Sunday, September 25, 2005

Wage Statistics Don't Add Up

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    EDITORIAL: The upcoming referendum in Albuquerque on a proposed living wage law has refreshed interest in Santa Fe's ordinance, which has been in effect just over a year now. Advocates on both sides of the issue have been marshalling statistics, mainly in an effort to persuade voters in the city to the south to come down on their side, but also as part of the speculation about the state of Santa Fe's economy in general, and the cause of the drop in city gross receipts tax revenues.
    Unfortunately, these pro and con arguments on the economic effects of the living wage have been made piecemeal, with each side seizing on the statistical factoids that best support their view. A thorough and most unbiased assessment of the effects of the law won't be available until late next year, after the University of New Mexico's Bureau of Business and Economic Research completes a follow-up to its massive 2004 study of Santa Fe's pre-ordinance economy.
    In the meantime, here are some apparent contradictions among the data cited by both sides— food for thought until the UNM study is available.

· The Santa Fe Chamber of Commerce and the New Mexico Lodging Association say the living wage is "killing" Santa Fe's hotels, citing the fact that two downtown hotels are being sold. However, the Albuquerque Living Wage organization, citing New Mexico Department of Labor figures, notes that the number of jobs in Santa Fe's leisure and hospitality sectors— supposedly the hardest hit by the living wage requirement— grew at a rate of better than 3 percent. The state Department of Labor says these gains "stand out," although the department notes that jobs in the professional and business services sector in Santa Fe grew by even more.
    Then there's our favorite figure: $4,500. That's how much one downtown Santa Fe hotel has returned this year to each of its employees as part of a profit-sharing plan. And that's despite having to pay a living wage to those same employees.

· The Washington-based Employment Policies Institute, a living wage opponent, noted that Santa Fe's unemployment rate has risen in the last year, or since the living wage ordinance took effect. Living wage advocates, however, point to a 2 percent increase in the number of jobs in Santa Fe overall, the same as the average for the state.
    Experts at UNM's business research bureau note that while Santa Fe's unemployment rate grew by 0.4 percent last year, unemployment statewide and in Albuquerque, both without living wage requirements, was up by a comparable 0.3 percent. And they explain that a rise in unemployment can come about because of an increase in the number of jobs— encouraged by job availability, people enter the labor market, where they are counted as unemployed until they actually land a job.

· In comparison to the less-than-1 percent increase in Santa Fe's unemployment rate, living wage advocates note that the number of families receiving welfare benefits here fell in the last year by almost 10 percent.
    The decline is particularly interesting in view of UNM's baseline study of the city's economy pre-living-wage. The study found welfare rolls in the state as a whole declined after welfare reforms were instituted in 1997. But in Santa Fe, possibly because of the city's very high cost of living and dearth of affordable housing, welfare rolls increased sharply in the wake of reform. The advocates argue that the higher minimum wage has contributed to getting so many families off the welfare rolls.

· The Chamber of Commerce calls the living wage ordinance a "disincentive" for business— a remark usually made in the context of arguing that the City Council generally is "anti-business." The drop in city gross receipts tax revenues— sufficient to prompt cost-cutting measures at City Hall— might be read as evidence that Santa Fe's economy has suffered some sort of downturn during the past year. However, the reasons for the revenue drop may be only a matter of record-keeping— though still below last year's, revenue figures have been revised upward with every review by city finance and state tax officials, and some peculiarities in the figures have not yet been unexplained. As one city councilor observed, by all other signs— building permits, hotel occupancy rates, the number of tourists— the city's economy seems to be robust.
    In short, without more data and more careful study, nobody on any side of the argument can draw meaningful conclusions about the effects of the living wage ordinance on business, or on the city's economy as a whole.