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FROM THE PUBLISHER

One size fits all?

Not with minimum wage

Posted

What if we instituted a mandatory speed limit in Las Cruces? And what if we set it at 50 mph? And that was not a top-end speed, but the required speed, meaning everyone had to go 50 mph all the time.

Driving down Picacho Avenue? 50 mph. Driving along Interstate 25? 50 mph. Main Street Downtown? 50 mph. Interstate 10? 50 mph. In a school zone? 50 mph. Along U.S. 70? 50 mph. Anywhere in the city limits, 50 mph. You can maybe drop it down to 49 as you come upon a red light. It would be excellent for the brake repair business in town.

Obviously, I’m being a little ridiculous, but there are many things for which a one-size-fits-all approach does not work.

It’s the same with Las Cruces’ mandatory minimum wage, which goes up again Jan. 1, 2020, to $10.25 per hour. It was $7.50 (the state’s minimum wage) prior to Jan. 1, 2015, when the city council’s ramp-up began, first to $8, then to $8.50, then $9.20, then $10.10 in 2018.

The state’s minimum wage will also take a jump next month, from $7.50 to $9 per hour, as it begins a four-year ramp to $12 per hour.

Minimum wage affects every business in different ways, almost none of the ways positive.

It will never affect a big-box store, with corporate billions and electronic checkouts, the same way it will a locally owned small restaurant. It will never affect a government defense contractor the same as it will a gift shop.

I have serious doubts as to any positive impact on minimum wage earners, many of whom have seen their hours drop from 40 to less than 30 as businesses find ways to cope with the imposed increases these past few years.

Minimum wage has always been just a temporary boost for its earners. Before long, inflation created by the increase overcomes any additional buying power. Within weeks, restaurants and grocery stores have to charge more to cover their increased costs associated with a minimum wage hike. Landlords have to increase rents. Car repair shops’ rates go up. It’s an inevitable cycle.

To review the impacts of minimum wage, the City of Las Cruces spent more than $200,000 with the Hibbs Institute from the University of Texas-Tyler. Hibbs gave its first report in 2018. They said Las Cruces’ economy had grown since the implementation of minimum wage increases, but at a slightly slower pace than it would have if, according to their models, minimum wage did not increase. Significantly, their models showed Las Cruces had 385 fewer jobs than was projected without the increase.

Those are the figures that worry me. A dollar-an-hour increase can help a full-time worker; an extra $150 a month or so can definitely cover a few bills. But if the worker loses 10-15 hours a week, that eats into any gains, and often reduces benefits. Of course, if the job goes away altogether, that’s even worse.

If a business makes $100 million a year – yes, we have some of those in Las Cruces – with, say, a 10 percent margin, it has $10 million in profit to absorb mandated wage increases.

But look at a much smaller business making $275,000 a year with, say, a 4 percent margin, for $11,000 in profit — and yes, we have those, too. If that company had three full-time minimum wage earners, and two part-time minimum wage earners, a $1.10 increase in minimum wage, which also brings taxes and other expenses to the business, would essentially erase the entire profit.

Minimum wage increases also hurt middle-income workers, whose raises have been forgone to afford the additional expense.

Today’s technology gives increasingly more options for companies to bypass human assistance. But those technologies are disproportionately available to large corporations, one more disadvantage to small local businesses.

The latest Hibbs report, given last month at City Council, estimates the increase from $10.10 to $10.25 will mean 84 to 105 fewer jobs over the next three years.

Minimum wage increases in Las Cruces have put us at a competitive disadvantage. Companies who considered New Mexico the past few years would immediately see the contrast in wages between Las Cruces and Albuquerque, whose minimum wage is well lower than ours. More dramatic is the consideration between Las Cruces and El Paso. We’ll now be $3 more an hour than El Paso, with Texas’ $7.25 rate. And considering a liquor license in New Mexico is several hundred thousand dollars more than one in Texas, there’s no logical explanation why a full-service restaurant would choose to open here rather than 30 miles down the road.

They don’t even have to go that far. Las Cruces has lost tax revenue from businesses who set up operations just outside city limits to avoid the extra expense. That will continue, despite the state’s increase to $9, as it will still be $1.25 less than the city’s minimum.

The state minimum wage increase will have a huge impact, because it will increase expenses for every state organization, from the smallest village to the biggest city. Locally, it will mean millions in added expense to Las Cruces Public Schools, Doña Ana Community College and New Mexico State University. Look for layoffs and cutbacks at all those entities. Because our state budget is so heavily dependent on the oil and gas industry, another oil bust, or even a slowdown, in the next four years, will wreak even more havoc on our state budget.