Santa Fe New Mexico: The Latest to Wrestle
With Local Minimum Wage Law Issues

Santa Fe, New Mexico is the latest community to debate the benefits of living wage and other types of local minimum-wage laws. A recent article in the Santa Fe New Mexican covered one such debate at a recent Santa Fe City Council meeting.

The Santa Fe City Council has scheduled a February 26th public hearing to consider an ordinance that would make it mandatory for private companies with more than 10 employees to pay a minimum wage of $8.50 starting July 1. The federal minimum is $5.15. The proposal calls for Santa Fe's minimum wage to rise to $9.50 by July 1, 2005, and $10.50 by July 1, 2006.

Here is our advice on this issue:

1. The pros and cons of local minimum wage laws should be judged on an individual basis. These costs and benefits should be assessed in an objective and unbiased manner.

2. While a number of cities--maybe 100 or so--have adopted this legislation, it is important to understand their rationale for adopting these laws. Some communities believe they are saddled with too many low-paying jobs and not enough good paying jobs exist in the community. Before jumping to a solution, it may be helpful to investigate why your community is such a good place for lousy paying jobs. Maybe your community should work harder at creating more high-quality jobs that pay more. In other cases, we find these efforts are strictly politically-motivated and have no economic grounding whatsoever.

3. Look at what is happening across the country on this issue. Go here to see what the states are up to with respect to state minimum wage laws. Listen to what those for these laws have to say. Go here. And listen to what those against these laws have to say. Go here.

4. Employers for the most part do not like local living and minimum wage laws. In some case studies we have examined, these laws do not appear to have any impact on developing more high-quality jobs in communities. We find instead in talking with businesses searching for new business facility locations, that these laws are seen as a negative in their own right and they are seen as an indicator of a unfriendly local business climate.

5. As we look at economic growth drivers both nationally and globally, productivity and value-creation will be most important to growth, especially in an unforgiving economic environment like the one we have today. Local minimum wage laws do not give incentive to productivity-based growth. From this perspective, we are skeptical of the benefits of local living-wage and minimum-wage laws.

6. We advise our economic development clients that they should work to create a balanced mix of employment opportunities for the community. This mix should be evaluated on a regular basis because work design and job content are very dynamic. We also advise them to create high-multiplier jobs that trigger other job growth in the community. Done right, industry cluster strategies can accomplish this for a community.

7. As we look at longer term technological forecasts, we see more automation of low-paying routine jobs in most industries. This job elimination trend will be forced by increasing pressure for businesses in all industries to meet global competition standards. This suggests that communities with workforces not ready for higher skilled jobs will need to strengthen their job-skill upgrading efforts to ensure that local workers can compete for better jobs as they come.

8. Our research finds a correlation between low-skilled and low-paying jobs and the presence of consumer and retail service industries, which as a rule do not drive growth in local economies, even in tourism-based economies. Economic growth is driven by export-based industries and industry clusters that bring new income and other economic resources to the local economy. That is not to say retail and consumer service jobs are not important, because they are important in supporting local consumers and in some cases visitors. Generally, these are not the jobs that most communities should provide incentive to in order to grow in the local economy. They tend to grow when local disposable income grows.

This is a complex issue that we have seen in many communities, both large and small, across the country. Our overall advice is to put your energy into economic development efforts that are consistent with the drivers of economic growth. Don't create job creation penalties in your community.