as the New Mexico Public Health Association, New Mexico Conference of Churches, UNM Law and Society and New Mexico Voices For Children, to name a few, have formed a coalition in support of increasing the minimum wage to $7.50 an hour. The coalition also supports indexing the minimum wage to the rate of inflation, and they oppose any legislation that prevents municipalities from increasing their own minimum wage.

“I think raising the minimum wage can help reduce poverty,” said Gerry Bradley, Economist and Research Director for New Mexico Voices For Children and author of the recent local study. “It can raise incomes for low-income workers, and I don't see any evidence from looking at other states, from Santa Fe or from reading literature that it's costing jobs.”

Bradley and other members of the coalition are in luck, because all signs seem to be pointing to a minimum wage hike passing during this Legislative Session. House Speaker Ben Lujan (D-Santa Fe) has drafted a bill that, if passed, would raise the minimum to $7.50 an hour. There may also be more proposals on the table, including one from Gov. Bill Richardson. Gilbert Gallegos, spokesperson for Gov. Richardson, said an increase is a top priority for the governor and that Richardson believes the increase would assist New Mexico's economic development by increasing residents’ buying power. “The governor believes there's strong support throughout the state for increasing the minimum wage,” said Gallegos. “The federal government obviously isn't doing much to increase the wage, so the governor feels like the state should take the lead at this point and provide a decent wage to all New Mexicans.”

The Other Side

There are some, however, that aren’t pleased with the likelihood of a minimum wage increase. House Minority Leader Ted Hobbs (R-Albuquerque), for one, said he's opposed to a wage hike. He said in his experience, when the minimum wage is raised, jobs are lost and small businesses are negatively impacted. “It's anti-business, it will curb economic development and it will cost jobs,” he said, adding that he thinks a minimum wage bill will pass because the governor and Democratic majority support it.

As it was with Albuquerque's attempt to increase its own minimum wage in October, members of the business community also fear that an increase will be economically detrimental. “We are very concerned about unintended consequences,” said Terri Cole, president and CEO of the Greater Albuquerque Chamber of Commerce. Cole said the Chamber of Commerce has a two-part stance on the matter, the first being that the wage control should be set at a federal level and the second being that they have agreed to be at the table to discuss a proposal from the governor. Cole said an incentive for businesses that provide health care that would allow them to pay workers a smaller wage would be a good incentive for any bill.

The Association of Commerce and Industry (ACI) of New Mexico, the state's chamber of commerce, is similarly opposed to a minimum wage increase. “Our preference is to have a uniform federal minimum wage,” said ACI President John Carey. “It makes more economic sense to have one minimum wage for the whole country, rather than different states and municipalities having a patchwork of different minimum wage levels.” Carey said ACI will look at bills to see what the impact will be on business and job growth, but he said the best way to increase wages is through the marketplace, adding that if an environment is created in New Mexico that encourages business growth and expansion, wages will automatically rise. According to Carey, the economy could be stimulated by creating tax incentives and competition in the workplace and by improving the regulatory climate (i.e. making it easier for businesses to get various permits). Carey said ACI will work closely with the administration and legislators to try to come up with a package that's not too burdensome.

New Mexicans should know by late next month whether or not the state's minimum wage will go higher than the federal. At press time the governor had yet to announce his proposal. For more information on the minimum wage, visit www.bis.gov, www.aci.nm.org, www.epinet.org and www.nmfairwage.org.