THE IMPACTS OF THE $9.50 LIVING WAGE ON THE ECONOMY … · impacts of the living wage. To that end, BBER conducted a baseline study of the Santa Fe economy in 2004. In 2005 and 2007,

OF THE CITY OF SANTA FE, PART II

Report to the City of Santa Fe

November 26, 2007

UNIVERSITY OF NEW MEXICO

BUREAU OF BUSINESS AND

ECONOMIC RESEARCH

THE IMPACTS OF THE $9.50 LIVING WAGE ON THE ECONOMY

OF THE CITY OF SANTA FE, PART II

Report to the City of Santa Fe

Nicholas Potter, MA Billy James Ulibarrí, MA

Joshua Akers, BA Myra Segal, MA, consultant

Molly Bleecker, MA

November 26, 2007

UNIVERSITY OF NEW MEXICO

BUREAU OF BUSINESS AND

ECONOMIC RESEARCH

THE IMPACTS OF THE $9.50 LIVING WAGE ON THE ECONOMY

The Impacts of the $9.50 Living Wage on the Economy of the City of Santa Fe, Part II

ACKNOWLEDGEMENTS

This report has several authors and contributors and would not have been possible without the invaluable assistance of several Bureau of Business and Economic Research (BBER) staff. First and foremost, the authors would like to thank Dr. Lee Reynis, director of our organization and manager of this project, for providing leadership, guidance, and support throughout all phases of this project. In addition, BBER administrator Elizabeth Eklund was instrumental in managing contracts, hiring contractors, enabling access to data, and ensuring the project’s ongoing success. She was supported by student Alvena Largo.

Nick Potter is responsible for the chapter on wage impacts. His work built on the efforts of a number of people over several years. Lucinda Sydow was instrumental in producing and cleaning a consistent time series of workers and employers. Lee Reynis and Melissa Binder provided a literature review and methodology from which this work is derived. Daren Ruiz served as a statistical and methodological sounding board. Molly Bleecker served a number of functions, including reviewing and editing this document and coordinating the work of several people to produce a coherent final report.

Thanks to the City of Santa Fe for funding this work and being committed to making policy decisions based on analytical work.

Billy Ulibarrí orchestrated the business survey’s implementation and wrote the accompanying chapter. BBER students Emily Lappin and Micah Le Lugas carefully entered survey data and tracked survey responses. The sample methodology and sampling frame were assembled by BBER student Lucinda Sydow. The Herculean task of stuffing envelopes for the survey mailing was easily managed by BBER staff Betty Lujan, Guy Dameron, and others. Thanks to Guy for ensuring the survey was mailed out on time.

Joshua Akers conducted interviews and other research in support of the “Unintended Consequences” chapter. His exploration is illustrated in his chapter. He would like to thank the NM Public Education Department’s Data Collection and Reporting Unit, Santa Fe Public Schools, NM Grantmakers’ Association, United Way of Santa Fe, Santa Fe Chamber of Commerce, and other non-profits that were willing to be interviewed. Dely Alcántara and Jack Baker of BBER provided population estimates.

Myra Segal (under contract with BBER) joined us for the third Living Wage study and was skillfully in charge of the focus groups. Myra facilitated four of the five focus groups. Myra, along with Billy Ulibarrí, Molly Bleecker, and BBER student Emily Lappin, formulated the questions and maintained contact with participants. Contractor Elvira López facilitated the Spanish focus group, translated project materials, and assisted in recruitment. Special thanks to contractors Mary Bellman and Rolando Simon-Gómez who pounded the

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pavement to recruit Spanish speakers. They also transcribed the Spanish-speaking session, which provided the data on this focus group used in this report. BBER scientist Jack Baker also provided translation support. Collectively, they spent numerous hours on the phone recruiting and confirming participants. Myra, Billy, and Molly wrote the sections of this report that pertain to the focus groups.

The authors also wish to thank the many members of the Santa Fe community who participated in this study by responding to the business survey and/or attending focus groups. We also received invaluable support from many people who patiently answered our questions, who made data available, and who agreed to be interviewed.

We wish to thank Simon Brackley of the Santa Fe Chamber of Commerce, David Kaseman from the Santa Fe Business Alliance, and Carol Oppenheimer and Morty Simon from the Santa Fe Living Wage Network for the assistance they provided at many stages in our research.

From Somos Pueblos Unidos, we would like to thank Marcella Diaz and Adda Garcia for allowing us to use their space for a focus group and for their help in recruiting participants.

We are grateful for the support of Los Alamos National Bank Senior Vice President Fidel Gutierrez and his staff who graciously hosting numerous BBER focus groups in their beautiful downtown branch.

The staff at Santa Fe Community College and La Familia Medical Center supported our efforts by allowing BBER staff to recruit focus group participants at their facilities.

Finally, the authors wish to thank the City of Santa Fe for providing funding for this study and the City of Santa Fe staff for handling all arrangements so that we could do this work and report our findings to date.

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EXECUTIVE SUMMARY This work is part of a body of analysis provided by the Bureau of Business

and Economic Research (BBER) at the University of New Mexico over the past four years. The approach is designed to provide a variety of views on the impacts of the living wage. To that end, BBER conducted a baseline study of the Santa Fe economy in 2004. In 2005 and 2007, BBER provided an analysis of the general economic status of Santa Fe and employment and wage impacts of the $8.50 living wage, as well as results from surveys and focus groups that took place in 2005. A report on the economic state of Santa Fe and the employment impacts of the $9.50 living wage was issued in August of this year. This report closes the analysis with a look at earnings impacts and the results of surveys and focus groups completed after implementation of the $9.50 living wage.

In terms of earnings, employees of large Santa Fe businesses experienced a small positive change relative to the control regions (employees of large Albuquerque businesses, large Santa Fe County businesses, and small Santa Fe city businesses) after the $9.50 living wage. This increase varied between $30 and $48 per quarter on average. These differences were generally smaller than the changes after the $8.50 living wage. Earnings in different industries behaved differently, but no particular industry exhibited overwhelming gains that would result from a large wage increase for a majority of workers.

A variety of sectors show major changes in earnings relative to the control group, but not consistently across different control groups or through both living wage rates. There is some suggestion that earnings in the information, health care, accommodations, and food services sectors increased substantially, but not against every control group. Many industries showed no significant difference in earnings changes, while a few industries, most notably professional and technical services, had negative earnings relative to most control groups.

Earnings for female, college, and high school age workers overall were similar to the general workforce, exhibiting small positive relative changes in earnings after the $8.50 living wage and no significant difference after the $9.50 living wage.

Increases in earnings become more substantial when we focus on those workers and industries that typically have lower wages (and are working for businesses subject to the living wage). Workers for chains stores also seem to have more substantial earnings gains. The overall pattern of earnings changes suggests that the living wage affects only a small portion of the workforce, and so corresponding earnings gains are minor for the workforce as a whole. For specific groups, earnings are more pronounced, but even in these cases few workers appear to have been affected by the living wage, either because their wage was already higher or because their employers are not complying with the ordinance.

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On the other hand, focus groups and surveys indicate that the living wage has had substantially positive effects for some individuals and presented significant hardships for some businesses.

The survey shows that most businesses (large and small) were already paying $9.50 before the rate was mandatory. Firms that had employees below the $9.50 rate are primarily large employers (20+ employees) from the hospitality industry. However, businesses often raised the wages of employees earning at or slightly above the living wage level. It was less common for employers to raise wages for workers at higher wage levels. Further, the size of the wage increases was typically higher for lower wage earners than for those with higher earnings. Business operators describe situations in which new employees (often unskilled) are making only slightly less than established employees. Changes in workplace morale and management’s ability to use pay increases as an incentive were noted as two implications of this wage compaction situation.

Overall, at least half of the survey sample reported that the $9.50 mandated wage resulted in no impact on various business operations. However, some adjustments were made. In addition to raising pay for low wage earners, common changes include cutting overtime and changing the way in which businesses handle seasonal demands. The largest concentrations of firms that made adjustments in wage structures and employment practices were firms with more than 25 employees. While larger employers more often had to make changes to become compliant with the ordinance, smaller employers had to make changes in order to remain competitive. Some feared that small businesses are more vulnerable and are less able to absorb increasing costs.

Respondents also expressed concern over the pending wage increase to $10.50 an hour. Many thought it was “too much, too fast” and it would cause too strong an interference in local market forces and would erode the attractiveness of Santa Fe to outside businesses. A disconnect between the local government and the business community was cited as a reason for the “premature” increase. Some respondents suggested that the true impacts of the ordinance have yet to be realized, since the local economy has been performing well over the past few years. They fear that a combination of a downturn in the economy and increased labor costs would be the “straw that broke the small businesses’ back.”

Several trends appear when comparing focus group findings from the current study to those of previous studies in 2004 and 2005. Workers are expected to get more work done and to be able to do more tasks. There is less tolerance for unreliability and employers have made careful screening of new employees a greater priority.

For workers, while they have enjoyed a slight increase in their quality of life at home and at work, they are still having a difficult time making ends meet. Most participants rely on informal or cash jobs in addition to their regular jobs to

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cover their expenses. Individual workers often face the same rising costs as businesses, especially in real estate (housing), food and healthcare.

A pervasive opinion among employers is that the local public schools do not produce workers that are reliable or motivated and do not have critical thinking, math and reading skills. While this is not a new concern, it is one that is aggravated as employers are required to pay an increasingly higher minimum wage to unskilled workers. Many employers are resentful that unskilled workers are able to easily get the same wage level that other workers have reached after years of service.

Participants in the focus groups recognized that the costs pressures on both employers and workers go beyond the reach of wage issues and that increasing the minimum wage is not the end-all solution. Other costs continue to rise and are not necessarily subject to local policy, as is the minimum wage.

For many businesses, raising prices to keep up with other rising costs is a difficult proposition. They fear that if prices go up any higher, the market will vanish and Santa Fe will be a less desirable place to conduct business, visit, or live. Many employers consider the living wage ordinance too great an interference of the government in the marketplace and will result in inflation and an even higher cost of living.

There are a few major concerns that are addressed in the unintended consequences chapter of this report. First and foremost, there is concern in the community and from some businesses that students are dropping out of high school to work because the living wage makes working a more appealing alternative to school. At the same time, and in stark contrast, several businesses mentioned actively preferring older workers in their hiring practices, suggesting that high school-age workers are having a harder time getting jobs.

Data on dropout rates is notoriously unreliable, but the best estimates suggest that dropout rates were flat in the school year following the $8.50 living wage (2004-2005) and declined by half in the year after that (2005-2006). The number of high school-age workers who are employed has risen significantly beginning in 2004, but at the same pace as national and state trends, suggesting that the living wage itself is not the reason for the increased trend in working for high school-age residents. At the same time, the increase in high school-age workers suggests that any active discrimination against high school-age workers is not pervasive enough to appear in the aggregated data.

A second unintended consequence is the effect of the living wage on non-profits, particularly those that provide services to disabled and otherwise disenfranchised residents. One specific issue is that state and federal compensation to non-profits does not provide for the increased wage rate; as a result, some organizations have reduced staff and services or left Santa Fe

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entirely. Non-profits are also reporting greater difficulty in finding employment for workers in training programs, assisted living situations, and vocational programs.

With respect to the effect of the living wage on health benefits, roughly 13% of businesses that responded to the survey choose to cut benefits in response to the living wage. Employers discussed health benefits in focus groups as well, and the general trend seems to be one of reducing benefits. However, this reduction was not specifically linked to the living wage, but rather the result of rising costs for a variety of things, most importantly health insurance itself. The decline in health benefits offered by employers is a national trend, and as such it is likely that most of the decline has to do with other pressures (with the exception of the 13% indicated above).

Finally, some businesses expressed concern that the living wage was inducing people living outside of Santa Fe to seek employment in Santa Fe. Looking at the percent of workers who list their address city as Santa Fe, this does not appear to be the case. Roughly 35% of workers at both chain and non-chain employers have an address with a city that is not Santa Fe, but this value has not changed significantly over the past four years.

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TABLE OF CONTENTS Acknowledgements................................................................................................ i Executive Summary ............................................................................................. iii Table of Contents................................................................................................ vii Table of Tables .................................................................................................... ix Table of Figures.................................................................................................... x Table of Figures.................................................................................................... x Chapter 1: Introduction .........................................................................................1 Chapter 2: Quarterly Earnings and the $9.50 Living Wage..................................3

Introduction .......................................................................................................3 Data...................................................................................................................4 Method ..............................................................................................................5 Results ..............................................................................................................6

General Employee Earnings Statistics...........................................................7 Difference Analysis of Changes in Quarterly Earnings in Santa Fe, Santa Fe County and Albuquerque ...............................................................................8

Industry Comparison by Location...............................................................9 Female Workers ..........................................................................................11 Young Workers ............................................................................................15 Low Wage Workers .....................................................................................20 Workers at Businesses with Multiple Locations ...........................................25

Discussion.......................................................................................................30 References......................................................................................................32

Chapter 3: Santa Fe living Wage 2007 Business Survey....................................33 Purpose/ Objective ..........................................................................................33 Method/ Sampling Procedure..........................................................................34 Implementation/ Data Collection Process........................................................35 Survey Coverage/ Representation ..................................................................35 Findings Regarding Impacts of the $9.50 Minimum Wage ..............................39

Business Climate .........................................................................................39 Compensation (Pay and Benefits) ...............................................................41 Employment Practices .................................................................................45 Prices of Goods and Services......................................................................46 Capital Investments and Business Expansions ...........................................48 Hopes and Concerns Regarding the Current LWO and the Pending Increase to $10.50......................................................................................................49

Quality of the local workforce ...................................................................49 Criticism of Local Government and an “Unfriendly” Business Environment.................................................................................................................50 Support for the Living Wage.....................................................................52

Conclusion ......................................................................................................53 Chapter 4: Santa Fe Living Wage 2007 Employer and Worker Focus Groups ...55

Purpose/ Objective ..........................................................................................55 Participant Selection........................................................................................55

Employers....................................................................................................56 Workers .......................................................................................................57

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Focus Group Data Collection ..........................................................................58 Employer Focus Group Findings .....................................................................59

Business Climate in Santa Fe......................................................................59 Recent Business Activity ..........................................................................59 Competitive and Cost Pressures..............................................................61 General Perceptions of the Local Business Climate ................................62

Business Adaptations to the Living Wage....................................................63 Impacts on Business Operations..............................................................63 Adjustments in Operations .......................................................................65

Feelings about the Proposed Amendment...................................................67 Other Consequences...................................................................................69

Worker focus Group Findings..........................................................................70 Quality of Life...............................................................................................70

Improvements Reported...........................................................................70 Making Ends Meet Still a Major Challenge...............................................71 Health Benefits are Very Scarce ..............................................................72 Survival Strategies ...................................................................................73

Conditions at the Workplace........................................................................74 Improved Job Satisfaction ........................................................................74 Job Loyalty Varies....................................................................................74 Increased Job Responsibilities.................................................................75 Wage Compaction....................................................................................76

Other Concerns ...........................................................................................77 Education in Santa Fe Needs Improvement.............................................77 Feelings about the Amendment ...............................................................77

