Raising New Mexico’s minimum wage will result in devastating job loss for low-skilled employees;
Research reveals Santa Fe’s living wage ordinance as cautionary tale against minimum wage hikes
Publication Date: February 2006
Topics: Minimum Wage
Washingon, D.C.–As New Mexico legislators debate a hike in the state’s minimum wage, the Employment Policies Institute advises lawmakers to learn from the devastating consequences of Santa Fe’s living wage ordinance which included job loss, involuntary part-time employment, and perhaps most surprisingly, no significant increase in income for those earning at the lowest 10th, 25th or 50th percentile.
EPI-sponsored research from economist Aaron Yelowitz of the University of Kentucky on the outcome of Santa Fe’s living wage ordinance revealed roughly a 16 percent increase in the unemployment rate and an alarming loss of 540 jobs as a result of the wage hike. The research also revealed that Santa Fe’s least educated residents—those with 12 or fewer years of education—suffered nearly all the job losses. In addition, the low-skilled adults who do keep their jobs end up working fewer hours than before; those with 12 years or fewer of education saw their hours reduced by an average of 3.2 hours per week following the increase.
Research showed that job loss among this vulnerable group was due in large part to the fact that high school students attracted by the higher wage entered into the labor market. In fact, the likelihood that an entry-wage employee was an unmarried teenager enrolled full-time in high school more than doubled after the ordinance was enacted.
Leading economists agree minimum wage increases result in job loss. Former Federal Reserve Chairman Alan Greenspan has said, “The reason I object to the minimum wage is I think it destroys jobs, and I think that evidence on that, in my judgment, is overwhelming.”
On Wednesday before the federal Financial Services Committee, Chairman Benjamin Bernanke echoed his predecessor’s belief and added that “one might consider alternative ways of helping working-class Americans—for example, the earned income tax credit which delivers money to working families without necessarily the employment effect.”
“Instead of rushing through an approval of a minimum wage hike, legislators should consider developing legislation for a state earned income tax credit,” said Mike Flynn, EPI’s legislative director. “A state EITC will bolster the income of the low-skilled without potentially pricing them out of the job market.”
For more information on the negative consequences of mandated wage hikes, go to www.EPIonline.org.