Businesses Combat A $1 Minimum Wage Increase

Businesses Combat A $1 Minimum Wage Bump

\ Oct 11, 2012

7 min read

Bucking the Buck — (Jeff Drew jeffdrewpictures.com)

After narrowly clearing its first hurdles to get on the November ballot, the Albuquerque minimum wage ordinance still faces powerful obstacles.

A coalition has formed to fend off the initiative, which would raise the city’s hourly minimum wage from $7.50 to $8.50. The ordinance would also tie the minimum wage to a national inflation index to account for yearly cost-of-living increases.

The hike includes a mandate for tipped employees in restaurants and bars, who earn $2.13 an hour—just enough to cover or partially cover their federal and state taxes. If approved by voters, the new minimum wage for tipped employees will increase to about $4 by 2013 and $5 by 2014.

Today’s minimum wage law allows employers who invest $2,500 in employee benefits yearly to knock $1 off their minimum wage rate. The new ordinance would maintain that exception.

Tens of thousands of signatures were required to put this issue before voters. The signatures were collected by Organizers in the Land of Enchantment and other labor and community groups. But activists had to fight to keep it on the ballot because of a typo in the text. The issue went all the way up to the state Supreme Court, which ruled that the measure should be allowed on the ballot.

Going Up

On Thursday, Sept. 27, about a dozen people waved pro-wage hike signs at the intersection of Central and Yale. Demonstrators said they were hopeful voters would approve the measure. Drivers seemed to agree, blasting their horns as they sped by.

Husband and wife Michelle and Don Meaders, longtime activists, say Albuquerque should take a stand for working folks. The wage hike could affect around 40,000 city residents, according to a report published by New Mexico Voices for Children.

Don says the decent wages and benefits he received as a union worker should be extended to all working people. "Anything you can do to get more money in the hands of workers, they’ll spend it," he says. "Then it’ll go around and around in the community to everybody."

James Cook agrees. The 19-year-old had just returned from Manhattan for the anniversary of Occupy Wall Street.

"The more we increase the minimum wage, the more people will start spending, which is going to create jobs. It’s 2012 and there are 49 million people living in poverty, 97 million people near poverty. It’s time to change something."

Burque Works

Opponents of the ordinance don’t take issue with the contention that changes are needed to jumpstart Albuquerque’s economy. But a higher minimum wage won’t help, they say. Instead, they predict businesses will suffer, and so will workers.

The New Mexico Restaurant Association has been marshaling other business groups as part of the Keep Albuquerque Working campaign to fight the wage hike. Their contention, as stated by CEO Carol Wight, is that the higher worker pay will increase costs for small restaurants by an extra $50,000 a year—which many of them simply can’t afford. Larger restaurants could see $150,000 more in costs.

The Rio Grande Foundation is a member of the coalition fighting the ordinance. President Paul Gessing says the restaurant industry will be disproportionately affected, which could lead to price increases and layoffs. He adds that companies employing minimum wage earners will be forced to make cutbacks or freeze hiring of entry-level employees—the very people the measure aims to assist. "Study after study, economic report after economic report, has shown that you have a significant number of people at the bottom of the skill set scale who end up out of work," he says.

John Schmitt, a senior economist at progressive think tank Center for Economic and Policy Research, says it’s typical for employers to predict dire consequences before minimum wage ordinances go into effect. The key, he says, is to look not at what businesses say before a wage increase, but at what can be measured afterward.

Behind the Numbers

Both sides of the minimum wage fight in Albuquerque look northward to back up their cases. While Santa Fe pays entry-level workers the highest wages in the county, the City Different also has the state’s lowest overall unemployment rate. Those figures, say supporters, show minimum wage increases don’t have negative effects on the economy or jobs market and may even have positive impact.

Schmitt says that two new national reports—“studies of studies that use statistical techniques”—have found no overall effect on employment in places where the minimum wage was increased. He also refers to a University of New Mexico report published in 2007, “which found that overall employment levels in Santa Fe were not affected by the living wage ordinances.”

Schmitt and a colleague conducted their own study in 2011. They looked at job creation in Santa Fe’s low-paying industries before and after the wage increase and compared it to surrounding areas and Albuquerque. “We found that there was no difference in the job creation rate as a result of the minimum wage. … The weight of the evidence nationally and in New Mexico both says that there’s not any significant effect on the minimum wage and employment.”

Terri Cole is president and CEO of the Greater Albuquerque Chamber of Commerce, which also opposes the ordinance. Cole, who has been in close contact with the Santa Fe Chamber of Commerce, says employment data doesn’t reflect other business realities.

Some Santa Fe businesses have simply had to close their doors as a result of the initiative, she says, and that info isn’t reflected in overall jobs numbers. “Other factors that you really can’t find in any data table … have included lower giving from business to charities." Plus, the higher worker wages encourage young people to leave school, says Cole, which contributes to Santa Fe’s already “dismal” dropout rate.

Julia Castro, a restaurant owner in Santa Fe for 20 years, says her experience with minimum wage increases has been positive. “When my employees and customers make more, they spend more. … My business has had no problem adjusting.” She also says that her staff seems happier and gives better service.

Rio Grande Foundation’s Gessing pointed out in his KIVA AM radio talk show that it may not be appropriate to compare Albuquerque’s economic picture to Santa Fe’s. “They don’t call it the City Different for nothing,” he noted. “It’s a very unique place with a very unique job market." The population there is only 70,000, and Albuquerque’s is more like 550,000.

Ultimately, the fate of Albuquerque’s ordinance on Election Day (Tuesday, Nov. 6) may come down to which side wins the public relations battle. Organizers in the Land of Enchantment appears to be working the people-power angle: The group put out a hiring call on Wednesday, Oct. 3, for canvassers to walk neighborhoods and work phone banks. The Keep Albuquerque Working coalition aims to raise $500,000 to launch TV, radio, billboard and direct mail advertising campaigns against the ordinance.