Conclusion ......................................................................................................78 Chapter 5: Potential Unintended Consequences of the Living Wage (Revised) .79

Negative Effects on High School Students......................................................79 Reduced Employment Opportunities...............................................................80 Increased Number of High School Dropouts ...................................................82 Workers with Disabilities .................................................................................85 Health Insurance Benefits ...............................................................................88 Exemption of Businesses with FEWER THAN 25 Employees ........................89 Influx of Non-local Workers and Leakage of Wage Revenues ........................89

Appendices .........................................................................................................91 Appedix 1A: Statistical Data for Tables and Figures ...........................................92 Appendix 1B: Supplemental Figures and Data .................................................102

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TABLE OF TABLES Table 2.1: Difference-in-Differences in Mean Quarterly Earnings by Job .............9 Table 2.2: Difference in Differences in Mean Quarterly Earnings by Job, Female

Workers ...............................................................................................12 Table 2.3: Difference in Differences in Mean Quarterly Earnings by Job, Worker

Age 18-22 ............................................................................................15 Table 2.4: Difference in Differences in Mean Quarterly Earnings by Job, Worker

Age 15-18 ............................................................................................19 Table 2.5: Difference-in-Differences in Mean Quarterly Earnings by Industry,

Worker Age 15-18................................................................................20 Table 3.1: Business Survey Response ...............................................................36 Table 3.2: Industry Type and Number of Employees of Survey Respondents....37 Table 3.3: Sample Representation by Proportion of Workforce in Each Industry

.............................................................................................................38 Table 3.4: Primary Customer Base of Survey Respondents...............................38 Table 3.5: Top Three Challenges Facing Santa Fe Businesses .........................40 Table 3.6: Changes in Sales Activity over the Past Year ....................................41 Table 3.7: Changes in Employee Compensation................................................42 Table 3.8: Employers that Contribute to Healthcare Plans .................................44 Table 3.9: Proportion of Employees Participating in Healthcare Plans ...............44 Table 3.10: Changes in Employment Practices ..................................................45 Table 3.11: Changes in Prices of Goods and Services.......................................46 Table 3.12: Changes in Business Plans .............................................................48 Table 4.1: Focus Group Profile: Representation of Santa Fe Labor Force and

Industry ................................................................................................56

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TABLE OF FIGURES Figure 2.1: Year-over-Year Percent Change in Quarterly Earnings of Non-Chain

Employees by City of Residence ...........................................................8 Figure 2.2: Difference-in-Differences of Quarterly Earnings of Employees of

Large Non-Chain Businesses, $8.50 Living Wage...............................10 Figure 2.3: Difference-in-Differences of Quarterly Earnings of Employees of

Large Non-Chain Businesses, $9.50 Living Wage...............................11 Figure 2.4: Difference-in-Differences of Quarterly Earnings of Female Employees

in the Manufacturing Industry...............................................................12 Figure 2.5: Difference-in-Differences of Quarterly Earnings of Female Employees

in the Health Care Industry ..................................................................13 Figure 2.6: Difference-in-Differences of Quarterly Earnings of Female Employees

in the Accommodations Industry ..........................................................14 Figure 2.7: Difference-in-Differences of Quarterly Earnings of Female Employees

in the Food Services Industry ..............................................................14 Figure 2.8: Difference-in-Differences of Quarterly Earnings of Employees Age 18-

22 in the Manufacturing Industry..........................................................16 Figure 2.9: Difference-in-Differences of Quarterly Earnings of Employees Age 18-

22 in the Arts and Entertainment Industry............................................17 Figure 2.10: Difference-in-Differences of Quarterly Earnings of Employees Age

18-22 in the Accommodations Industry................................................18 Figure 2.11: Difference-in-Differences of Quarterly Earnings of Employees Age

18-22 in the Food Services Industry ....................................................19 Figure 2.12: Difference-in-Differences for Low Earning Employees of Living

Wage Businesses Relative to Control Groups .....................................21 Figure 2.13: Difference-in-Differences for Low Earning Employees of Living

Wage Businesses Relative to Control Groups in the Food Services Industry ................................................................................................22

Figure 2.14: Earnings Differences for Low Earning Employees of Large Multiple Location Businesses by City of Residence ..........................................23

Figure 2.15: Frequency of Jobs at Santa Fe Businesses by Earnings Category 24 Figure 2.16: Frequency of Jobs at Large Santa Fe Businesses by Earnings

Category ..............................................................................................24 Figure 2.17: Difference in Mean Quarterly Earnings of Employees at Multiple

Location Businesses after the $8.50 Living Wage by Worker Category.............................................................................................................26

Figure 2.18: Difference in Mean Quarterly Earnings of Employees at Multiple Location Businesses after the $9.50 Living Wage by Worker Category.............................................................................................................27

Figure 2.19: Difference in Mean Quarterly Earnings for Employees of Multiple Location Businesses after the $8.50 Living Wage by Industry.............28

Figure 2.20: Difference in Mean Quarterly Earnings of Multiple Location Businesses after the $9.50 Living Wage by Industry ...........................28

Figure 2.21: Frequency of Jobs at Multiple Location Businesses with Worker’s Residence in Santa Fe By Earnings Category.....................................29

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Figure 5.1: Santa Fe City Employment Quarter over Quarter, Second Quarter 1996 through 2006...............................................................................80

Figure 5.2: New Mexico and Santa Fe High School Age Cohort Normalized to 1997.....................................................................................................81

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CHAPTER 1: INTRODUCTION

This document reports the findings of Part II of BBER’s study of the impacts of the $9.50 living wage on the economy of Santa Fe. Part I, which was completed in August of this year, presented and analyzed the accumulating evidence from a variety of secondary data sources and included a statistical analysis of employment data from individual employers collected by the New Mexico Department of Labor (now called the New Mexico Department of Workforce Solutions) in administering the unemployment insurance program. Part II serves as a complement to Part I with the introduction of new data collected by the BBER from a survey of City of Santa Fe employers and from a series of focus groups conducted separately with city businesses and low wage employees. The report also includes an analysis of wage record data on individual employees (also from the NM Dept. of Workforce Solutions) and updates the findings in the first report on unintended consequences.

The living wage ordinance (LWO), which went into effect June 24, 2004,

mandated a minimum hourly wage of $8.50 for all private businesses operating within the city limits that have 25 or more employees. The law applied to all employees, including part-time, full-time, and contractors.1 As originally drafted, the ordinance anticipated two further wage increases, an increase to $9.50/ hour on January 1, 2006 and an increase to $10.50/ hour on January 1, 2008, with annual increases tied to the cost of living thereafter. The $9.50 increase was implemented. A proposed amendment to the LWO, which has the support of the Mayor, some members of City Council and other key stakeholders, would expand coverage to all employers, eliminate the 25 employee threshold, and would, in lieu of the slated increase to $10.50, institute the annual cost of living increase beginning in 2008, so that Santa Fe’s minimum wage will rise with inflation.

The implementation of the LWO in 2004 set in motion a series of adaptive

behaviors on the part of both employers and workers. Many of these changes are still playing out, making it exceptionally difficult to “tease out” impacts of the ordinance’s initial implementation from impacts of the increase to $9.50. Additionally, the mandated wage increases are occurring in a dynamic economy where businesses and consumers have been affected by rising costs for energy, food, healthcare and health insurance, a falling dollar, and a prolonged and dramatic housing boom that has been followed by a bust, creating considerable turmoil in financial markets. As a result, it is difficult to determine if any reported impacts are directly linked to the increased minimum wage, to other factors, or to a combination of factors.

The chapters which follow examine the evidence achieved through a

variety of research methods to evaluate the impacts of the increase to $9.50 on the Santa Fe economy. Starting at a general level, the report uses data at 1 With the exception of nonprofit organizations that provide home healthcare services with Medicaid reimbursement.

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different levels of analysis and continues to the most micro-level, the daily experiences of individuals.

Chapter 2, using individual wage record data, examines the statistical

evidence regarding earnings. In particular, earnings of workers of businesses subject to the living wage were compared to earnings of workers for businesses in Santa Fe County, Albuquerque, and Santa Fe city that were not subject to the living wage. Special attention was paid to earnings of female workers, high school and college aged workers, and workers with low earnings. Due to the limitations of the data, workers at businesses with multiple location businesses were treated separately from workers at single establishment businesses.

Chapter 3 presents the findings of a survey administered to City of Santa

Fe employers. In general, the survey’s objective was to capture how Santa Fe businesses are modifying their operations in response to the mandated $9.50, but the survey also considers the general environment in which particular businesses are operating and attempts to identify challenges as well as opportunities. The purpose of the survey is to provide a more comprehensive representation of the city’s labor market and wage and benefit structure than what could be achieved using information from secondary data sources.

Chapter 4 presents the findings of focus groups that were conducted

separately with employers and employees. The purpose of the focus groups was to solicit the “stories” that tell how the LWO has impacted these principal actors in the Santa Fe economy. Unlike other research methods, focus groups offer the benefit of conversation between individuals as they respond to each other’s experiences. The sessions allowed participants to describe how the LWO impacts their day-to-day decision-making.

Chapter 5 takes a closer look at possible “unintended consequences” of

the LWO. Among other issues, the chapter addresses the concerns over an increased high school drop out rate, as well as those regarding limitations on youth employment opportunities.



CHAPTER 2: QUARTERLY EARNINGS AND THE $9.50 LIVING WAGE

INTRODUCTION

The Bureau of Business and Economic Research (BBER) has examined a

number of aspects of the Living Wage Ordinance (LWO) in Santa Fe, beginning with a baseline analysis of the Santa Fe economy2 and following with analysis based on overall economic trends3, a wage analysis based on a survey of businesses, and an analysis of employment impacts using ES-202 micro data.4 In August 2007 a report on the employment impacts of the $9.50 living wage was completed.5 This report is the last statistical analysis and focuses on the changes in earnings after the $9.50 living wage.

The methods used in the analysis of wage impacts are quite similar to those used in previous studies3 to examine the effects of the LWO on employment in Santa Fe. To estimate the impacts of the LWO on quarterly earnings, we look at the difference in earnings at each job before and after the LWO by industry. Earnings for women and youth workers are also examined, as well as for workers of chain stores, and low earnings jobs.

This report differs from the earnings analysis of the $8.50 living wage in that it considers total earnings per person in addition to the standard analysis of earnings per job. It also attempts to examine earnings changes for employees of businesses with multiple locations, which are typically left out due to data limitations. The final difference is that business locations in this study are determined by latitude and longitude rather than geo-coded address, and so are much more exact. This allows for the comparisons of the earnings of employees of businesses in Santa Fe to those in Santa Fe County and Albuquerque, whereas previously only comparisons between Santa Fe and Albuquerque were possible.

As noted in earlier reports, determining the impacts of the LWO is difficult at best. Apart from the usual difficulties (isolation of influences, reliability of data, etc.) in determining the impacts of a policy change, the case of the Santa Fe living wage is unique in that the small geographical region is less balanced and more subject to seasonality and other economic fluctuation, which increases the

2 Reynis, Lee. Santa Fe Living Wage Baseline Study. March 2004. 3 Reynis, Lee et al. Preliminary Analysis: Impacts of the $8.50 Minimum Wage on Santa Fe Businesses, Workers, and the Santa Fe Economy. December 2005. 4 Potter, Nicholas. Measuring the Employment Impacts of the Living Wage Ordinance in Santa Fe, New Mexico. June 2006. and Potter, Nicholas. Earnings and Employment: The Effects of the Living Wage Ordinance in Santa Fe, New Mexico. August 2006. 5 These reports were previously issued to the City of Santa Fe, and with the City of Santa Fe’s permission, will be posted on the BBER website at http://www.unm.edu/~bber.



variability of employment and earnings and leads to exaggerated estimates of the impacts of any time-based policy such as the LWO.

In the next section, we discuss data sources and adjustments, corrections and other processes used to create the final data sets used in the analysis. Following that, we discuss the methods used in the analysis and finish with a presentation and discussion of the results. DATA

The analysis makes use of the same data sets that were used in the

previous studies. The first data set is comprised of all firms paying unemployment insurance and is compiled by the New Mexico Department of Workforce Solutions. Data is collected on the number of employees receiving pay during the pay period including the 12th of each month. The second data set is similar, but consists of data on each worker for businesses that pay unemployment insurance.

Employer data begins as quarterly reports, each of which was merged according to the employer ID to create a single file comprising employers from 1996 to 2006. The data includes monthly employment and quarterly total wages. Beginning in the third quarter of 2003, the data also includes the latitude and longitude for each business location. The data was geo-coded using latitude and longitude to select those businesses located in Santa Fe City, Santa Fe County, and Albuquerque. Each business was assigned a value indicating in which of these three geographies it belonged during the quarter just before and one year after the living wage took effect (i.e. 2004q2 and 2005q2 for the $8.50 living wage and 2005q4 and 2006q4 for the $9.50 living wage). People who are self-employed and businesses with no employees are not included in this data set because they are not subject to the living wage. Only private employers were included.

Determining worker wages is a similar process, starting with quarterly data and matching based on worker ID and business ID to create a longitudinal series for each worker at each business. There is naturally a large degree of fluctuation, and it is not uncommon for a worker to change positions after a few quarters.

Because the wage data only includes a business ID but not a variable indicating which location the worker works at, it is impossible to determine if workers at businesses with multiple locations are working for the location in Santa Fe or in other locales. To create the best possible population businesses with multiple locations are therefore not included in the generic data file, but are treated separately.



Wage data was adjusted to 4th quarter 2006 real dollars using the consumer price index. An average of quarterly wages is created for the year before and after each living wage (2003q3-2004q2, 2004q3-2005q2 and 2005q1-2005q4-2006q1-2006q4 respectively). Only those quarters in which a worker was actually working (i.e. earned a wage) are included in the average. Birth date and city entry errors were corrected when possible. Differences are created by subtraction the average after the living wage from the average before the living wage.

Several derivative data sets were created based on the wage data. A data set on quarterly earnings by person was created by summing earnings of individuals from multiple jobs, allowing us to examine changes in overall earnings, something that is not possible using the per job earnings data alone. Another data set includes workers for businesses with multiple locations based on the worker’s city of residence. While using city to determine which location a worker is employed at is an imperfect measure, it is fair to assume that most workers who have an address in Santa Fe work at a business located in the Santa Fe region. The data is too messy to reliably use for regression modeling of difference-in-differences, but looking at general trends in the earnings data gives additional insight to this important group of workers.

It should be noted that these data sets do not include every worker employed at a privately held single location business in Santa Fe or Albuquerque. As with any data set, human error is a significant problem. Matching multiple data sets compounds the problem. Since matches are based on identification numbers, an error in the unemployment insurance identification number results in the worker not being recognized as an employee, while an error in the ID of a worker will result in separate entries and can skew estimates of wage changes. BBER has done its best to account for these errors, but 100 percent accuracy is impossible. If these errors can be assumed to be random, their impact on the analysis can be assumed to be negligible. METHOD

The primary method used throughout this analysis is the difference-in-

differences method used by Card and Krueger and others.6 The difference-in-differences analysis compares before and after differences in a given control region to differences in the region in which a minimum wage law was enacted. The results then indicate whether the change in the minimum wage region was positive or negative relative to the change in the control region. This analysis is supplemented by looking at trends in earnings data for a variety of different worker groups.

