Sen.’s minimum-wage plan makes sense, HB 31 doesn’t

In the 1930s and in the midst of the Great Depression, newly re-elected President Franklin D. Roosevelt pushed through the Fair Labor Standards Act, which led to the first federal minimum wage of 25 cents an hour intended to maintain a “minimum standard of living necessary for health, efficiency and general well being, without substantially curtailing employment.”

It’s those sometimes conflicting policy goals raised in that language — employee well being vs. the potential for lost jobs — that are at the heart of the ongoing debate at the federal, state and local levels of what the minimum wage should be. (The federal minimum today is $7.20 an hour; New Mexico’s is $7.50.)

Fast forward to present-day Santa Fe, where dueling proposals have been introduced to raise the state minimum.

The House and its strong Democrat majority has passed, largely along party lines and with enthusiastic support from Gov. Michelle Lujan Grisham, HB 31, which bumps the rate to $10 an hour in July, $11 an hour in 2020 and $12 an hour in 2021. It would then increase automatically on a formula tied to inflation. It would also phase out the longsuccessful system in which tipped employees like bartenders and wait staff earn a significantly lower minimum wage ($2.13 an hour; $5.50 in Albuquerque) because their overall compensation tends to exceed the minimum — in many cases by significant amounts. Under current law, employers have to make up any difference if the server wage plus tips does not equal minimum wage.

One of HB 31’s sponsors, Rep. Miguel Garcia, D-Albuquerque, says it would “restore the value of work” and is about “reducing inequality” because many low-wage workers are women and/or single parents. That sounds lovely, but you can’t value work if there isn’t any. Opponents say jumping from $7.50 to $12 in three years would be devastating, especially to mom-and-pop businesses and those in rural parts of the state. It doesn’t take an economics degree to understand places like Hatch, Jal and Claunch can’t afford the wages or prices Albuquerque and Santa Fe can. And the bill ignores the fact that cities and counties, which have a better handle on their local economies, can and have increased minimum wages. Santa Fe and Las Cruces already exceed $10; Albuquerque is at $9.20.

Opponents also object to the indexing provision — for good reason. Automatic pay increases during the Great Recession would have been devastating to N.M. businesses.

Ditto for the tipped employee language. Restaurateurs say paying servers the full minimum wage would blow up the service business model and hurt the employees it’s supposed to help because owners would have to raise prices, cut jobs or convert to counter service to stay open.

Carol Wight of the New Mexico Restaurant Association cites census data that says the average hourly wage for a tipped restaurant employee is $13.08, with top earners at $24 an hour or more. Higher prices and/or less service will make dining out unaffordable or unattractive, creating a vicious cycle in which sales decline, so prices go up and jobs are cut, so sales decline, etc.

Fortunately, there is a more reasonable proposal pending in the Senate. SB 437, sponsored by Sen. Clemente Sanchez, D-Grants, would increase the state minimum to $9.25 this year and $10 next year — a 33 percent increase. It would bump the minimum for tipped employees from the current $2.13 an hour to $3 next year.

There is no automatic escalator. That’s wise, because such sweeping decisions that affect business owners’ lifelong investments should be made after a review of the current economic situation. And there is a lower minimum of $8.50 to encourage employers to hire kids in high school — after school hours or when school is not in session. Going to Garcia’s point on the “value of work,” why not start teaching that concept in the teen years?

By comparison, the House bill will incentivize employers with already tight margins to accelerate the move to automation. A recent Chicago Tribune story noted that in a state where the minimum was just raised to $15 an hour, you can already check into your hotel and grab lunch, groceries or movie tickets without interacting with cashiers.

“They’re chipping away at manual tasks to reduce the number of hours employees have to work,” and the higher minimum in Illinois will “just accelerate it,” a consultant observed. It’s true there, and it will be true here.

From Day One, the minimum wage was intended to balance the needs of workers and job creators. Sen. Sanchez’s bill does a better job of that and should be the basis for a minimum wage hike going forward.