Minimum wage increase poses costs and benefits

By Johanna Albright / CJ 475 Reporter
Posted Dec. 4, 2012

Many tough decisions were made in this year's election, but one in particular could directly affect all Albuquerque residents by raising their income next year.



ABQ wage increase an issue
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By Johanna Albright

Is raising minimum wage in ABQ worth the costs?



As early as September, Organizers in the Land of Enchantment (OLE) proposed a $1 increase to the minimum wage in Albuquerque, raising the hourly wage from $7.50 to $8.50 starting January 2013.

On Election Day, residents voted 66 percent in favor of the initiative. The bill can still be overturned if a majority of city councilors vote against the initiative and receive the mayor's approval.

Opponents of the initiative wonder if the costs of raising minimum wage outweigh the benefits. Businesses owners are concerned that the wage increase will affect the local economy.

Ella Leeper, Desert Paper & Envelope Co. Inc. president, said she believes the wage increase will be bad for the economy and people seeking employment.

"I think it hurts those least likely to find employment in the first place," Leeper said. "Those that are the most vulnerable are the ones hampered the most when minimum wage goes up."

Melissa Binder, undergraduate director and associate professor for the Department of Economics at the University of New Mexico (UNM), said the opposition to raising minimum wage stems from fear that employers will stop hiring and employment will go down. Economists have found that for every 10 percent increase in minimum wage, employment may decrease 1 to 3 percent.

"One to 3 percent is a very small disemployment effect," Binder said. "If you're looking at it in terms of, well most people won't lose their jobs and they will be gaining, as a group minimum-wage workers benefit."

Federal minimum wage is $7.25, according to the U.S Department of Labor. It increased from $6.55 to $7.25 in 2009. From 1997 to 2009, federal minimum wage was $5.15. New Mexico is one of 19 states, along with Arizona and Colorado, that already pays more than the federal minimum wage. More populated states, like Texas and Oklahoma, pay the federal minimum wage.

Brandon Pettit, a college student who has worked minimum-wage jobs for several years, said he thought it seemed like a good idea to raise minimum wage.

"It just seems generally beneficial for all," Pettit said, "I know personally, $7.50 [an hour] doesn't go a long way."

Leeper said even though she has always paid her employees more than minimum wage ($9), she believes this increase will affect her business.

"It won't impact how I pay my employees, but it will impact the economy, which in the end will impact my employees," Leeper said. "If we slow down, my income slows down, sales slow down, my ability to pay more slows down. The cyclical event will still negatively affect us."

Binder said fearing that the cost of goods will rise with the cost of labor, is not realistic.

"I think it's a simplistic view to say they (business owners) will pass along prices, because they really can't. From the studies that have been done, it doesn't seem like a factor," Binder said. "The employers can't just raise the prices, they are subject to the same problem of supply and demand. If they raise the price then people will buy less."

Pettit said working a minimum-wage job, even at $8.50 an hour, doesn't leave people much room for spending. "Working on minimum wage is really difficult to maintain any kind of a lifestyle, especially if you have a family," Pettit said.

The benefits to raising the minimum wage for employees outweighs the costs to employers, Binder said. She said people voted on this issue based on how they thought it would affect them personally.

"It's more of a values question," Binder said, "It helps minimum-wage workers more than it hurts employers. The question is, is it okay to require employers to pay more?"