6 For example, see the debate between Card and Krueger (1994, 1995, 2000) and Neumark and Wascher (1995, 2000).



The difference-in-differences method is used to examine changes in wage earnings that may have resulted from the living wage. In the difference-in-differences analysis, the basic unit of measurement is average quarterly wage earnings for an individual at a specific job taken over the quarters of the year before and after the wage change went into effect. To be included in the difference calculations, a person has to have earned wages in at least one quarter in each of the two years that bookmark the wage change. The difference analysis itself compares the difference between average quarterly earnings for a given worker at a given job in the year after and the year before both the $8.50 and the $9.50 living wages went into effect. The difference-in-differences measure is the result of a regression between the differences for employees of large Santa Fe businesses and a given control group. The three control groups are employees of large Albuquerque businesses, employees of small Santa Fe businesses, and employees of large Santa Fe County businesses.

The selection of Albuquerque as the control region is discussed in depth in “Measuring the Employment Impacts of the Living Wage Ordinance in Santa Fe, New Mexico (BBER, 2006).” To maintain continuity of comparison amongst the analyses, Albuquerque is used as the control region for this analysis as well. However, the greater geographic accuracy in these data sets allows us to compare the city of Santa Fe to Santa Fe County as well. Adding Santa Fe County as a control group gives another dimension of comparison against which to examine earnings changes for significant differences. RESULTS

A wide variety of different measures are presented here, and keeping the

differences between them straight can be difficult. We begin by looking at the total earnings characteristics of Santa Fe and Albuquerque residents. These measures consider the total earnings per person (i.e., earnings from multiple jobs are summed) rather than the earnings for a given job. This is a useful starting point for developing a general feel for earnings trends for workers in Santa Fe and Albuquerque. However, because we are summing earnings from multiple jobs, we can’t differentiate these values by industry, business location or business size.

To examine the differences that industry, business location and business size might have on the earnings of employees, we follow with a section that looks at the change in earnings for employees in a variety of different businesses. This is the standard difference-in-differences analysis that compares the change in earnings for employees of large Santa Fe businesses to the control groups.

We proceed by further breaking out the earnings results by looking at earnings for women, youth, low income, and workers for businesses with multiple locations. Each of these sections considers earnings on a job basis instead of



the total earnings per person basis so as to examine how specific jobs may be changing. General Employee Earnings Statistics

Here we look at total earnings per person. In Figure 2.1, the year over

year percent change in earnings for workers living in Santa Fe trends fairly closely with Albuquerque, though Albuquerque has a couple of unusual quarters. The overall trend suggests that earnings in both locations have been increasing at increasingly faster rates since 2004, with some strong growth occurring in 2006.

Except for the two quarters that are negative for Albuquerque workers, the percent change in earnings for residents of both cities is fairly similar. Whatever gain in earnings, if any, occurred because of either the $8.50 or the $9.50 living wage is small enough to not cause a discernable change in the growth of earnings for Santa Fe residents.

This is not to say that there is no effect. The earnings shown in Figure 2.1 include residents who work for a number of businesses that are not subject to the living wage, including small businesses and large businesses in Santa Fe County. The number of employees who saw their hourly wage increase as a result of either living wage change are a relatively small portion of the population.

Still, earnings are increasing in real terms (remember these are real 2006 4th quarter dollars) for residents of both cities.



Figure 2.1: Year-over-Year Percent Change in Quarterly Earnings of Non-Chain Employees by City of Residence

Earnings Per Person by City of Residence

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Difference Analysis of Changes in Quarterly Earnings in Santa Fe, Santa Fe County and Albuquerque

In this section we consider the difference-in-differences in earnings for

employees of large Santa Fe businesses as compared to employees of large Santa Fe County or Albuquerque businesses as well as to employees of small businesses within each location.

This overall measure captures how the earnings of employees of those

businesses directly affected by the living wage, specifically businesses located in Santa Fe with 25 or more employees, have changed with respect to the earnings of employees at other businesses.

In Table 2.1 we are shown five difference-in-differences measures for each living wage level ($8.50 and $9.50). The relative change in earnings for employees of large Santa Fe businesses was $34 higher than employees of Santa Fe County businesses and $47 higher than employees of Albuquerque businesses for the $8.50 living wage. By size, employees of large businesses did better than those of small businesses in Santa Fe ($43) and Santa Fe County ($41), but slightly worse in Albuquerque (-$10).



Assuming no other factors affected changes in wages between the different groups (a big assumption), the $8.50 living wage could be responsible for somewhere between $30 and $48 in average quarterly earnings per job.

The differences between earnings after the $9.50 living wage are much smaller. Comparing employees of large Santa Fe businesses with those of large Santa Fe County businesses and large Albuquerque businesses, neither difference was significant at the 10% level, and both difference-in-differences were minor ($10.89 and -$5.19 respectively). The same trend is also apparent when comparing by size. Employees of large businesses did better regardless of location and all difference-in-differences were significant, but none of the values was very large.

Table 2.1: Difference-in-Differences in Mean Quarterly Earnings by Job

$8.50 Dif $9.50 Dif $8.50 Dif $9.50 Dif

Santa Fe Cty 34.88 10.89 Santa Fe 43.43 18.32Albuquerque 47.25 -5.19 Santa Fe Cty 41.96 18.16

Albuquerque -10.00 9.59

Large Businesses Compared to Small by Location

Large Santa Fe Businesses Compared to Other Locations:

Note: Population size and statistical significance are shown in Appendix 1A, Table A1.

It is worth noting that employees of large Santa Fe businesses did better

against employees of small businesses than their counterparts in Santa Fe County and Albuquerque, though not by much. Since these are differences per quarter, we would expect to see much larger differences if the living wage were causing employers to reduce hours (a negative change) or raise wages (a positive change) significantly. That all measures for both the $8.50 and $9.50 living wage are fairly small suggests that not many businesses had to increase wages or cut back hours (unless some combination of the two occurred such that it roughly balanced out the earnings of employees).

Since workers in some industries are paid much higher than others, it is useful to consider the earnings changes by industry, paying special attention to those industries that might see a significant change as a result of either living wage change.

Industry Comparison by Location

In this section we compare the earnings of employees of large Santa Fe

businesses to those of employees of large Santa Fe County and Albuquerque businesses. All businesses included in this section are single-location businesses with 25 or more employees.



The results in Figure 2.2 and Figure 2.3 show the difference-in-differences for earnings of employees of large Santa Fe businesses relative to the three control groups for select industries. Figures and tables of the results for all industries are show in Appendix I B in Tables B1 through B4 and Figures B1 through B4. The results suggest some fairly strong increases in relative earnings in the food services sector after the $8.50 living wage, with less conclusive results in the other sectors. Figure 2.2: Difference-in-Differences of Quarterly Earnings of Employees of

Large Non-Chain Businesses, $8.50 Living Wage

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In Figure 2.3 the change in relative earnings is smaller and less conclusive across the board, though earnings in the retail sector are stronger against all control groups. In the other sectors the results vary by control group and are generally minimal.



Figure 2.3: Difference-in-Differences of Quarterly Earnings of Employees of Large Non-Chain Businesses, $9.50 Living Wage

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Taken together the results suggest that workers for large Santa Fe businesses in the food services industry may have seen an increase in earnings after the $8.50 living wage, and those in retail may have seen an increase in earnings after the $9.50 living wage, but that these changes were small relative to the control regions, and generally there was enough variance between the results that no real change in earnings was discernable. Female Workers

Looking specifically at female workers, we see difference-in-differences measures that are similar to workers at large Santa Fe businesses overall. Female workers at large Santa Fe businesses experienced small positive differences relative to earnings of employees of Santa Fe County, Albuquerque, and small Santa Fe businesses after both the $8.50 living wage and the $9.50 living wage (see Table 2.2). In most cases, the differences for female workers are smaller and less significant.



Table 2.2: Difference in Differences in Mean Quarterly Earnings by Job, Female Workers

$8.50 Dif $9.50 Dif $8.50 Dif $9.50 Dif

Santa Fe County 9.28 26.09 Santa Fe 36.39 19.23Albuquerque 58.53 4.50 Santa Fe County 41.02 13.23

Albuquerque -16.27 -2.1807




As before, that we see such small changes in relative earnings suggests

that only a small portion of workers were affected by the living wage or that the living wage did little to increase earnings.

A few industries stand out as having substantially different changes in the earnings of female employees of large Santa Fe businesses. As seen in Figure 2.4, earnings in the manufacturing industry increased relative to earnings in each control group after the $8.50 living wage, but decreased after the $9.50 living wage.

Figure 2.4: Difference-in-Differences of Quarterly Earnings of Female Employees in the Manufacturing Industry

-200

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vs Santa Fe County vs Albuquerque Lg vs Small

Large Santa Fe vs Control Group

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$8.50 $9.50



Figure 2.5 shows relative changes in earnings for female workers in the health care industry, which were generally small after both living wage levels, except when compared to earnings of female employees of large businesses in Santa Fe County. Against Santa Fe County, earnings of female employees of businesses subject to the living wage decreased after the $8.50 living wage and increased substantially after the $9.50 living wage.

Figure 2.5: Difference-in-Differences of Quarterly Earnings of Female Employees in the Health Care Industry

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Figure 2.6 shows the difference-in-differences in earnings for the accommodations industry. Except for the large negative change in earnings relative to female employees of large Santa Fe County businesses after the $8.50 living wage, other changes in the accommodations industry are relatively small.

On the other hand, in Figure2.7 we can see that the food services sector earnings of female employees of businesses subject to the living wage are positive relative to each control group after the $8.50 living wage and negative after the $9.50 living wage, though the differences are relatively small.



Figure 2.6: Difference-in-Differences of Quarterly Earnings of Female Employees in the Accommodations Industry

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Figure 2.7: Difference-in-Differences of Quarterly Earnings of Female Employees in the Food Services Industry

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Overall, the data on female workers suggests some slight gains in earnings relative to the control groups after the $8.50 living wage with changes in earnings being not statistically different from changes in control groups after the $9.50 living wage. This is consistent with the results for workers in general. Young Workers

There are two groups of young workers we focus on here. The first is workers aged 18-22 when each living wage rate took effect – those workers who are likely to have been in college. The second group is workers aged 15-18, who would have been in high school.

One caveat regarding the analysis of young workers: the 2006 wage data is missing a lot of birthdays, making it impossible to know the age of workers. While there are still plenty of workers whose age we do know, the 2006 data undoubtedly excludes many young workers. The population size for this data set is correspondingly reduced.

After the $8.50 living wage, College age workers at large Santa Fe businesses saw an increase in relative earnings that was slightly higher than the increase for the workforce as a whole when compared to employees of large Santa Fe County, large Albuquerque, and small Santa Fe businesses (Table 2.3). As college age workers are more likely to be working for low wages, we would expect differences to be higher for this demographic if the living wage contributed to earnings. The results suggest that the $8.50 living wage may have increased earnings somewhere between $40 to $70 per quarter per job worked by a college age person.

Table 2.3: Difference in Differences in Mean Quarterly Earnings by Job, Worker Age 18-22

$8.50 Dif $9.50 Dif $8.50 Dif $9.50 Dif

Santa Fe County 50.25 -29.85 Santa Fe 68.32 -3.15Albuquerque 43.92 -11.39 Santa Fe County 62.54 6.99

Albuquerque -31.77 1.70




In contrast, the differences after the $9.50 living wage are small and

statistically insignificant for all groups. Earnings overall for college age workers of businesses subject to the living wage did not increase any more than earnings for workers of businesses not subject to the living wage.



In the following figures, we’ve selected the industries with the largest significant differences or that are otherwise of interest. Figure 2.8 shows the difference-in-differences for college age workers in the manufacturing industry, which shows positive earnings changes relative to every control group after the $8.50 living wage, but zero or negative changes in earnings relative to control groups after the $9.50 living wage.

Figure 2.8: Difference-in-Differences of Quarterly Earnings of Employees Age 18-22 in the Manufacturing Industry

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In Figure 2.9 we see the difference-in-differences in the arts and entertainment industry. Difference-in-differences after the $8.50 living wage are positive for employees of businesses subject to the living wage compared to the control groups. However, after the $9.50 living wage the relative earnings change is negative compared to employees of large Santa Fe County and large Albuquerque businesses and positive relative to employees of small Santa Fe city businesses.



Figure 2.9: Difference-in-Differences of Quarterly Earnings of Employees Age 18-22 in the Arts and Entertainment Industry

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As show in Figure 2.10, results for the workers in the accommodations industry show no real earnings increase after either living wage. In fact, wages for employees of businesses subject to the living wage and those of businesses in the control groups are fairly similar (though consider the scale of Figure 2.10 in relation to other figures, as it is skewed by the large negative number relative to Santa Fe County after the $8.50 living wage).



Figure 2.10: Difference-in-Differences of Quarterly Earnings of Employees Age 18-22 in the Accommodations Industry

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In the food services industry, shown in Figure 2.11, we see dramatic gains in earnings for employees of businesses subject to the living wage relative to those of businesses in the control groups after the $8.50 living wage, but as has been the trend throughout, little difference in the change in earnings after the $9.50 living wage.



Figure 2.11: Difference-in-Differences of Quarterly Earnings of Employees Age 18-22 in the Food Services Industry

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$8.50 $9.50

The overall results for high school age workers are not substantially different from those for college-age workers. In Table 2.4 we see numbers that are fairly similar to those in Table 2.3 (and not too different from those in either Table 2.2 or Table 2.1). The population size is smaller, which can lead to less significant results but the data indicates that earnings for high school-age workers generally increased after the $8.50 living wage relative to the control groups, but decreased after the $9.50 living wage rate.

Table 2.4: Difference in Differences in Mean Quarterly Earnings by Job, Worker Age 15-18

$8.50 Dif $9.50 Dif $8.50 Dif $9.50 Dif

Santa Fe County -68.49 -102.71 Santa Fe 64.95 8.97Albuquerque 48.63 -53.03 Santa Fe County 51.20 32.65

Albuquerque -23.83 -6.46




Though small sample sizes make it difficult to perform a statistical analysis on high school age employees of businesses subject to the living wage in specific industries, service industries tend to have enough workers for a comparison.



In Table 2.5, we see the difference-in-differences for a few specific

industries. These numbers show that earnings in the arts and entertainment sector increased significantly relative to employees of large Albuquerque businesses and small Santa Fe businesses after both the $8.50 and the $9.50 living wage. In contrast earnings differences in accommodations were insignificant for both living wage levels, while earnings in food services were positive and significant after the $8.50 living wage, but insignificant after the $9.50 living wage.

