Questioning the mechanism

If you oppose a minimum wage increase, proponents tend to label you.

The labels include “Rich greedy business owner,” “Short-sighted capitalist,” or “blind to the issues of poverty.”

I disagree with significant raises in minimum wage for two primary reasons.

First, it disproportionately and negatively affects small, local businesses. Most of these types of business owners are the opposite of rich and greedy. They are not rich, because there are so many obstacles impeding their success, including deep-pocketed corporate chain competition with large wholesale discounts, inconsistent work force, challenges and expense of technology and mandated requirements. Many businesses, and even entire industries, cannot survive the onslaught. Office supplies is just one example of an industry that essentially no longer exists at the local level because of these obstacles. Most small local business owners are not greedy, either. In fact, they are often generous to a flaw, donating to every community cause that affects their friends, their neighbors and their customers.

Secondly, I’ve done a lot of math and looked at a lot of scenarios, and I simply don’t believe a higher minimum wage is an effective tool to address pay inequity, let alone poverty. In a relatively short time after a minimum wage increase, the majority of consumer costs also increase, as businesses and organizations raise prices to compensate for the extra expense. That means the temporary boost in buying power for the minimum wage earner is quickly erased.

We’ve all heard the saying “A rising tide lifts all boats.”

That may be true, but if I start out in a dinghy, and you start out in a Chris-Craft yacht, we’ll probably still be in the same boat, literally and figuratively, once the minimum wage reaches equilibrium.

I bring up minimum wage for the second straight week in this column because it’s about to go up again both at the city and state levels. And a lot of our local small businesses are worried.

I don’t believe anyone in Doña Ana County, or anywhere in New Mexico, is blind to the issues of poverty. It’s all around us.

But many well-intentioned ideas have been brought forth in the interest of addressing poverty. In the 1950s and ‘60s, the government introduced inner-city, high-rise projects to create affordable housing. A noble concept, but putting thousands of severely financially and socially stressed people in such close quarters proved to be wildly counter-productive.

I believe addressing the worker end of pay inequity requires a holistic, systemic societal approach, engaging businesses, municipalities and the community at large. Minimum wage increases address poverty barely at all. The wage gap is already addressed by federal tax breaks for low earners, but that could be expanded. To demonstrate the depth of their belief in paying people more, municipalities should put some skin in the game.

I’m just brainstorming here, but maybe municipalities create an additional tax relief for low earners, and a tax relief for businesses who pay higher wages. Maybe municipalities could create a sort of bonus, in the form of cash or scholarships, to workers who start a job and remain for six months. Albuquerque allows for a $1/hour lower minimum wage to businesses who provide certain benefits, including childcare.

Bernie Digman, who owns Milagro Coffee y Espresso, is one of those local, small business owners affected by minimum wage increases.

“If the city (or other government entity) thinks small businesses have the resources to support an increase in minimum wage to support someone else’s social agenda, it seems reasonable and logical for the (entity) itself do the same” Digman said. “The city (or state) does not know what resources small businesses have, but they’re imposing on someone else a theoretical solution. If they believe, without knowledge, that small business can do it, then certainly they believe they can do it, and make the entire population share.”

I told Digman I was grateful to State Sen. Clemente Sanchez of Grants, who led a compromise to decelerate the state’s minimum wage increase, and added a training wage amendment, meaning high-school age workers can be paid less, at $8.50, as opposed to $12. A higher minimum wage is typically less important to a 17-year-old student than to a 33-year-old single mother.

“That would be helpful in a financial sense,” Digman said. “But they’re using the (minimum wage) argument to address income inequality, and that’s a social issue. It’s mixing up financial solutions to a social problem and it just doesn’t work.

“I don’t know any small biz person that would not support the idea of folks making a livable wage. There’s no nobody who contests that. It’s the mechanism that doesn’t make sense.”