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By Bob Quick The New Mexican |
December 13, 2005
The city’s minimum-wage ordinance doesn’t seem to have harmed Santa
Fe’s economy, according to a preliminary
analysis released Monday by The University of New Mexico’s Bureau of
Business and Economic Research.
In fact, job growth is strong and reliance on social-assistance programs
in Santa Fe County
is down since the city imposed the $8.50 hourly minimum on employers with
more than two dozen workers.
While business owners surveyed for the 85-page report have adapted to the
$8.50 level for the most part, many are pessimistic about how a scheduled
increase to $9.50 on Jan. 1 will affect their enterprises and the cost of
living in Santa Fe.
The report will be followed in May 2006 by the release of a more
comprehensive study, said Lee Reynis, director of the research bureau.
The preliminary study was issued just days before the City Council is
scheduled to consider whether to delay the next minimumwage increase.
Some councilors have said they want to put off the increase until they
have a clear picture of the municipal wage law’s economic impact. The
state and federal minimum remain at $5.15 an hour.
The preliminary study covers the time period from mid-2004 , when the
ordinance went into effect, through the second quarter of 2005.
“Basically the Santa Fe
economy seems to be doing fine with the possible exception of
construction ,” Reynis said Monday in a telephone interview. “I think
people will have some (hard evidence ) to analyze and not just anecdotal
evidence with which to make their decisions.”
Gerry Bradley, research director with New Mexico Voices for Children, and
a proponent of the higher minimum wage, said he was “utterly unsurprised
by the study. Jobs continue to increase, wages are up and gross receipts
behave erratically, as they always have. If you look at the economy from
before the living wage and then afterward, it shows smooth upward
patterns.”
Bradley also said there is “no indication” that Santa
Fe employers will not be able to adjust to the
pending $9.50 wage level. “I expect a lot of it to be paid for by
tourists,” he said. “I think tourism is doing well in Santa
Fe.”
Simon Brackley, interim president of the Santa Fe Chamber of Commerce,
one of several business groups challenging the minimum wage in court,
said the study might be skewed because many of the statistics are for Santa
Fe County
and not just the city of Santa Fe.
He also criticized the fact that individuals taking part in the focus
groups were paid to do so.
Brackley pointed to what he says are “serious questions” about the effect
of the $8.50 wage and called on the City Council to defer the $9.50 wage
until the consequences of the higher wage are clear.
The council will hold a study session on the wage analysis at 3 p.m.
Wednesday and might decide at its regular meeting later that evening
whether to allow the $9.50 wage hike to go ahead as planned.
One of the big worries about the minimum-wage ordinance was that it might
result in job losses as employers cut staff to compensate for higher
labor costs.
That didn’t happen, the preliminary report said. “Implementation of the
living wage does not appear to have resulted in employment declines. Many
sectors of the Santa Fe
economy have experienced strong growth since the minimum wage went into
effect in July 2004.”
Santa Fe’s growth “is coming from
accommodations and food services, from information services and from
professional and business services,” the report said.
Santa Fe County’s
unemployment rate has been “well below” that of the Albuquerque
and Las Cruces areas, the
report said, and there is no “clear evidence” the rate has increased
since July 2004. The rate of job growth was up 3 percent in every month
since February 2005, well above the growth seen throughout 2004 and also
above the historical trend for Santa Fe
County.
As for earnings, the study found that average wages showed “considerable
improvement” in the first half-year following implementation of the
minimum-wage ordinance.
The only sector in Santa Fe County
in which there was a sharp drop in employment and earnings was
construction, which is booming elsewhere in the state and around the
country. The reason for that is unclear, but the minimum wage might have
been a factor, the study said.
“For whatever reason, the construction boom in Santa
Fe seems to have come to an earlier end here
than elsewhere in the state. The mandated living wage may have had a
role,” the report said. “Sharply rising real estate prices undoubtedly
also had a role.”
On the other hand, there was strong job growth in the hospitality and
food-service sector, in which many lower-wage workers are employed. That
growth peaked in the first quarter of 2005 at 5.3 percent, then slowed.