Table 2.5: Difference-in-Differences in Mean Quarterly Earnings by Industry, Worker Age 15-18

$8.50 $9.50Arts and EntertainmentSF vs Abq 99.59 165.19SF lg vs SF small 134.97 154.64

AccommodationsSF vs Abq 57.76 -34.11SF lg vs SF small -15.01 -137.30

Food ServicesSF vs Abq 57.76 -34.11SF lg vs SF small 85.50 51.40


What is important about the results we see for both college and high

school age workers is the size of the change in earnings. While overall differences in earnings for young workers are positive they are not substantially different from difference-in-differences from workers overall. However, when looking at specific industries we see relative changes that are much larger than those found for the general population of workers. This fits with the idea that young workers are more likely to work a minimum wage job and so should experience a larger portion of the earnings gain. Low Wage Workers

To examine potential impacts on low-wage workers, we examined just those workers whose average quarterly earnings before each wage increase was below a given level. Because there is no measure in the data for determining how many hours a person has worked, we can only approximate earnings. For this analysis, we included only those people whose average quarterly earnings was less than it would be if they were working 40 hours per week earning $8.50 per hour. As many jobs are less than 40 hours per week, this group will necessarily include many people who make more than $8.50 per hour.



Perhaps because of this, overall earnings changes for low wage workers

relative to the control groups are only slightly higher than those found for other worker groups. Figure 2.12 shows the difference-in-differences for low wage workers overall after each living wage.

However, one industry that does show significantly different results is the food services industry. Figure 2.13 shows substantially higher changes in earnings for workers of businesses subject to the living wage relative to the control groups after the $8.50 living wage and smaller changes after the $9.50 living wage. Figure 2.12: Difference-in-Differences for Low Earning Employees of Living

Wage Businesses Relative to Control Groups

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Living Wage Rate

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Figure 2.13: Difference-in-Differences for Low Earning Employees of Living Wage Businesses Relative to Control Groups in the Food Services Industry

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To capture changes in earnings of low wage workers of businesses with multiple locations, Figure 2.14 shows the difference in earnings after each living wage by city of residence. Here we see significantly higher growth in earnings for residents of Santa Fe than for residents of Albuquerque after both the $8.50 and the $9.50 living wage.



Figure 2.14: Earnings Differences for Low Earning Employees of Large Multiple Location Businesses by City of Residence

(50)

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Santa FeAlbuquerque

To look at how earnings have changed over time, we sorted jobs into earnings groups of $1,000 and compared the frequency of jobs. As the living wage takes effect, we would expect to see declines in the percent of jobs with low earnings. Figure 2.15 shows the frequency for jobs at all Santa Fe businesses, and Figure 2.16 shows the frequency for jobs at large Santa Fe Businesses.



Figure 2.15: Frequency of Jobs at Santa Fe Businesses by Earnings Category7

0%10%20%30%40%50%60%70%80%90%

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Figure 2.16: Frequency of Jobs at Large Santa Fe Businesses by Earnings Category8

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We can see some declines in the percent of jobs with low earnings beginning in 2005 for some groups but really taking hold in 2006. However, this

7 The last two quarters of 2006 show substantial declines that are almost certainly overestimates of the change. While the 3rd quarter data is not preliminary, the 4th quarter is and has not undergone revisions. Both quarters have significantly less employees for the state as a whole. Most employees who are not included in the initial data are transient workers who get added at a later point, and so we would expect a disproportionate number of their jobs to have lower earnings. For these reasons, the significant declines in the frequency of lower earnings jobs in the 3rd and 4th quarter of 2006 should not be taken as absolute fact. 8 Ibid.



behavior is not unique to jobs at Santa Fe Businesses. The same trend can be found for jobs at Santa Fe County and Albuquerque businesses, though Albuquerque’s doesn’t happen until the 3rd quarter of 2006. Charts for Santa Fe County and Albuquerque are in Appendix I B, Figures B5 through B8. Workers at Businesses with Multiple Locations

Though the limitations of the data make it impossible to match employees to specific locations of multiple location businesses, we approximated those workers by selecting those workers who work at multiple location businesses and who’s address shows them living in Santa Fe or Albuquerque. While commuters and workers at businesses with locations in Santa Fe County are undoubtedly included when they shouldn’t be, this analysis is helpful to at least gain an overall picture of the trends in earnings for this important class of generally lower-wage workers.

Differences in earnings after the $8.50 living wage are substantially higher for workers living in Santa Fe compared to workers living in Albuquerque. Figure 2.17 shows the difference in earnings for workers of multiple location businesses who reside in Santa Fe and Albuquerque. The difference is stronger for women, college age, and high school age workers, who typically earn lower wages. Most astoundingly is the increase of over $400 dollars per quarter per job for high school age workers in Santa Fe while Albuquerque workers of the same age saw a (still substantial) increase of $200. If previous results have failed to find strong evidence of an increase in earnings due to the living wage, the results for workers of multiple location businesses show significant changes in earnings.



Figure 2.17: Difference in Mean Quarterly Earnings of Employees at Multiple Location Businesses after the $8.50 Living Wage by Worker

Category

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All Men Women College High School

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However in Figure 2.18 we see the difference in earnings after the $9.50 living wage, which while strong, are minimally different from residents of Albuquerque. For all worker groups except female workers, the change for workers living in Santa Fe is smaller than the change for workers living in Albuquerque.



Figure 2.18: Difference in Mean Quarterly Earnings of Employees at Multiple Location Businesses after the $9.50 Living Wage by Worker

Category

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All Men Women College High School

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Looking at specific industries in Figures 2.19 and 2.20 we see similar behavior. Most changes in earnings are similar between residents of Santa Fe and residents of Albuquerque, though Santa Fe shows stronger growth in the information, health care, arts and entertainment, and food services sectors and weaker growth in construction and manufacturing.



Figure 2.19: Difference in Mean Quarterly Earnings for Employees of Multiple Location Businesses after the $8.50 Living Wage by Industry

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But if those differences were due to the $8.50 living wage, we don’t see a repeat of the same pattern when looking at the $9.50 living wage. Every industry that showed greater earnings growth after the $8.50 increase shows growth after the $9.50 living wage that is equal or less than growth in Albuquerque.

Figure 2.20: Difference in Mean Quarterly Earnings of Multiple Location Businesses after the $9.50 Living Wage by Industry

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Repeating the frequency count of jobs shown in Figures 2.15 and 2.16, we can see similar behavior for chain employers as for single location employers in



Figure 2.21. The number of jobs declines slightly in 2005, with strong declines in last two quarters of 2006. The chart for Albuquerque is included in Appendix I B, Figure B9.

Figure 2.21: Frequency of Jobs at Multiple Location Businesses with Worker’s Residence in Santa Fe By Earnings Category9

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$2000-2999

$1000-1999$0-999

The data for workers of multiple location businesses suggests that some growth in earnings after the $8.50 living wage could be due to the living wage itself, but that any increase in earnings due to the $9.50 living wage only kept pace with changes in Albuquerque. This may be due at least in part to relatively few workers who were earning a low enough wage for the living wage to make a substantial difference.

9 Though again, the last two quarters of 2006 may be suspect.



DISCUSSION

The overall changes suggest small positive changes overall for employees of businesses subject to the living wage relative to the control groups for the $8.50 wage increase, and no discernible difference in earnings change between the groups after the $9.50 living wage. Earnings in different industries have behaved differently, but no particular industry exhibited overwhelming gains that would result from a large wage increase for a majority of workers.

If little evidence can be found of earnings increases, the most likely explanation is that the majority of workers were already earning an hourly rate above the living wage. This certainly seems plausible given that fast food workers were being paid $6.50 to start in 2001.10 Any industry we examine has a variety of workers at different wage levels, and an increase in the wage rate for only that portion below the living wage understandably has little effect on the mean earnings of workers in the industry as a whole.

Yet even so several industries responded quite positively after the $8.50 and $9.50 living wages took effect. Industry sectors such as information, administrative services, health care, accommodations, and food services all show significant gains relative to the control groups for employees of businesses subject to the living wage, though these gains were larger after the $8.50 living wage took effect than after the $9.50 living wage began.

Perhaps most interesting is the data on young workers. Young workers typically work at the bottom of the pay scale and so we would expect an increase in earnings to show up most strongly amongst those workers. Though we don’t see significant increases in earnings relative to the control groups for employees of single location businesses subject to the living wage, we do find substantial gains in earnings for young employees living in Santa Fe and working for businesses with multiple locations. These gains are much higher than the gains found for young workers living in Albuquerque and working at multiple location businesses.

The results for low-earning workers are also somewhat different from workers overall, especially low-earning workers for multiple location businesses, which show significant increases in earnings for residents of Santa Fe compared to residents of Albuquerque.

There are intricacies to this analysis that have been hinted at but not yet fully discussed. In particular, a limitation of the comparison between Santa Fe and Albuquerque is the difference in the number of workers in each location. Depending on how complete the wage data is, this can skew results because the behavior of a small number of Santa Fe workers count for the entire group. 10 This rate comes from a presentation at the First Friday Community Forum in Taos, NM by Jerry Easley, former Executive Director of the Santa Fe Chamber of Commerce.



Theoretically, the data sets used in this analysis include virtually the entire group, but for various reasons such as improper entry and missing values this is probably not truly the case. The skewed sample size doesn’t change the actual value, but can lead to results being considered more statistically significant than they should be. However, in cases where most of the worker population is captured by the data, different sample sizes are not a problem.



REFERENCES Charles Brown, Curtis Gilroy, and Andrew Kohen. The effect of the minimum wage on employment and unemployment. Journal of Economic Literature, 20(2):487-528, Jun 1982. David Card and Alan B. Krueger. Minimum wages and employment: A case study of the fast-food industry in New Jersey and Pennsylvania. The American Economic Review, 84:772-793, 1994. David Card and Alan B. Krueger. Myth and Measurement: The New Economics of the Minimum Wage. Princeton University Press, 1995. David Card and Alan B. Krueger. Minimum wage and employment: A case study of the fast-food industry in New Jersey and Pennsylvania: Reply. The American Economic Review, 90(5):1397-1420, Dec 2000. David Neumark and William Wascher. Minimum wages and employment: A case study of the fast-food industry in New Jersey and Pennsylvania: Comment. The American Economic Review, 90(5):1362-1396, Dec 2000. Potter, Nicholas. Measuring the Employment Impacts of the Living Wage Ordinance in Santa Fe, New Mexico. University of New Mexico – Bureau of Business and Economic Research. Report, June 2006. Potter, Nicholas. Earnings and Employment: The Effects of the Living Wage Ordinance in Santa Fe, New Mexico. University of New Mexico – Bureau of Business and Economic Research. Report, August 2006. Reynis, Lee. Santa Fe Living Wage Baseline Study. University of New Mexico – Bureau of Business and Economic Research. Report, March 2004. Reynis, Lee, and Myra Segal and Molly Bleecker. Preliminary analysis of the impacts of the $8.50 minimum wage on Santa Fe businesses, workers and the Santa Fe economy. University of New Mexico – Bureau of Business and Economic Research. Report, December 2005. Reynis, Lee and Nicholas Potter and Joshua Akers. The Impact of The $9.50 Living Wage on the Economy of The City of Santa Fe Part I. University of New Mexico – Bureau of Business and Economic Research. Report, August 2007. Robert Pollin and Jeannette Wicks-Lim. Comments on Aaron Yelowitz, ‘Santa Fe’s living wage ordinance and the labor market’. Working paper, Oct 2005. Aaron S. Yelowitz. Santa Fe’s living wage ordinance and the labor market. Pages 1-12, Sep 2005.



CHAPTER 3: SANTA FE LIVING WAGE 2007 BUSINESS SURVEY PURPOSE/ OBJECTIVE

In accordance with the Santa Fe Living Wage Ordinance (LWO), effective January 1, 2006, the minimum wage in Santa Fe, New Mexico increased from $8.50 to $9.50 an hour. The Bureau of Businesses and Economic Research (BBER), under contract with the City of Santa Fe, conducted a study to investigate the ongoing economic impacts of the LWO. As part of the study, BBER distributed a survey to Santa Fe businesses in an effort to capture changes in their business operations and identify challenges as perceived by business operators. This chapter reports the results and analysis of the survey. The impact study began in 2004, in which the business survey was used to establish a baseline. The survey was administered again in 2005 and now, for the third time, in September 2007.

In general, the survey’s objective was to capture how Santa Fe business leaders are modifying their operations in response to the mandated $9.50 wage and to identify potential challenges posed to businesses. The purpose of the survey is to provide a more comprehensive illustration of the city’s labor market and wage and benefit structure than what could be established using information from institutional databases maintained by state agencies (i.e., NM Department of Labor). The survey’s value lies in the ability for Santa Fe business leaders to identify and prioritize concerns regarding the Ordinance as it impacts their particular business operations. The survey also allows BBER to determine what adjustments in business operations have been made over the past year. Also, the survey is able to identify challenges or unforeseen consequences that may not have been an issue in 2004 or 2005. While the survey is beneficial in identifying what modifications have been made in the operations of Santa Fe businesses, responses to the survey cannot point to a direct causal relationship between the implementation of the LWO and changes in business operations, or the business climate. Like local economies in all parts of the country, the Santa Fe economy is being affected by rising costs on a national level, especially in terms of fuel, transportation, energy and healthcare. While considering the findings of this survey, it is important to remember that any changes in the business climate or adjustments made by individual businesses cannot be wholly attributed to the LWO.

Following the methodology used in the 2004 and 2005 studies, BBER administered a survey to Santa Fe businesses. In the 2004 study, the survey was sent to businesses that both had employees and were non-employers. However, in 2005 and in the current study, the sample was limited to businesses that have employees (or had employees in any month in 2005 or 2006).



The study and its methodology were approved by the University of New Mexico Institutional Review Board (IRB). The function of the IRB is to ensure that all participants have been briefed on the study, its purpose and how any information provided will be used. The IRB reviewed and approved the business survey. METHOD/ SAMPLING PROCEDURE

For the purposes of the survey, the population is comprised of all businesses employing a positive number of employees in 2006, that are not government or American Indian corporations and that are located within the city limits of Santa Fe, New Mexico. Firms meeting these criteria may be subject to the LWO. Within this population, there are two11 strata of businesses: first are those businesses that, during any month from 2003 through 2006, had more than 20 employees. Second are smaller businesses that always had fewer than 20 employees in every month from 2003 through 2006.

To identify firms in each category, BBER used the employer records from the NM Department of Labor ES-202 employer file, which is primarily used in administering the unemployment insurance program.12 This file includes monthly data on number of employees for each business and also contains information that can be used to determine whether or not the business location is within the geographic jurisdiction of the LWO. Business names and addresses were also cross-checked with a publicly available database, Reference USA to ensure a complete listing.

The sample selection methodology changed from previous studies. This

year, BBER was able to use latitude and longitude data from the ES-202 employer files to more accurately identify businesses in the city limits. This resulted in a larger population and hence, a larger sample than in previous years. Diagnostic statistics were used to ensure adequate coverage of smaller business (< 20 employees). In an effort to give each category a comparable representation of the sample, each category was sampled at a different rate. Businesses with 10-19 employees and with 20 or more employees were sampled at 100%; every business in these categories received a postcard. It was important to achieve good coverage of the 10-19 group, as they may be more likely to change their employment numbers to avoid being subject to the wage. Together, these two categories turned out 800 firms. The remaining two categories were sampled at rates that would turn out 400 firms13 in each. This would give the different wage categories similar proportions in the sample, allowing for more reliable comparisons.

