Who really sets minimum wage?

The East Mountains of New Mexico is a rural community that stretches from the east side of the Sandias to Moriarty west to east and perhaps 20 miles north and south of Interstate 40. In this relatively small area, we have three counties—Bernalillo, Santa Fe and Torrance. Each county has a different minimum wage. Should we start county-hopping for better wages?

I’m not sure it would cover the cost of gas unless you’re commuting to El Dorado. Here’s how it plays out in the East Mountains: in Moriarty, minimum wage is the state minimum of $7.50 and will increase to $9 on Jan. 1; 10 miles west in Edgewood, the minimum wage is the same state rate (while unincorporated Santa Fe County is $11.80); drive another 10 miles west to Cedar Crest and the minimum wage is the Bernalillo County minimum of $9.05.

Go a little further on your commute and you’ll be making $9.20 in Albuquerque or $11.80 in Santa Fe. Head way south to make $10.10 in Las Cruces. Cross the border to El Paso, and you’re back to $7.25.

Here’s my deep insight as a business owner, part-time economist and lifelong conservative: this is nuts. Let’s be clear. It’s very rare, if not impossible, to pay employees minimum wage year after year (or even month after month) and stay in business. You know why? Because employers cannot attract and keep the employees they need for $7.25. Walmart’s minimum wage is $11. Target’s is $12. Heck, even McDonald’s is starting folks at $10. Those three firms are among the largest employers in this country. I think they have some pretty good data to figure out the going rate.

But New Mexico is a poor state, you say. We need to put more money in the hands of working people. Guess what? We do! According to the U.S. Bureau of Labor Statistics (BLS), 97.2% of New Mexico workers over the age of 16 make more than minimum wage. The average wage in New Mexico for 2018 was $21.43/hour. The lowest paid occupation is “Dining Room and Cafeteria Attendants” at $9.39/hour. The highest paid occupation is “Obstetricians and Gynecologists” at $138.81/hour.

I guess the state minimum wage increase passed this year will perhaps even the playing field in the East Mountains, but it’s doubtful that anyone here is paying $7.50 an hour and keeping employees. Why even have a minimum wage, when employers are in the position of competing for the best employees as they set their own wages?

Most states have established minimum wages commensurate with market prices for labor. I suppose this is okay, or at least not harmful. Where I get worried is when populists demand a federal minimum wage of $15 immediately. It’s one thing to tie minimum wage to actual commercial wages, reflecting the current state of the job market and the economy. It’s another thing altogether to unilaterally disrupt one of the world’s most successful labor markets.

If California, Washington, and New York know that their cost of living is high and have documentation showing prevailing commercial wages are higher than the rest of the nation (they have and they are), setting a state minimum wage higher than the federal wage can make sense. Washington state, with the highest state minimum wage in the nation, sees job growth slightly (0.3%) higher than the national average. New Mexico, setting a rate of $9 in 2020, seems to be keeping up with current wages.

This is a turnabout of opinion for me; I have long thought states and localities should leave minimum wage alone and leave it to the Feds. But if I look at the national research from the last two administrations, I see that a federal minimum wage increase would be a job-killer.

In 2014 the Congressional Budget Office (CBO) estimated a federal increase in minimum wage to $10.10 would eliminate 500,000 jobs. In 2019, CBO estimates that an increase to $15 at the federal level will eliminate 3.7 million jobs. Here’s why: Mississippi is not Massachusetts. Individual states need to manage minimum wage rates to align with their economic realities, or even simply let the labor market set its own rates (Texas largely does that; their average wage for 2018 was $23.90 even though they have not created a state minimum wage). California’s gross domestic product (GDP) is the fifth largest in the world; California’s economy is bigger than India’s.

New Mexico’s GDP is ranked 102nd in the world, between Puerto Rico and Venezuela. With a smaller economy, our employers have smaller budgets. Our employers don’t need a single number from Washington to benchmark our labor market; we are doing a decent job ourselves.

Merritt Hamilton Allen is a PR executive and former Navy officer. She lives north of I-40 where she and her family run two head of dog, and one of cat.

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