By Steve Friess, Special for USA TODAY

SANTA FE — For the Martinez family, this state capital's new $9.50-an-hour minimum wage — the nation's highest — has been a blessing and a curse.

Housekeeper Di Martinez, 24, is making about $160 more a month. That has helped her contribute more to the $780 rent on a two-bedroom, 650-square-foot house she shares with four friends and her brother, Marcelo.

Yet dishwasher Marcelo Martinez's take-home pay hasn't gone up at all. In some weeks, it has actually dropped after his boss cut back on offering overtime because of the higher hourly pay.

Four months after the new wage took effect, it's too soon to know the long-term impact on this city of 68,000, built largely on state government and tourism. Popular with celebrities and well-heeled art lovers, Santa Fe is an expensive place to live. The median home price for the last quarter of 2005 was $470,000, more than double the U.S. median of $213,000.

The city's minimum wage is scheduled to rise to $10.50 an hour in 2008, pending another vote by a City Council that overwhelmingly supported the increase to $9.50. The federal and New Mexico minimum wages are both $5.15.

Santa Fe's wage covers all businesses with 25 or more employees.

The city has had the USA's highest minimum wage since pegging the rate at $8.50 an hour in July 2004. Newly elected Mayor David Coss, who as a City Council member pushed the measure through, says the latest increase has had little effect on businesses here.

"There's been no real negative impact that we've seen," Coss says. "About 9,000 working families here got a raise. We had about the same job growth with the minimum wage as before. Santa Fe usually outperforms the rest of the state in job growth, and we still do."

Healthy job growth

A University of New Mexico study released in late 2005 shows Santa Fe job growth was 3.5% in the first year of the $8.50 wage, ahead of the 2.1% growth for the state.

Opponents of the higher wage say the impact has been slight because almost all workers here earn well above the federal minimum. The de facto wage floor has been about $7.50 because of the high cost of living in Santa Fe, so bumping it to $8.50 was easy to absorb, says Simon Brackley, interim president of the Chamber of Commerce. The chamber sued to block the $8.50 wage but chose not to appeal in mid-2004 when a judge upheld it.

"A lot of our concerns were not about whether an individual business can afford to pay a little bit more. It's the unintended consequences," Brackley says. "If you pay $9.50 an hour to someone who just walked in off the street, then someone else who's been working there for a couple of years, who has been gaining skills and proving loyalty, should automatically get more because they're worth more to the business."

Some business owners suggest that the $10.50 wage planned for 2008 should be partly based on experience.

"I don't think that's what a teenager at his first job should be paid or someone that we're training," says Sarah Wilhelm, owner of the Aztec Cafe. She starts workers at $7.50 an hour because, as a business with fewer than 25 employees, she's not governed by the $9.50 law.

Al Lucero, who owns Maria's restaurant and opposed the higher wage, says the increase has prompted him to cut back on overtime to save money.

Lucero says he's mainly concerned that the high minimum wage will dissuade businesses from coming to Santa Fe and prompt them to choose less expensive places to operate, such as Albuquerque or Las Cruces.

"I'm not opposed to a minimum wage, but I believe it ought to be applied equally, that it should be done by the state or the federal government, not city to city," he says.

Some business owners say Santa Fe's distinction of offering the highest minimum wage is a badge of honor.

"Santa Fe has always had the reputation for attracting free thinkers and progressives," says Larry Keller, owner of Design Warehouse, a furniture store where he pays starting employees $14 an hour. "If it can work here, why couldn't it work in Oklahoma City?"

Better than before?

Keller says $10.50 is "the compromise because business people for the most part feel they can afford to pay it, that it's not going to jeopardize the bottom line. It's the beginning of some kind of wage that (workers) can pay the rent, put food on the tables (with). I'm not sure $9.50 gets you paying a $100,000 mortgage or owning your own home, but it's a lot better than before."

At the Martinez home, that's questionable. "I don't really think it's made that much of a difference, except to the politicians," Di Martinez says. "We had this much before, now we have that much. But that much isn't a whole lot, anyway, you know?"

For Ivan Cornejo, 18, the new wage has been a big help. The Santa Fe Community College freshman received an immediate raise at his part-time job as a store cashier and has since moved on to work as a teller at a local bank branch, where he gets more hours. Between the new wage and the additional hours, his take-home pay has jumped from $125 to $360 a week. He now gives his parents, with whom he lives in a three-bedroom home, $250 a month toward rent and food.

"It's been a big change for me and most people I know," Cornejo says. "Now I can buy movies instead of renting. I can buy books instead of getting them from the library."