11 Non-employer businesses were not included in this sample as they were in 2003. 12 BBER has access to these individual records under a confidentiality agreement with NMDOL. 13 Firms in the 1-4 and 5-9 categories were randomly selected.



A total of 3,801 businesses were identified in the population. Following the sampling methodology outlines above, the sample consisted of 1,640 firms. IMPLEMENTATION/ DATA COLLECTION PROCESS

In both the 2004 and 2005 studies, the business survey was implemented as a mail-out/ mail-back survey. The current study introduced an electronic version of the survey, allowing business managers and owners the opportunity to complete the survey online. In early September 2007, all businesses in the sample were sent a postcard announcing the study and directing the respondent to the online survey.14 The postcard described the study, its relevance to the Santa Fe business community and provided instructions on how to participate. The card also had contact information for BBER staff in case the respondent wished to complete a paper version of the survey. BBER requested the assistance of the Santa Fe Chamber of Commerce, the Santa Fe Alliance and the Living Wage Network in encouraging their member firms to participate if they had received the survey.

BBER maintained the confidentiality of all who completed the business

survey. Each business in the sample was assigned a 5 digit access code. This code allowed business operators to conveniently access the survey online. To protect confidentiality, the randomly generated code is the only identifier linking individual respondents to their responses. The “key” file, which associates the business name to the access code is stored in a separate location with restricted access, ensuring that business names are never associated with individual responses. The code also provides security by ensuring respondents complete the survey only once and that non-sampled businesses cannot access the survey.

A few weeks after the survey was launched, a reminder postcard was sent to all businesses that had not yet responded. Due to technical difficulties with the website, many potential respondents could not access the survey. The website’s problems were not discovered for a few weeks after the survey’s launch. However, once discovered, the issues were quickly resolved. As a follow up, five weeks after the first postcards were sent; all non-respondents in the sample were mailed the survey in paper form, although the online format was available and functional. The paper version of the survey is included in Appendix II. SURVEY COVERAGE/ REPRESENTATION

The original sample size was 1,640 businesses. Sixty-seven businesses were dropped from the sample because they had problematic address data or, for some other reason, were unable to receive the study’s announcement via postal mail. As a result, the final sample size was 1,576 firms. BBER received

14 The survey was available at https://livingwagesurvey.unm.edu



277 valid responses15: the response rate was 17.6%. Table 3.1 below illustrates the response rate of each category.16

Table 3.1: Business Survey Response

Number of Employees Population Sample ResponsesResponse

Rate1 to 4 1,993 384 62 16.1%5 to 9 757 387 69 17.8%

10 to 19 303 284 59 20.8%20 or greater 537 521 85 16.3%

Total 3,590 1576 275missing = 2

277 17.6%UNM Bureau of Business and Economic Research

While the rate achieved in this study is acceptable, it is not ideal. Many

possible explanations exist for the low response rate. Small businesses, which make up the majority of the sample, are not officially covered under the LWO and may assume that its implementation has no effect on their operations. Following this logic, they would see no reason to complete the survey. BBER tried to minimize this effect by explaining the importance of small business representation in the study in the survey’s cover letter and instructions.

Table 3.2 breaks out the respondents’ industry type by the number of

employees in each firm. More than three-fourths of respondents have 24 or fewer employees. The remaining 22 percent of the responding firms have 25 or more employees, meeting one of the criteria for the LWO. The table shows that these larger firms are largely in the leisure and hospitality industries (7.7%). This category includes restaurants, hotels, museums and galleries.

15 Several submitted surveys were excluded from the sample because they were excessively incomplete or took efforts to hide the access code (entering 99999 or 00000, for example), making it impossible for BBER to determine if it was a legitimate submission. 16 Forty two surveys were returned with the “how many employees do you have” question left blank. BBER staff used the survey ID number and back-tracked to the original business list to identify the respondent. Using Reference USA database, BBER was able to determine the number of employees at the business.



Table 3.2: Industry Type and Number of Employees of Survey Respondents

Industry Type number of respondents 1-4 5-9 10-24 25-99 100+

Total of Industry

Type

Construction/ Natural Resources 27 3.3% 2.9% 2.2% 1.1% 0.4% 9.8%Retail 50 2.5% 5.1% 6.5% 3.3% 0.7% 18.2%Wholesale 4 0.4% 0.0% 0.4% 0.7% 0.0% 1.5%Manufacturing 12 1.5% 0.0% 1.5% 0.7% 0.7% 4.4%Transportation, Warehouse, Utilities 6 0.0% 0.4% 1.1% 0.7% 0.0% 2.2%Financial, Real Estate, Insurance 17 2.5% 1.5% 1.1% 1.1% 0.0% 6.2%Professional/ Business Services 65 6.9% 8.0% 6.5% 2.2% 0.0% 23.6%Health, Education and Social Services 40 4.0% 2.9% 5.5% 1.8% 0.4% 14.5%Information Services 6 0.0% 0.7% 1.1% 0.4% 0.0% 2.2%Liesure and Hospitality 47 1.5% 3.6% 4.4% 7.3% 0.4% 17.1%Other 1 0.0% 0.0% 0.4% 0.0% 0.0% 0.4%Total of Number of Employees 275 22.5% 25.1% 30.5% 19.3% 2.5% 100.0%

N=275UNM Bureau of Business and Economic Research

Number of Employees

Table 3.3 shows how various industries were represented in the sample. The table illustrates how each industry is represented in the sample compared to how each industry is represented in the city’s workforce. For example, the construction/ natural resources industry was slightly over represented in the sample. The construction industry accounted for almost 10 percent of the sample, but represents only eight percent of the city’s employment.

The professional and business services industry was over represented in the sample. While accounting for only 11 percent of the city’s employment, it comprises almost 24 percent of the survey sample. To a lesser extent, manufacturing is also overrepresented in the sample (4.4% vs 2.4%). Health, Education & Social Services and Leisure & Hospitality are two sectors that were underrepresented in the sample, with a difference of about five percentage points in each. The “Other” category also shows a discrepancy between the sample (0.4%) and the city’s workforce (4.8%). This category includes government agencies, which were not included in the sample.



Table 3.3: Sample Representation by Proportion of Workforce in Each Industry17

Industry Typenumber of

respondentspercent of

sample

proportion of city

employment by industry

Construction/ Natural Resources 27 9.8% 7.9%Retail 50 18.2% 20.6%Wholesale 4 1.5% 2.3%Manufacturing 12 4.4% 2.4%Transportation, Warehouse, Utilities 6 2.2% 1.5%Financial, Real Estate, Insurance 17 6.2% 6.7%Professional/ Business Services 65 23.6% 10.7%Health, Education and Social Services 40 14.5% 19.4%Information Services 6 2.2% 2.3%Liesure and Hospitality 47 17.1% 21.6%Other 1 0.4% 4.8%Total 275 100.0% 100.0%

Missing =2UNM Bureau of Business and Economic Research

The largest percentage of respondents is in the professional/ business services sector, making up about 24 percent of the firms, followed closely by retail (18%). Table 3.4 below shows that most businesses who responded self-identify as catering primarily to Santa Fe residents.

Table 3.4: Primary Customer Base of Survey Respondents

Primary customer base number of

firms %

Visitors to Santa Fe 31 11.2%Residents of Santa Fe 165 59.8%Businesses in Santa Fe 29 10.5%Government 14 5.1%Customers from other parts of NM 12 4.3%Customers from outside NM 25 9.1%N= 276

UNM Bureau of Business and Economic Research

17 Proportion of 2006 Santa Fe (city only) non farm employment represented in each industry. Proportions of City employment calculated from ES-202 employer file to which BBER had access under a confidentiality agreement with what is now the NM Department of Workforce Solutions.



FINDINGS REGARDING IMPACTS OF THE $9.50 MINIMUM WAGE The survey’s goal was to identify changes in and challenges to business operations in Santa Fe after the $9.50 minimum wage was mandated. However, it is important to note that the survey could not reasonably conclude that any changes were the direct result of the Santa Fe Living Wage Ordinance. Many other factors in the national and local economies can influence changes in business practices. For example, restaurant suppliers have added delivery surcharges to invoices in an attempt to cover rising fuel costs. Also, rising healthcare costs have resulted in many businesses decreasing or eliminating contributions to employee health insurance. While these changes are contemporaneous to the LWO’s implementation, it is impossible to say that one “causes” the other. The following sections present data from the responses to the survey. The survey also included an open ended question in which respondents could write in their thoughts concerning the LWO. Direct quotes are presented throughout this report; they are in italics. Business Climate The survey asked a few questions to evaluate employers’ perceptions of the current business climate in Santa Fe. First, they were asked to identify and rank the three greatest challenges facing their business operations. Second, they were asked to generally describe any changes in their sales activity (revenues) over the last year. This section outlines the responses to survey questions regarding the Santa Fe business climate and describes other challenges as described by respondents. Businesses were asked to identify the top three greatest challenges facing their business operations. Over half of the respondents indicated that attracting and retaining workers with necessary skills was a major issue, as shown below in Table 3.5. In previous surveys, employers have consistently criticized in the workforce’s lack of formal education, training and experience: about 33 percent of the sample indicated that it was their greatest challenge. The cost of wages and benefits was identified by 47% of the sample as one of the top three challenges. About 17 percent said it was the single greatest challenge.



Table 3.5: Top Three Challenges Facing Santa Fe Businesses

greatest challenge

2nd greatest

challenge

3rd greatest

challenge top 3Attracting/ Retaining workers with necessary skills. 32.9% 14.4% 13.6% 58.1%Attracting/ Retaining workers with the right attitude. 9.7% 18.5% 11.3% 36.8%Costs of wages and benefits. 17.4% 21.0% 10.9% 46.5%Difficulty raising capital. 3.5% 3.3% 5.0% 10.9%Government regulations. 4.7% 7.4% 10.4% 20.5%Other 5.0% 2.9% 3.6% 10.9%Other costs (material inputs, services). 2.7% 7.4% 14.5% 22.1%Real estate costs (rent, mortgage, etc). 5.0% 7.4% 10.9% 21.3%Sluggish economy/ markets. 12.8% 11.1% 11.8% 32.6%Tough competition 2.3% 6.6% 8.1% 18.6%

N= 258 243 221 258

UNM Bureau of Business and Economic Research The third most common challenge facing businesses is the ability to attract and retain workers with the right attitude. As in the previous LWO impact studies, BBER uncovered a commonly-held and strongly-felt perception of a low-quality workforce in Santa Fe. Employers express high levels of dissatisfaction with workers’ work ethic, loyalty, and work behavior in general (tardiness, absenteeism, inappropriate dress and demeanor, etc). Among business leaders, the underlying concerns with the quality of the workforce are aggravated by the idea that they have to pay unskilled and generally unreliable employees the same wage they pay skilled and dependable employees. Other costs are problematic for employers, while they may not be the most pressing. Included here are the rising costs of business insurance, gas, transportation, overhead, and costs of other goods and services. The “other” category includes challenges such as “water shortages” and “unpredictable weather.” One fifth of respondents indicated government regulations were posing great challenges to their business operations. The sluggish economy and markets option was chosen by nearly 33 percent of the sample as one of the top three challenges to their business, with about 13 percent saying the was their primary challenge. As another measure of the perception of the business climate, respondents were asked to characterize any changes in their sales activity over the last year. Table 3.6, below, summarizes responses to the survey question, “How has business been over the past year?” The columns are divided into categories based on the number of employees in each firm. The data show that 70 percent of the sample reported sales activity had either stayed the same or improved. Of those who said sales activity had decreased, these businesses attribute the downturn to local and national economic conditions.



Table 3.6: Changes in Sales Activity over the Past Year

1 to 4 5 to 9 10 to 24 25 to 99 100+ total

Sales activity has been down from last year 6.2% 8.9% 7.8% 5.8% 0.8% 29.5%

Activity has been about what it was a year ago 9.3% 9.7% 13.6% 5.4% 1.9% 39.9%

Seeing some growth over the last year 5.4% 5.0% 7.4% 7.0% 0.0% 24.8%

Things are booming and we are having trouble keeping up 1.2% 2.7% 1.6% 0.4% 0.0% 5.8%

Total 22.1% 26.4% 30.2% 18.6% 2.7% 100.0%

N= 57 68 78 48 7 258


Number of Employees

The survey did not directly ask respondents about how the LWO may influence the business climate for potential start-ups or larger businesses that would consider establishing operations in the city. However, some respondents expressed fear that the LWO may make the Santa Fe business climate unattractive for incoming or new businesses. As some respondents noted,

It will continue to drive people, families, and businesses from choosing to locate in Santa Fe.

The continuing increases will eventually negatively impact the economy of Santa Fe by further raising the cost of living, stratifying the society even more, and reducing Santa Fe's competitiveness as an attractive market/destination/place to live.

A later section will deal explicitly with respondents’ plans to expand operations and other capital investments. Compensation (Pay and Benefits) The LWO mandated that, as of January 1, 2006, with some exceptions, businesses with 25 or more employees must pay $9.50 per hour. More than half of the responding businesses indicated that their employees’ pay and benefits were not affected by the LWO mandate of $9.50 an hour. Most businesses that responded to the survey were already paying at least $9.50 an hour before the mandated increase to $9.50 took effect. This finding is consistent with previous studies.

Table 3.7, below, summarizes changes in employee compensation as reported by business operators in the latest survey. The question asked what



changes had been made in response to the increase to $9.50. Forty-five percent of the sample (123 firms) said they had to make adjustments to their employee’s compensation. About 36 percent of these businesses said that they had employees earning less than the minimum wage and had to make increases.

Notice that a large proportion of businesses that increased wages for those making less than the living wage and those at or slightly above the living wage are larger employers. About 36.6 percent of affected firms had to bring people up to $9.50. Of these, 78% had 25 or more employees. About one third of businesses that had to make changes were smaller businesses that were not necessarily required to increase wages, but did so anyway.18 Thirteen of the businesses that made adjustments for lower wage earners also said that the LWO had no effect on their employees’ pay and benefits. While this appears contradictory, it may also suggest that it was not the LWO that prompted the changes.

