July 25, 2006, 9:12PM
Santa Fe's in the spotlight in minimum wage hubbub

By LOREN STEFFY

SANTA FE, N.M. — This city, one of America's oldest, has become an example of the country's newest type of economic activism.

It began as an experiment in setting a minimum wage high enough that workers could afford Santa Fe's elevated cost of living. It ended up with business owners caught between entrepreneurship and a sense of economic justice.

"We were really a test case for the country," says Simon Brackley, president of the Santa Fe Chamber of Commerce. "The eyes were on Santa Fe."

Whether this experiment has been a success depends on whom you ask.

Two years ago, Santa Fe adopted a "living wage" ordinance setting the base pay for most private businesses at $8.50 an hour. The rate rose to $9.50 earlier this year and is up for review again in early 2008, when it could climb to $10.50.

By Houston standards, the rate seems high, but not for a resort community like this. Even opponents of the ordinance agree that the federal minimum wage of $5.15 an hour was far too low for anyone to live on here.

Mayor David Cross says Santa Fe was becoming too costly for service industry employees, the bedrock of the local economy, to live in the city. Many were moving to nearby towns such as Rio Rancho to the south and Espanola to the north.

"That divide between those who were doing well and the service workers who were moving farther and farther out of town was growing," says Cross. "It was a thriving community that a lot of people couldn't afford to live in any more."

Unchanged federal wage

Across the country, activists have promoted living wage legislation, driven by the stagnant federal minimum, which has been unchanged for almost a decade.

An initial push by community groups in the late 1990s, including efforts to promote a living wage in Houston, fizzled. But the longer the federal wage has remained unchanged, the more efforts such as those in Santa Fe gained momentum.

So far this year, six states have raised their minimum wages, and in all, about 23 now have laws that supersede the federal requirement. The latest battle is playing out in Chicago, where the City Council this week will vote on whether big-box retailers such as Target and Wal-Mart should be required to pay workers a minimum of $10 an hour, which includes a mandatory $1.50 in benefits.

Earlier this year, Lawrence Township, N.J., enacted a similar law, and other cities — including Santa Fe's neighbor, Albuquerque — have either adopted or are considering them.

Santa Fe, though, remains the model. To hear Cross and other supporters tell it, the living wage has had no negative impact on the local economy.

They point to statistics from the New Mexico Department of Labor showing the city gained about 1,500 jobs last year, causing Santa Fe's unemployment rate to fall to 4 percent from 4.5 percent. The strongest area of job growth has been in the leisure and hospitality sector, which also has been the area most affected by the living wage.

Aid to needy families fell almost 10 percent in the city, while it fell less than 1 percent statewide.

In terms of an economic downside, "it's just not there," Cross says.

Brackley, the chamber president, says the evidence of any consequences is largely hearsay. The city still is awaiting the results of a definitive economic study, which was supposed to be completed last month.

Brackley, though, says the higher wage has scared off some business. The Gap, for example, closed its stores in the city, as did Toys "R" Us — surprising, given Santa Fe's growing economy. Other business owners have canceled expansion plans, and some newcomers, such as Chili's, chose to build in Espanola, about 25 miles to the north.

Cross, however, argues that the living wage is a vital economic development tool. Instead of shelling out tax breaks to lure companies that make a one-time promise of new jobs, Santa Fe is offering a wage that will attract working families, Cross says. It's a strategy that is focused on growing local businesses rather than attracting outsiders.

Avoiding overtime

Local business owners, though, don't feel as if they're being nurtured.

Al Lucero, who owns Maria's New Mexican Kitchen, a Santa Fe institution since 1950 with about 52 full-time employees, says he's reluctant to hire more people and tries to avoid paying overtime because of the cost.

"It's almost an impossible task to pay overtime now because you're looking at $14.25 an hour" for dishwashers and prep cooks, he says.

It's about morality

When I went to Santa Fe to study the issue, I thought the living wage was about economics, but it isn't. The movement is a morality play, and one that consistently generates overwhelming support. In polls here, the living wage never received less than 65 percent support from the public.

Brackley says the living wage movement isn't really about wages at all; it's about poverty and how communities address it. If business leaders don't want a living wage, he says, they should get behind anti-poverty programs.

Otherwise, as small-business owners in Santa Fe have found, the issue becomes an emotional one for voters and a political windfall for politicians.

"They don't want to be the bad guy," says Laurie Lucero, Al's wife.

In Santa Fe, that role was left to the small-business owners.

•In my column on Friday, I'll look at how workers and business owners in Santa Fe have dealt with the living wage.
-SIGNER- Loren Steffy is the Chronicle's business columnist. His commentary appears Sundays, Wednesdays and Fridays. Contact him at loren.steffy@chron.com. His blog is at http://blogs.chron.com/lorensteffy/.