Last year the city of Las Cruces, New Mexico decided to raise the minimum wage, a move which some economists have warned could have serious unintended consequences. The recent hike is the first of three phases, the second of which will raise minimum hourly pay rates from $8.40 to $9.20 in January of the New Year. According to city officials, the minimum wage hike in Las Cruces has so far not had any serious negative effects on employment in the city. Maria de la Canal, city development coordinator, proudly proclaimed “The increase in minimum wage does not appear to have a negative impact on the Las Cruces economy.”
Let’s not get ahead of ourselves.
The city government is comparing gross receipts taxes and construction numbers with previous years in order to guess at the effects of the policy. But while tax receipts may be all that government officials worry about, that’s not a real indicator of the impact of this new mandate. Instead, we should consider specific employment data from the Bureau of Labor Statistics – which helps us understand the impact on jobs and hiring. According to Michael Saltsman of the Employment Policies Institute, the government statistics that have been released for industries likely to have been affected by the minimum wage hike are only preliminary, and aren’t limited to just the city limits of Las Cruces. However, the results so far aren’t as promising as the city council is willing to admit.
“For example, data released by the Census Bureau show that the net number of restaurants in the Las Cruces metro area declined by 2.7 percent in 2015. The net number of hotels in the area fell by 10 percent for the year as well,” wrote Saltsman for the Las Cruces Sun-News last summer. “There was a 9 percent employment drop at grocery stores, another big starter wage employer, in the year. And employment at gas stations fell in 2015 for the first time since 2009, after steadily increasing in each of the prior years.”
New Mexico in particular stands to lose whenever the minimum wage is raised too high. Highly educated, wealthy enclaves like San Francisco and Seattle have been much more willing to raise the minimum wage than the American heartland and the Southwest, in part because not many people in those areas are in danger of being put out of work. But for the Latino community, those without college diplomas, and those in areas where the minimum wage is quite high relative to average wages, the danger is much greater. According to research by The LIBRE Institute, these groups are disproportionately likely to face lower employment rates as a result of minimum wage increases, and policymakers in the Land of Enchantment would be wise to ensure their policy on the minimum wage takes that into account.
Everyone hopes that the minimum wage hike in Las Cruces will leave the city’s most vulnerable residents unharmed, but in the meantime policymakers should proceed with caution. The minimum wage is a blunt policy instrument that often forces employers to give raises to some workers and layoffs for others. Its effects are not felt equally by all workers, and often those most likely to be affected by negative unintended consequences are the ones we are trying our hardest to help. Hispanics, young people, and those with lower levels of education are all more likely to lose their jobs when the minimum wage is raised. In order to truly create opportunity for everyone, policymakers should consider alternatives. Good public policy should be judged on the basis of good outcomes, not just good intentions.