Table 3.7: Changes in Employee Compensation

1 to 4 5 to 9 10 to 24 25 to 99 100 + Total

Had to bring people up to $9.50 3.3% 3.3% 1.6% 23.6% 4.9% 36.6%Not required, but brought people up to $9.50 7.3% 9.8% 15.4% 0.8% 0.0% 33.3%Not required, but raised wages for lower wage workers 4.1% 7.3% 10.6% 1.6% 0.0% 23.6%Had to increase wages for those earning $9.50 to $11.49 2.4% 6.5% 14.6% 17.1% 5.7% 46.3%Had to increase wages for those earning $11.50 to $13.49 2.4% 5.7% 8.9% 10.6% 4.9% 32.5%Had to increase wages for those earning $13.50 to $15.99 2.4% 2.4% 4.1% 7.3% 1.6% 17.9%Had increase wages for those more than $16.00 2.4% 3.3% 4.1% 2.4% 1.6% 13.8%Have reduced healthcare contributions 0.8% 2.4% 5.7% 3.3% 0.8% 13.0%Have increased healthcare contributions 0.0% 0.8% 1.6% 0.0% 0.0% 2.4%Reduced other benefits (401K, daycare, etc) 1.6% 0.0% 6.5% 4.1% 0.8% 13.0%Increased benefits 401k, daycare, etc 0.0% 0.0% 0.8% 0.0% 0.0% 0.8%

N= 123total 26.8% 41.5% 74.0% 70.7% 20.3%UNM Bureau of Business and Economic Research

Employee Range

The table above also gives a glimpse into wage compaction, a major concern for both employers and employees of both large and small businesses Table 3.7 shows that 46 percent of affected businesses increased wages for those already making the living wage or slightly above ($9.50 to $11.49). A smaller proportion of businesses (32.5%) increased the wages of employees in the next wage category ($11.50 to $13.49). In the third category, $13.50 to $15.99 an hour, an even smaller percentage of employers raised the wages of employees. The pattern continues for the highest paid employees. It appears, therefore, that wage compaction is occurring, for it is more common for employers to raise the wages for employees at or near the minimum wage than it is for them to raise the wages for employees making more.

18 Of those that said they were not required to but did raise wages to $9.50, 23% were part of a national/ regional chain or had multiple locations and were reporting only on one location.



The survey also asked businesses to give the proportion of pay increases given at each wage category. The survey also asked businesses to give the proportion of pay increases given at each wage category. Forty six percent of those businesses reporting impacts indicated that they had to raise wages for workers earning between $9.50 and $11.49 per hour. The percentage increases ranged from 1% to 80%, with a median of 11% and average of 15%.

More than 32 percent of impacted businesses reported raising wages for

workers who earned between $11.50 and $13.49. The percentage increases ranged from 1 percent to 46 percent also with a median of 11percent but with an average increase of 12.3 percent. Of businesses affected by the ordinance, a still smaller percentage – 13.8 percent -- reported that they had had to give wage increases to workers earning $13.50 to $15.99, with the increases averaging 9.5 percent. Finally, 17.9 percent indicated the need to give increases to workers earning $16 or more, with the average 9 percent.

Wage compaction has emerged as a major concern and challenge for businesses, carrying with it a laundry list of implications in worker performance, workplace morale, and the ability for a manager to give merit raises. The open-ended section of the survey provided the respondents an opportunity to express their concerns regarding wage compaction in regards to the current wage and the potential increase to $10.50 an hour.

Senior employees’ wages could not be adjusted for all those years of dedication and hard work … some are working at or slightly above a new employee. This is just awful and unfair to those who have worked so hard.

Mandating $10.50 for everyone limits our ability to increase wages for those that work hard and excel...

Personally, I think $10.50 an hour is a reasonable wage, particularly given the cost of living in Santa Fe, but it drives up the wages of skilled staff much higher. It does seem unfair that a person straight out of high school can make as much as skilled staff who have been on the job for many years.

These issues were explored in greater detail in focus groups comprised of business managers and employees and are discussed in the following chapters. The provision of healthcare benefits and company contributions to healthcare plans were also explored in the survey. Of the 277 businesses in the sample, 182 (66%) said that they contribute some amount to a healthcare plan for employees. The table below shows how businesses who offer some form of healthcare plan to which the business contributes are distributed by number of



employees. Almost two thirds (73.6%) of businesses that offer healthcare plans are companies with less than 25 employees.

Table 3.8: Employers that Contribute to Healthcare Plans

1 to 4 5 to 9 10 to 24 25 to 99 100 + TotalOffers healthcare plan with company contribution 17.6% 22.5% 33.5% 22.5% 3.8% 100.0%

N=182


Employee Range

It is important to also consider the proportion of employees at each business that are covered, as many businesses may offer healthcare benefits but employees may elect not to participate. The following table outlines the proportion of employees that are participating in healthcare plans. About 60 percent of the businesses that offer healthcare contributions have at least 50 percent participation rates among their employees. About 26 percent of businesses that offer healthcare plans are larger than 25 employees. This includes 11 percent that have at least a 50 percent participation rate. The data shows that smaller businesses are more often offering healthcare plans and have higher participation rates than businesses with 25 or more employees. Smaller firms may have to guarantee at least 50%. About 79 percent of businesses that offer benefits to employees offer them to all full time employees. Also, of companies that provide a contribution to employee healthcare plans, the average contribution for a full-time employee is 77 percent, with a median of 80 percent.

Table 3.9: Proportion of Employees Participating in Healthcare Plans

Proportion of Employees 1 to 4 5 to 9 10 to 24 24 to 99 100 + Total0% to 9% 0.6% 1.1% 1.1% 3.4% 0.0% 6.3%10% to 50% 4.5% 9.1% 10.2% 9.1% 2.8% 35.8%51% to 100% 11.9% 13.1% 22.2% 9.7% 1.1% 58.0%

Total 17.0% 23.3% 33.5% 22.2% 4.0% 100.0%N=176UNM Bureau of Business and Economic Research

Employee Range

The ever-increasing cost of healthcare insurance is a major challenge to businesses large and small, not just in Santa Fe, but throughout the United States. When businesses implement cost-cutting measures, health insurance contributions are often the first to be eliminated or reduced. Thirteen percent of businesses who responded to the survey said they already have reduced healthcare contributions or have eliminated healthcare all together. The survey also asked respondents to list other benefits provided to employees. One hundred eighty-one respondents (65%) said they provided other



benefits, which primarily consisted of 401(k) or other retirement plans (87%) and paid personal time off (86%), including sick days and vacation. Employment Practices One hundred ten respondents (39%) stated that the LWO has affected the employment practices in their businesses, resulting in several cost-cutting adjustments. The most common adjustments were to cut overtime (48%) and reduce the number of people on payroll (48%). However, keeping the number of employees under 25 to avoid being subject to the law is no longer a common adjustment, as was found in the previous BBER study. Smaller businesses, while not mandated to pay the living wage, are usually compelled by market forces to pay their employees a higher wage. Employers have often stated that the local workforce is small and that it is common to compete for employees. As such, businesses who pay less than the living wage are at a disadvantage in their ability to attract and retain workers.

The percentages in the table below represent the proportions of firms that indicated they had to modify employment practices in response to the LWO. The remaining 60% of the sample (168 firms) indicated that the LWO had no effect on their employment practices.

Table 3.10: Changes in Employment Practices 1 to 4 5 to 9 10 to 24 25 to 99 100 + Total

Have held employment low so as not to be subject to the law 1.8% 2.8% 0.0% 4.6% 0.0% 9.2%Have cut back on use of part timers 4.6% 6.4% 11.9% 12.8% 2.8% 39.4%Reduced turnover 0.0% 3.7% 0.9% 3.7% 0.0% 8.3%Inreased use of full timers 0.9% 0.9% 3.7% 6.4% 1.8% 13.8%Increased hours of part timers 0.0% 0.9% 0.9% 0.9% 0.0% 2.8%Have cut overtime 2.8% 6.4% 15.6% 18.3% 4.6% 48.6%Reduced number of people on payroll 6.4% 10.1% 16.5% 11.0% 3.7% 48.6%Changed way to respond to seasonal demands. 2.8% 7.3% 11.0% 11.9% 3.7% 36.7%


Employee Range

While most businesses in the sample stated that their employment practices had not been impacted by the $9.50 living wage, open-ended responses revealed some relevant concerns to the current mandate and the upcoming increase to $10.50. A sampling of the quotes that are most illustrative of these concerns are listed here. Further research would be needed to verify if these concerns translate to observable practices.

I fear I would have to cut staff even more … I would have to offer higher wages to my management staff and would have to screen prospective employees even more.

We will not hire anyone under 18. We have cut other personnel’s hours to pay for increase. We will not give benefits to anyone hired since the new law went into effect. We will hire less people.



I have stopped hiring younger aged people (high school students) because the amount and quality of work they produce does not equal the amount I now have to pay them.

Requiring employers to pay unskilled or inexperienced employees $9.50 (or $10.50) an hour is a major issue for business owners and is one of the most common critiques of the ordinance. As a response to the concern of teenagers or trainees making as much as workers with experience, some proposed a separate wage structure for these groups that would allow a lower “training wage” for teenagers or trainees. The implications of a “tiered” wage system are many. While offering an opportunity for employers to control labor costs (especially for unskilled workers), a tiered system can displace entire sections of the local workforce. The survey was useful in highlighting this issue at a general level. The focus group chapter explores the concerns further by examining the implications in both the day-to-day operations of Santa Fe businesses and the daily lives of the employees who would be most impacted. Prices of Goods and Services The survey asked business operators about changes in the prices of goods and services they provide and the costs of goods and services they need as inputs in their own commercial operations. Specifically, they were asked if changes in prices and costs were a result of the LWO. The majority of firms (149, or 54%) said that they did not raise their own prices, nor did they experience changes in costs as a result of the LWO. Almost 89 percent of these businesses had less than 25 employees. Less than half of the surveyed businesses (47%, or 133 businesses) indicated that they either raised their prices or experienced increases in the cost of goods and services in reaction to the increased minimum wage. Of these businesses, 63% said that they had to increase the prices they charge for goods and services. Additionally, 71% said they had to pay more for goods and services they themselves need to conduct business. The table below shows the distribution across the size of businesses.

Table 3.11: Changes in Prices of Goods and Services

1 to 4 5 to 9 10 to 24 25 to 99 100 + TotalHave had to raise prices 8.3% 12.0% 17.3% 21.8% 3.8% 63.2%Have to pay more for goods and services in Santa Fe 11.3% 16.5% 21.8% 18.0% 3.8% 71.4%Other price impacts 0.0% 0.0% 3.8% 0.0% 0.0% 3.8%


Employee Range

Respondents were also given the opportunity to identify other ways in which prices are effecting their business operations.



With [increases in] wages and inflation, we have had to dramatically raise prices.

High labor costs equal high menu prices, meaning customers will go only to cheaper restaurants.

Raising prices is a common cost-savings strategy for businesses, especially when their costs are also increasing. However, some businesses are unable to increase costs and must decrease their scope of services in order to remain solvent. One non-profit healthcare provider said,

..we are unable to change prices in healthcare... we are decreasing service

An early education provider had a similar statement,

We just won’t be reimbursed …I hope we don't have to curtail too many services to kids …

The two previous quotes raise the issue of businesses with fixed-rate reimbursements. While the LWO makes exceptions for businesses that are on Medicaid waivers, such as home healthcare providers, other entities, such as healthcare and childcare providers, are negatively impacted because their state and federal reimbursement rates are fixed and do not cover the increase in labor costs. Also, businesses that are “waived” from the LWO because they are dependent on Medicaid waivers still have to compete for employees and are forced to pay the higher rate anyway. The increase in labor costs cannot be recouped by businesses that depend on state and federal reimbursements, resulting in decrease in services, such as low-cost healthcare, childcare, and early education programs. This poses a possible dilemma for the city’s low-income families who depend on these low-cost services. A decrease in subsidized social services may be an unintended consequence of the LWO. However, through interviews with various non profit representatives, BBER has found that many nonprofits are re-organizing themselves by merging with other organizations, limiting services to a specific “niche”, or aligning themselves with national organizations in an effort to secure their presence in the Santa Fe community. This is further explored in the “Unintended Consequences” chapter. Many businesses expressed concern that the LWO would result in far-reaching price increases, ultimately raising the city’s already high cost of living. In the open-ended section of the survey, some respondents decried the LWO as the beginning of the end for the Santa Fe economy.

The costs of goods and services has gone up. People who were making a good living at $12 now need a raise due to rising costs



The so called 'Living Wage' actually hurts those it is intending to help. Because of it, prices have increased all over town and this hurts the lowest income people.

As stated above, however, over half of surveyed business (53%) said that the LWO had no effect on the prices of goods and services. Clearly, business operators are noting increases in costs of goods and services. The extent to which the rising costs are a result of the LWO is unclear. Santa Fe is also affected by national trends such as rising costs of fuel, energy, and healthcare. This has Santa Fe business owners very nervous, many of whom fear that any further increases in labor costs will translate into inflation and a more expensive city in which to live and work. Capital Investments and Business Expansions The business survey asked questions regarding capital investment and business expansion. BBER was interested in learning more about how the LWO may have affected business expansion and capital investment. About 34 percent (93) of responding businesses said that they are changing their business investment plans in Santa Fe. Of these, as Table 3.12, below, shows, 61 percent said that they are limiting future capital investment, which usually meant limiting expansion plans. About 14 percent of these businesses stated they have moved or will be moving out of the city limits, and nearly 11 percent said they will be closing their Santa Fe operations.

Table 3.12: Changes in Business Plans 1 to 4 5 to 9 10 to 24 24 to 99 100 + Total

Have moved or will be moving outside of SF 3.2% 0.0% 7.4% 2.1% 1.1% 13.7%Closed or will be closing SF operations 2.1% 3.2% 2.1% 3.2% 0.0% 10.5%Limited further capital investment 6.3% 12.6% 18.9% 17.9% 5.3% 61.1%


Employee Range

Again, the open-ended survey questions allowed respondents to express their specific plans.

I hope I can sell my business and leave Santa Fe.

When our lease is up in 2013 we will leave and not even think about renewing, we don’t need the hassle of your living wage.

Beyond describing the plans for their own operations, respondents speculated on capital investment by other businesses that may be looking to set up in Santa Fe. One respondent stated,

This living wage has and will continue to cause businesses to stay away from Santa Fe and will eventually cause severe economic



difficulties for Santa Fe even though you may not be able to quantify it yet.

One respondent recognized the concerns of businesses, but thought that the LWO’s ability to drive out businesses was weak.

Although we understand the concerns of those traditionally paying minimum wages, we believe that the advantages of decently paid workers outweighs the disadvantages of lessened profit. We do not believe that a higher wage really drives out a significant number of businesses, even if the owners say they might have to close.

About 66 percent of the sample (182 firms) said that they will not be changing their business investment plans as a result of the LWO. Over half of these firms have 24 or fewer employees. Hopes and Concerns Regarding the Current LWO and the Pending Increase to $10.50 The final section of the survey allowed respondents to express their hopes and concerns regarding the standing $9.50 minimum wage and the possible increase to $10.50 an hour. Many of these comments have been scattered throughout this chapter, but others that came up repeatedly are discussed here. Topics covered in this section include: quality of the local workforce, perceptions of government interference, and businesses that support the LWO. Quality of the local workforce By this point, it should be clear that employers are dissatisfied with the quality of the workforce in Santa Fe and are often resentful of paying those workers wages comparable to those who are skilled and have developed a sufficient work history. In past studies of Santa Fe businesses, employers have consistently lamented the low quality of the workforce. It is reasonable to assume that these worries are being magnified by the requirement to pay unskilled workers higher wages. This has less to do with formal training and experience than “soft skills” associated with holding a job: reliability, communication skills, and, more generally, the desire to do a good job and effectively support the goals of the business. The following quotes are in reference to both the current law and the potential increase to $10.50 and express concerns about the local workforce.

