As Bangor debates an increase to the minimum wage within city limits, city councilors might look southwest to Santa Fe, New Mexico, to inform their decisions.
More than a decade ago, New Mexico’s capital of 70,000 people became one of the first cities in the U.S. to raise its minimum wage while the wage floor stayed the same in surrounding areas.
With a decade of evidence, what does Santa Fe — The City Different, as it’s known — have to show the Queen City?
The minimum wage is one of the most commonly researched topics in economics, and a number of researchers have attempted to assess the impact of raising the minimum wage on a city’s jobs and business activity.
The verdict from Santa Fe and other cities that hiked their wages? Virtually no statistically significant economic impact.
In 2006, researchers from the Bureau of Business and Economic Research at the University of New Mexico compared Santa Fe with Albuquerque, which didn’t raise its minimum wage until more than two years after Santa Fe. “The analysis shows that overall employment levels have been unaffected by the living wage ordinance,” the researchers wrote.
Businesses closed in that period, but it’s difficult to attribute closures specifically to a higher minimum wage. “There is considerable churn among small businesses. Firms are going out of business and new businesses are rising all of the time. What is important from the research is that you do not see a net decline in employment as a result of the minimum-wage ordinances,” Ken Jacobs, chairman of the Berkeley Center for Labor Research and Education, told the Seattle Times.
A 2011 study by the Center for Economic and Policy Research examined fast-food restaurants, retailers and other low-wage establishments, both large and small, after Santa Fe’s elevated minimum wage expanded beyond businesses with 25 or more employees. Employees noticed the bump in their paychecks, but they were basically just as likely to be employed as before the minimum wage rose.
In sum, concludes a review of studies on the minimum wage by the group Integrity Florida released earlier this week, “The results of the state and city case studies do not prove that a higher minimum wage results in job growth. But the results provide no indication that a higher minimum wage is associated with job losses.”
How does the jobs picture essentially become a draw? Researchers point to a combination of reasons. Employers might find higher labor costs offset by lower turnover among employees who are more likely to stick around with higher pay (for businesses, this means significant avoided costs). They might also raise prices or simply absorb the marginal impact of higher hourly wages.
The minimum wage ordinance before the Bangor City Council would raise the city’s minimum to $8.25 per hour on Jan. 1, 2016, to $9 a year later, then to $9.75 in 2018. After that, it would be tied to the Consumer Price Index. Maine’s current minimum, $7.50, hasn’t changed since 2009. If it had kept up with inflation, it would be $8.34 in today’s dollars.
In Santa Fe, the minimum wage first rose 65 percent — to $8.50 from $5.15 — not the 10 percent proposed in Bangor. Today, it’s $10.84.
If a 65 percent minimum wage hike didn’t cause job losses or much of any statistically significant economic effects, it’s difficult to argue that Bangor would experience drastic, negative impacts such as significant layoffs, closures and relocations. At the same time, it’s undeniable that 75 cents more per hour can be a meaningful pay raise for an individual working at a fast-food restaurant or retail establishment earning the minimum wage or even a couple dollars more.
We agree it would be better to address this issue at the state and federal levels. But neither the state nor federal government has boosted the wage in six years, leaving the choice to individual towns and cities.
Since there’s no evidence to suggest damage to the city’s economy, and a higher wage can make a difference in the lives of low-wage workers, we urge the Bangor City Council to keep those workers in mind — including tipped workers and those who work at small businesses — and approve a raise for them.