“It is common to see such a slowdown after four quarters of strong
growth,” the report said.
Backers of the ordinance hoped for a reduction in poverty and reliance on
socialassistance programs such as the Temporary Assistance for Needy
Families, food stamps and general assistance.
That appears to have happened , the researchers said.
“Caseloads for both TANF and general assistance have generally declined
faster or grown more slowly in Santa Fe
County as compared with the
state as a whole since the minimum wage went into effect,” the analysis
said. “Food-stamp caseloads have actually increased faster in Santa
Fe County
than statewide.”
The report didn’t address what might have caused the higher use of food
stamps, other than to imply it might be due to population growth.
The city’s gross-receipts-tax revenues have fallen in recent months,
which some have suggested indicates a weakening economy, but the study
says that’s probably not the case.
“The poor performance of taxable gross receipts is at least partly
explained by the significant change in the tax code,” the study said.
In reporting the results of a mail-out survey to businesses, the study
indicated that more than half of the respondents said their business had
been affected by the $8.50 minimum wage, and 36 percent of those
companies said they had reduced overall employment.
Almost 44 percent of responding businesses cut overtime , and others
reduced parttime workers.
More than 60 percent of businesses affected by the higher wage raised
their prices, and 10 of the 297 businesses surveyed indicated they have
moved or would be moving outside the city limits.
Among major concerns about the scheduled increase to $9.50 an hour is the
worry that the higher minimum would force businesses to close. “Another
frequent concern was that the high minimum wage would serve as a
disincentive to local workers to improve their skills or get more
education,” the study said.
The third major concern was that price inflation caused by higher labor
costs would drive up the cost of living in Santa Fe.
Among the unintended consequences of the minimum wage is that
organizations that provide vocational services to people with
disabilities find it more difficult to find jobs for people with
disabilities.
That’s because employers fear they won’t get as much productivity for
their money as they would with other workers, the report said.
Another concern is that at $9.50, employers are less likely to hire un-
or low-skilled workers such as high-school students.
City councilors said they were pleased with the study and found it
helpful in evaluating the impact of the minimum wage on wage earners and
the economy.
Carol Robertson-Lopez said she was more interested in what the study said
about the $9.50 wage than the current $8.50 wage. “Right now I’m trying
to listen to my district, and there are concerns about the unintended
consequences” of the higher wage, she said. “It could make Santa Fe even
more unaffordable .”
Councilor Karen Heldmeyer said the first impression she got from reading
the report was that the economic trends in Santa Fe were similar to those
elsewhere in the state.
Heldmeyer sees “no major roadblocks” for the city to proceed to the $9.50
wage level.
Competing report sees economic harm
Aaron Yelowitz, an economist with the University of Kentucky, recently
released a report critical of the city of Santa Fe’s minimum-wage
ordinance, saying it led to negative consequences for workers in the
city, especially for low-skilled employees.
Yelowitz was an expert witness for business groups who in 2004 took the
city of Santa Fe to state District Court in an effort to overturn the
ordinance.
“The increased likelihood of unemployment and a decreased number of hours
worked were all highest for low-skill employees,” Yelowitz found.
The professor also found “significant evidence” that adult employees were
displaced in the job market by unmarried high-schoolage employees.
“The Yelowitz study is very partisan,” said Andrew Lewinter, who is with
the Santa Fe Living Wage Network, a nonprofit group that supports the
minimum wage. “He really misrepresents the data. His goal was to prove
that the ordinance has a negative impact. It’s important that none of us
get confused between what is objective and what is partisan.”
Wage Study at a Glance
Among conclusions in a preliminary study of the impact of the city of
Santa Fe’s $8.50 hourly minimum wage:
The law hasn’t harmed the local economy, which continues to show strong
job growth and less reliance on social-assistance programs.
Owners of affected business have, for the most part, adapted to the $8.50
requirement, but many are pessimistic that a scheduled increase to $9.50
on Jan. 1 will hurt their bottom line, push prices higher and possibly
lead to closures.
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