Employees expect at least $9.50/hr without proving skills or benefit to my business. Living wage gives mediocre employees inflated value. Issues that I have dealt with [in the local workforce] have included inattention to detail, failure to complete assigned tasks, pretending



to know how to do the job and bluffing until exposed, excessive absenteeism, chronic tardiness, inappropriate dress, personal business conducted on company time, unauthorized use of computers during work hours…. It’s sad to pay [high school] kids such high wages knowing they are just ‘blowing’ them at the mall. The real problem in Santa Fe is that within those in the job pool, we find a lack of true education (not just schooling), a lack of integrity, a lack of public relations skills, a lack of understanding and speaking of the English language, a great lack of work ethics, and a 'you owe me' work attitude.

Integral to the discussion of an unqualified and unreliable workforce is education. Many predict that the living wage will encourage high school students to drop out because they would be able to get a higher paying job without graduating.19 Further, employers often worry that the living wage, as a starting wage, will discourage worker loyalty and give no incentive to perform well at the workplace or further develop their skills. As some employers stated:

Also, we find that we are getting younger applicants who have dropped out of high school. They have no experience and if they are hired to make the living wage of $9.50 or more we will never have an educated population...

Criticism of Local Government and an “Unfriendly” Business Environment Previous sections have shown that some employers think the LWO is ineffective, as increased wages will result in increased prices for goods and services, ultimately cancelling-out any benefits given to workers by the increased wages. Further, any increases would exacerbate the situation. Following this general logic, the ordinance appears to be an artificial feature of the economy, spearheaded by the local government. Critiques of the local government represent a “rallying point” for those who oppose the ordinance or oppose the wage increase. Regarding the potential increase to $10.50,

I believe the move is premature and the market should be given time to rebound from the first “Living Wage” imposition. The continuing increases will eventually negatively impact the economy of Santa Fe by further raising the cost of living, stratifying the society even more and reducing the city’s competitiveness as an attractive market/ destination/ place to live.

19 A further exploration of this concern cam be found in the “Unintended Consequences chapter of this report.



Governmental interference in business activity should be kept to minimal safety and health issues and should not dictate how an employer runs his/her business. The market will dictate when someone has to pay a higher wage to retain and keep employees.

Many believe that if the market is allowed to determine the prevailing wages, the LWO is largely unnecessary. This was especially the case for employers who were paying the living wage before the ordinance was implemented. Allowing the market to determine the wage, it is believed, will allow employers to use wage increases as incentives for job performance, years of service, and professional development, as opposed to an “entitlement.”

Another common critique of the local government was that it appeared to take an idea that is sound in principle and pushed it to the illogical extreme.

I don’t think that this was thought out very well, it did not consider the hardships it would place on businesses that are trying to keep up with the continued mandated increases. An increase in pay is good, but not when it is in such drastic increments and time frames. I hope the people in charge put a hold on this until a better solution can be designed.

….Business owners want their business to succeed. Therefore, they want to attain and retain the best employees and they will pay and reward those employees appropriately. The government appears to be doing all it can to hurt people.

Some also think that the full impact of the LWO has not been felt because the Santa Fe economy has been performing well over the past few years. They fear the present conditions may change and the LWO would have disastrous results.

Though we pay above the Living Wage, it is too much of an economic distortion for the wages of the state. The economy of Santa Fe is relatively strong at this point, but that could change. It would be wiser and safer to stay at $9.50.

A final concern that will be discussed in further detail in a later chapter is that workers are coming from neighboring towns to work in Santa Fe and earn the living wage. The workers, it is assumed, then spend their earnings in their hometown and not in Santa Fe. As one manager expressed,

The living wage was designed to help people living in Santa Fe cope with the high cost of living in Santa Fe, but the ordinance does not make it mandatory that you live in Santa Fe to get the same wage. Therefore more people than even before are driving into



Santa Fe for work for the increased pay. That is hurting small businesses like mine because these people are spending their money earned here elsewhere!!

Support for the Living Wage The survey did not explicitly ask respondents if they support or oppose the LWO or the pending increase to $10.50 an hour. Like many matters surrounding the living wage, whether a business operator supports or opposes it is not cut and dry, but rather entangled with desires for developing a quality and qualified workforce and a business climate that is supportive to both small and large businesses in a city with a comparatively high cost of living. That being said, forty-eight respondents explicitly stated their support for the living wage and the pending increase, even though it was not specifically solicited. The following quotes are from those respondents. Also, it should be noted that most of these respondents considered themselves “not affected” by the LWO, as they were already paying the minimum wage.

I hope that we, as a city, are brave enough to lead the nation in mandating a living wage.

Although it doesn't apply to our business specifically, we would hope that the living wage increase would help lead to an overall better standard of living for all residents.

I think it's high time. Santa Fe will never be an industrial-based economy. I think that there needs to be more acknowledgement of what drives the Santa Fe economy -- outside visitors -- and acceptance of this reality means attracting and retaining individuals who consider the service industry a valid, well-paying career choice.



CONCLUSION

This chapter has outlined changes in business operations for 277 businesses that responded to the Santa Fe Living Wage Business Survey. Despite concerns with the representativeness of the sample, the findings are similar to findings of previous living wage studies and are a significant contribution to the discussion of the Living Wage. Generally speaking, smaller businesses (less than 25 employees) have already been paying the mandated minimum wage in order to compete with larger businesses to attract and retain workers. Businesses that had to raise wages to meet the law’s requirements were typically larger companies and were mostly restaurants and retail firms.

Increased labor costs are only one challenge facing Santa Fe businesses.

National trends in fuel prices, transportation costs, energy prices, and healthcare costs all pose significant challenges to the bottom line of Santa Fe businesses. Also, Santa Fe depends on tourism and visitor spending as major inputs into the economy; the city is therefore vulnerable to trends that result in decreased travel and discretionary spending.

There does appear to be some wage compaction occurring. Businesses appear to raise the wages of those earning at or slightly above the minimum wage level. It was less common for firms to raise the wages for workers at higher levels. Further, the size of the wage increases was typically higher for lower wage earners than for those with higher earnings. Business operators describe situations in which new employees (often unskilled) are making only slightly less than established employees, posing additional challenges to employers. Changes in workplace morale and management’s ability to use pay increases as an incentive were noted as two implications.

Overall, at least half of the sample reported no impact on various business operations as a result of the LWO. In addition to raising pay for low wage earners, common changes include cutting overtime and changing the way in which businesses handle seasonal demands. The largest concentrations of firms that made adjustments in wage structures and employment practices were large employers. While larger employers more often had to make changes to become compliant with the ordinance, smaller employers had to make changes in order to remain competitive. Some feared that small businesses are more vulnerable and are less able to absorb increasing costs.

Some respondents suggested that the true impacts of the ordinance have yet to be realized since the local economy has been performing well over the past few years. They fear that a combination of a downturn in the economy and increased labor costs would be the “straw that broke the small businesses’ back.” Also, a major concern was that the increase in labor costs, in conjunction with other rising costs, would create inflationary pressures in the economy and negate any advances in purchasing power that were gained by the living wage. Further,



the cost of living would continue to increase, as would the cost of doing business, making the city an unattractive place for business startups and incoming commercial enterprises.

Respondents also expressed concern over the pending wage increase to $10.50 an hour. Many thought it was “too much, too fast” and it would cause too strong an interference in local market forces and would erode the attractiveness of Santa Fe to outside businesses. A disconnect between the local government and the business community was cited as a reason for the “premature” increase.

Many of the issues raised in this chapter will be further explored in the focus group chapter that follows. The focus groups were tremendously beneficial in allowing business leaders and workers to discuss their perceptions of how the LWO has affected the business climate in the city and how it has translated into their daily lives. Among other topics, the focus groups provided additional information on wage compaction, workplace morale, and the provision of healthcare benefits for employees.

The survey also identified some possible unintended consequences of the LWO that are explored in the “Unintended Consequences” chapter of this report. First is the potential displacement of first-time employees or young workers. Several businesses indicated that they would hire fewer high school students or inexperienced workers in the future because they prefer not to pay the living wage to teenagers or trainees. Second, many felt as though the LWO would provide an incentive for high school students to leave school and enter the workforce. Both of these issues are.

A third potential unintended consequence is the dilemma faced by non-

profits that have fixed reimbursement rates (especially social service agencies). In many cases, they are exempt from the ordinance, but they still have to pay the living wage in order to compete for workers. They are caught between increased labor costs and the inability to increase revenues. Often, these agencies are likely to scale back the level of services, which are often primary supports (childcare, subsidized healthcare) for low-income families.

A fourth issue mentioned less frequently than the previous three is the

concern that citizens from nearby towns would seek higher paying jobs in Santa Fe, thus taking jobs away from Santa Fe residents and “leaking” Santa Fe revenues into the surrounding communities when these non-local workers take their earnings back home.



CHAPTER 4: SANTA FE LIVING WAGE 2007 EMPLOYER AND WORKER FOCUS GROUPS

PURPOSE/ OBJECTIVE

The Bureau of Businesses and Economic Research (BBER), under contract with the city of Santa Fe, conducted a study to investigate the economic impacts of the $9.50 per hour minimum wage that was mandated by the Santa Fe Living Wage Ordinance (LWO), effective January 1, 2006. As a central component of the study, BBER conducted focus groups with Santa Fe business leaders and employees. Focus groups were also conducted in 2004 and 2005 as part of the ongoing economic impact study.20

The purpose of the focus groups was to solicit the “stories” that tell how

the LWO has impacted the primary actors in the Santa Fe business community: employers and employees. Unlike other research methods, focus groups offer the benefit of conversation between individuals as they respond to each other’s experiences. Guided by a facilitator, the conversations reveal the experiences, priorities, and challenges faced by both study groups. The sessions allow participants to describe how the LWO impacts their day-to-day decision making, information that is difficult to obtain through survey research or secondary data analysis.

A limitation of this approach, obviously, is that findings cannot be

generalizable to larger populations. However, the intent of the focus groups is not to identify generalizable trends, but rather to explore, at the micro-level, how the ordinance is impacting individuals in their decision-making and daily life.

The study and its methodology were evaluated and approved by the University of New Mexico’s Institutional Review Board (IRB). The function of the IRB is to ensure that 1) that the study does not place study participants at risk of harm, 2) that all participants understand the nature of the study, and 3) that precautions have been taken to preserve their anonymity. The IRB reviewed and approved the business survey and the focus group guides. PARTICIPANT SELECTION

Invitations were made to participants in a careful and deliberate manner. Participants were selected in a way that provides a balanced and proportional representation of the labor market and its diverse demographics. Table 4.1,

20 Reynis, Lee A., “Santa Fe Living Wage Baseline Study”. UNM- Bureau of Business and Economic Research, 2004. Reynis, Lee A., Myra Segal, Molly J. Bleecker, “Preliminary Analysis of the Impacts of the $8.50 Minimum Wage on Santa Fe Businesses, Workers, and the Santa Fe Economy”. UNM- Bureau of Business and Economic Research, 2005.



below, illustrates each industry’s representation in the Santa Fe workforce and how that translated into focus group participation.

Table 4.1: Focus Group Profile: Representation of Santa Fe Labor Force and Industry

Industry

Proportion of Santa Fe

employment in industry*

Expected # of Participants

(Employer and Worker)

Employer Participants

Employee/ Worker

ParticipantsRetail 18.7% 4 3 4Lodging/ Eating, Drinking 20.0% 5 6 8Healthcare, Social Services, Education 18.5% 4 3 1Manufacturing 2.6% 1 1 0Construction/ Natural Resources 9.6% 2 2 2Wholesale/ Distribution 2.3% 1 1 0Professional Services 11.7% 3 1 2Financial, Real Estate 6.4% 2 1 2Other nongovernmental Services 6.6% 2 1 0Total 96.4% 24 19 19

*Source: NM DOL 2002, Santa Fe CountyUNM Bureau of Business and Economic Research Employers

For the employer focus groups, a list of potential participants was created from a variety of sources. First, when possible, people who participated in previous focus groups were invited to participate again. About 53% of the employers who participated this time had participated in 2005, and 26% had participated in both 2004 and 2005. Other contacts were obtained from lists obtained from local business associations such as the Santa Fe Chamber of Commerce, the Living Wage Network and the Santa Fe Alliance. BBER also used a listing of all registered businesses obtained from the city of Santa Fe.

In most cases, BBER staff called the business and spoke with the

business’ owner/operator. BBER research staff explained the purpose of the study and invited him/her to participate in a focus group. Generally, employers were happy to participate and BBER was able to fill the groups with relative ease.

While this focus group recruitment was going on, BBER was in the

process of administering the business survey. The survey included a question that asked if the respondent would be interested in participating in a focus group. If the respondent was interested, s/he included contact information in the survey form so that BBER could contact him/her later. At least six employers who participated in the focus groups were recruited in this way. A total of nineteen owners and business managers from a variety of businesses and non-profit



agencies participated in the employer focus groups. The table above illustrates the industries they represent. Workers In studies past, it has been extremely difficult to recruit employees for the focus groups. Varying work schedules, family obligations, and transportation limitations make it difficult for workers to participate. To address this, focus groups were offered at various times of the day and participants were provided a meal and $25 for their time.

A list of potential worker participants was created with the cooperation of

community-based organizations and local agencies, including Santa Fe Community College and La Familia Medical Center. These organizations generated lists of individuals they interact with who they felt might be interested in participating in the study. Additionally, on-site recruitment took place at La Familia and at the cafeteria of the Santa Fe Community College. BBER also contacted previous participants and followed up on secondary referrals provided by initial contacts. Only a few (2) of the employees who participated in previous focus groups were able to return this year. Recruitment flyers were also posted at Santa Fe Community College and throughout Santa Fe. The flyers gave a description of the study and how to contact BBER. At least five workers were recruited when they contacted BBER after seeing a flyer.

Similar to the process used in the employer focus groups, efforts were

also made to achieve a selection of employees that resembled the industries represented by Santa Fe’s labor force. Other characteristics, such as hourly wage, age, and language, were also taken into consideration. BBER’s efforts were successful in identifying workers, but BBER was careful about admitting people into the focus groups. For a person to be eligible to participate, he/she had to meet the following criteria: 1) work in the city limits of Santa Fe, 2) work for a non-governmental business or agency, and 3) rely on wages rather than tips or commission. People who had been out of a paid working position for an extended period of time were not admitted into the focus groups, as it would be difficult for them to describe the LWO’s impacts on their life. Nineteen employees from various industries participated in the worker focus groups. See Table 4.1 for industry representation information.

In all, nineteen employers and nineteen workers participated in the

groups, even though many more were confirmed to attend and failed to show up. In any case, there was a solid representation of industries and the data collected at the sessions did not yield any surprises that would necessitate additional focus group sessions.



FOCUS GROUP DATA COLLECTION

Workers and employers participated in separate focus groups. Each participant was given an opportunity to respond to each question. In all groups, responses were captured by a note-taker. Anonymity was promised to all participants and the facilitator never revealed the identity of any participants to any other participants. Both employers and workers were identified only by the industry they worked in, “restaurant,” “bank,” etc. One employee focus group was conducted in Spanish.

The focus groups featured questions that explored current economic conditions from the perspective of both study groups in order to compare the current situation with previous BBER living wage studies. (The complete list of focus group questions for employers and workers can be found in Appendix III.) Additionally, a separate feedback form was distributed so participants could privately express their opinions concerning the proposed amendment and respond to questions regarding the pending living wage increase to $10.50 an hour. These forms are also included in Appendix III. The focus group discussions were transcribed and analyzed. The following sections summarize this analysis, outlining how employers have changed their business operations, and describing the impacts on the daily life of employees of the increase in the minimum wage to $9.50 an hour. (Direct quotes are shown indented and in italics.)



EMPLOYER FOCUS GROUP FINDINGS

Questions asked of employers in their focus groups were designed to address two larger questions: how has the business climate in Santa Fe changed in the last few years, and how have Santa Fe businesses adapted to the living wage ordinance.21 The following section summarizes employers’ responses to these questions, followed by other common concerns or comments that arose during the course of the meetings.

Business Climate in Santa Fe Recent Business Activity

In relation to the first question, participants were asked to characterize how business has been for them in the past few years. Overall, most participants said business was generally good. (Forty-one percent of participants reported that they experienced growth, 53% reported that business held steady, and 6% reported contraction.) Participants in the accommodations, restaurant, and alternative health industries reported holding steady.

I would characterize the last two years as ‘static’. We haven’t lost ground, we haven’t made ground.

Those in construction, landscaping, and durable goods said they had strong growth, which they attributed to their market niche and/or the quality of their product or service.

Our sales are parallel to larger, national markets for our product. We’ve had a good couple of years. Our revenue is up 40% [local customer base]. Our corporate office tells us that our sales are at levels seen in larger cities. My business has been running 30 or 40 percent increases every year. Santa Fe is a very strong market for us.

But for some of these participants, this growth doesn’t equate to free and

clear profits, nor do they feel this growth can last.

We are working harder to generate money, but are not keeping as much as we are generating. In the short run, we can say business is fine. But you can’t project that everything will stay fine.

21 See Appendix A for a complete list of the questions asked in these focus groups.



Indeed, many businesses worry about weathering downturns that stem from national events like 9/11, the current mortgage crisis, or a recession.

There is no cushion- it is difficult to recover from a bad month. All we need is another 9/11 crisis, and we’re locked into paying the minimum wage, and we end up firing people because we can’t afford to have them employed. I had a horrible June, you just need one hit, and gosh, we hope and pray that we will at least stay static for the next year or two.

During the course of the discussion on the current business climate, some

participants brought up criticisms of the recently issued report from BBER on Santa Fe wages.22 They felt it painted too rosy a picture of current economic conditions, and felt it didn’t address the big questions.

The report issued in November [August] compared Santa Fe to Albuquerque. That doesn’t seem like a fitting comparison. Can they compare Santa Fe to Santa Fe?23

Has the increase in gross receipts been accounted for? How is the impact measured?24

22 Reynis, Lee A., Nicholas Potter, Joshua Akers. The Impacts of the $9.50 Living Wage on the Economy of the City of Santa Fe, Part I. UNM Bureau of Business and Economic Research, August 31, 2007. http://www.unm.edu/~bber/pubs/LivingWageFinal.pdf 23 An explanation for why Albuquerque was used as a control group in this and the previous impact study can be found in the latter: As with any comparison analysis, the selection of a useful control region is crucial to the conclusiveness of the results. This is particularly difficult in the case of Santa Fe [because] Santa Fe is a small geographic region relatively isolated from comparable metropolitan areas. To determine the best control group, we compared employment in Santa Fe from 1996 to 2005 to employment in several different areas, including Taos, Taos County, Albuquerque, Santa Fe County (less Santa Fe City), Bernalillo County, Bernalillo County less Sandia National Laboratory (Sandia NL), and New Mexico as a whole (less Santa Fe Dity). In the smaller regions of Taos, Taos County and Santa Fe County, small economies led to substantial variability. We chose the best region based on a simple regression of annual percent change in employment in the potential control region on the annual percent change in employment in Santa Fe. Albuquerque provided the best fit, though Bernalillo County and Bernalillo County less Sandia NL were a close second and third best match. Potter, Nicholas, “Measuring the Employment Impacts of the Living Wage Ordinance in Santa Fe, New Mexico.” UNM-Bureau of Business and Economic Research: June 30, 2006. http://www.unm.edu/%7Ebber/pubs/EmploymentLivingWageAnalysis.pdf 24 BBER used gross receipts data from the NM Taxation and Revenue Department in its analysis. See pp. 17-24 in the report for the full discussion. Reynis, Lee A., Nicholas Potter, Joshua Akers. The Impacts of the $9.50 Living Wage on the Economy of the City of Santa Fe, Part I. UNM Bureau of Business and Economic Research, August 31, 2007. http://www.unm.edu/~bber/pubs/LivingWageFinal.pdf


http://www.unm.edu/%7Ebber/pubs/LivingWageFinal.pdf

http://www.unm.edu/%7Ebber/pubs/EmploymentLivingWageAnalysis.pdf

http://www.unm.edu/%7Ebber/pubs/LivingWageFinal.pdf


I want to know how much the increase in minimum wage cost as a whole. What is the total increase in wages paid out resulting from this law and what’s the total impact on the economy?25

Competitive and Cost Pressures

Next, the focus group facilitator asked about competitive and cost pressures facing local businesses. In response, most said that cost pressures far outweigh competitive pressures and that wages are only one part of a large array of unrelenting cost pressures, including insurance, rent, fuel surcharges, and utilities.

It isn’t the competitive pressures that keep us up at night; it’s the cost pressures that keep building - wages & utilities in that order. And the number one concern is the cost of insurance. Yet government is doing little to nothing about those rising prices.

Rent is probably our highest cost.

Elected officials seem insensitive to the costs of this ordinance to businesses. It cost us a quarter million dollars to go from $8.50 to $9.50.

Health insurance and wages are also rising costs over which firms feel

they have less control. Health insurance benefits in particular have become an overwhelming cost pressure, due to the national trend of rising health care costs. In terms of wages, many participants indicated that paying the living wage wasn’t a problem; many of them were already paying employees at the living wage level. Rather, it was paying the wage to unskilled workers that was a major cost pressure. (Both of these cost pressures will be explored in further detail in the next section, Business Adaptations to the Living Wage.)

Small, locally-owned businesses feel especially vulnerable to cost pressures.

We have a loyal following, though new competition has opened in Santa Fe. Being small makes it difficult to compete - we don’t have as much bargaining power as the big stores, so our costs start out higher.

25 There is no way of accurately measuring the total number of workers affected by the living wage, and, therefore, no way to measure the wages paid to these workers. In each of the Santa Fe living wage impact studies BBER has completed thus far, the organization has relied on data on employment and earnings, as well as overall economic indicators, to measure the impacts of the living wage because this is the best data available.



We don’t always get the product as quickly as other national branches.

Because of these cost pressures, participants said they are less likely to

invest in capital improvements.

We all have aging properties. Though income is higher, expenses are as well for the necessary capital improvements. My repair bills are higher than in former years because my equipment and property is aging. I don’t have money left to do as much capital investment as I’d like; it’s bad for business, the neighborhood, and morale.

In the face of the cost pressures discussed above, one solution would

seem to be raising prices. Many of the employers said they feel they need to do this, but resist doing so for a variety of reasons: fear of scaring off customers; fear of being unable to maintain their sales volume; and fear of contributing to a higher cost of living and of doing business in Santa Fe.

If I raise my prices too much, people will eat at home more.

My prices have peaked out, so I can’t handle continuous price increases. I am in competition with Albuquerque. Many of us in this room compete for consumers’ discretionary dollars – even if we are in different businesses [industries]. We’ve had to increase prices, and people are going to start saying, ‘Man, it’s expensive to go to Santa Fe, maybe we aren’t going to go there anymore.’

General Perceptions of the Local Business Climate

Some of the challenges of doing business in Santa Fe that came up in the previous studies were mentioned again, such as a lack of available and affordable business space, restrictions to build certain commercial properties, and delays in completing the convention center.

One focus group participant noted that the Living Wage Ordinance reinforced the impression that Santa Fe’s local government is unfriendly to business. Some participants suggested that the business climate in Santa Fe discourages new business start ups and prevents outside companies from establishing operations in the city.



[The local business climate] may have scared off a couple chain restaurants and that benefits local businesses.

Others perceive a decline in customer service and new tensions between workers and business owners and worry about how this affects the business climate in Santa Fe.

I have noticed that the standards for customer service in Santa Fe have fallen somewhat – fewer people to take care of you in stores – I’m concerned about the long term impact of this. The Living Wage issue created tension between the regular Joe and the business person. Because we didn’t want to pay, we are cast as villains. It put a fuse where it wasn’t needed.

Business Adaptations to the Living Wage Impacts on Business Operations

In relation to the second broad question, how have Santa Fe businesses adapted to the living wage ordinance, employers were asked how the LWO has affected their day-to-day operations. As far as wages and benefits go, responses indicate that some of the participants were already paying wages comparable to the mandated living wage.

We always paid more than [the minimum wage] because our business model is quality-oriented. We mostly tried to hire people who seemed like they could be with us for the long haul so we wouldn’t have to worry about hiring. So we paid them a couple bucks more than what other people were paying, and it was a good business model for us.

However, because they now have to pay a higher wage to new employees

than they would have before the ordinance, and because of other rising costs, their wage structure has been affected. In particular, wage compaction is commonplace: workers at pay levels above the minimum wage level are not getting raises commensurate to those of workers at the minimum wage level. As a result, wages are compressed around the minimum wage level.

Wage compaction is happening – those who have been here awhile are making a small amount more than the new people. It’s not feasible to do merit increases anymore. It’s bad – I have people who have worked more than seven years and make only one dollar more than a new person. I can’t afford to give them a raise and this is the first year I can’t afford to give them a bonus.



Others said they have raised the wages of longer-term employees or try to compensate for their inability to do so in other ways.

I have to stay ahead of the living wage to retain my longer-term employees. I try to reward [my employees] intangibly, such as providing more time and attention; but I know it doesn’t help them advance their standard of living.

When asked how wage compaction is affecting the morale of workers, a

few said they’ve heard complaints and others said their workers don’t talk to them about it. Employees, however, did discuss how wage compaction affects workplace morale. Their discussions are explored in a later section.

Many employers said that they find it more difficult than it was in 2005 to provide health insurance and that most of their employees prefer more money in their paycheck to health benefits, especially if the premiums are high. Therefore, many have stopped offering benefit plans.

Even my managers struggle to make ends meet and can’t afford health insurance.

Of those employers who reported that they continue to offer health

benefits, some said that they must renegotiate plans in order to continue offering it; others said they have extended the amount of time an employee must work before becoming eligible.

Another impact described in the groups is the decreased ability to attract

and retain skilled workers. Participants indicated that this has always been a problem in Santa Fe, but they perceive it is being exacerbated by the LWO. Businesses can no longer afford to offer a higher wage to lure more qualified employees and because there is more competition from larger businesses who may be able to do so. Some also suggest that the living wage has served as a disincentive to workers. Interestingly, employers seemed to often equate a “skilled” workforce with a workforce that is reliable, motivated and willing to work. (A further discussion of the quality of the workforce follows below.)

The pool of workers is small; there aren’t many for us to choose from. It’s harder and harder every year, but it has more to do with the work ethic and education than it does with the minimum wage.



I think the wage is why we can’t retain people because they can keep their bad work habits and go somewhere else and get the same wage.

Paying a decent wage is a good business model for attracting and retaining good employees. I see a sense of entitlement by workers…they can decide not to show up to work with me and then go get another job at the same high wage. The minimum wage was never intended to be that you live on it. It was an entry-level policy. It gave people the incentive to learn new skills and go to school. Finding employees who can pass a drug test is still an issue.

On the other hand, one employer indicated that the company policy of profit-sharing has increased loyalty among employees.

Adjustments in Operations

Next, participants were asked about adjustments they have made to their business operations since the LWO went into effect. Responses indicate that a variety of adaptation strategies have been implemented, including increasing prices, creating different product categories, and reducing costs. The most common strategies, however, had to do with employment policies.

Many employers said they have made changes to their employment structure, such as consolidating their workforce into primarily full-time positions and paying those fewer people higher wages. One employer determined that automation was the best strategy:

We invested in high-tech equipment to avoid high turnover associated with unskilled employees. Equipment is getting more sophisticated and less expensive.

Some no longer hire students or seasonal help.

I don’t hire students in the summer anymore – we’ve redesigned the job descriptions so that they are more technical and require more skill.

Many participants said they now expect more from employees, which

translates into both increased “cross-training,” of employees so that more tasks can be completed with fewer employees, as well as an expectation of increased productivity. Employers expect minimum wage employees to perform at what



they perceive as a $9.50/hour level. A few employers said they have no qualms about firing someone who doesn’t produce at this level.

We’re doing more cross-training so we can shift where they work as need determines. We are more selective, we can ask more of our minimum wage employees, and we don’t put up with what we used to.

Others said they had reduced the frequency of employee raises.

As stated above, employers indicated that it has always been difficult to find and retain qualified workers. Since the living wage ordinance went into effect, several employers said they have expanded their screening strategies for job applicants to include skills, motivation, and reliability because they can no longer afford to train new employees at that rate.

I have them take a math test. I bring people in to work five hours for $10/hour to see if they can handle the hard physical labor. We do personality tests that try to assess integrity, honesty and drug use. We ask them to go to the NM Department of Labor and take the ‘WorkKeys’ test. The act of taking the test demonstrates motivation.

We screen for valid social security number and U.S. work status. The Department of Homeland Security pilot program for social security number matching results in terminating a lot of people – I’ll have a record number of W2’s at the end of the year. We try to avoid people who have bounced around from job to job.

Underlying many of the issues discussed above is the problem of the quality of the local workforce. This topic came up in discussions of cost pressures, wage compaction, morale, hiring, and attracting and retaining workers. Employers specifically complained about a lack of basic work skills (appearance, speaking articulately with customers, reliability), academic skills, and trade skills among local high school students and graduates.

Santa Fe would greatly benefit from a skill-building program in the trades.



We don’t even interview high school students because they are ill-equipped to provide customer service. We mostly hire people (ages 20-30) who come from other communities. We have a poor track record with local graduates – we prefer hiring people from other states. People coming out of the Santa Fe public schools can’t even complete the employment application. It’s alarming! I avoid [hiring local youth] like the plague. They are often unable to articulate, make eye contact, or pass the drug test.

It’s demoralizing to my older employees that started at $5.15 an hour when a young high school grad walks in at $9.50 and can’t follow the dress code, is inarticulate, and spends time on the cell phone. If the schools were good, I would feel like they could demand a higher wage.

Feelings about the Proposed Amendment

Following this discussion, the facilitator asked for opinions on the proposed amendment to the Living Wage Ordinance that would eliminate the increase to $10.50 that was scheduled to take place in January, 2008, eliminate the minimum of 25 employees rule, and make future minimum wage increases tied to cost-of-living and automatic. Most of the participants would prefer there were no ordinance at all, but absent that option, they generally preferred the amendment.

The automatic increases take performance appraisals out of the picture. It takes the decision out of the employer’s hands. There is not a good choice here…”Would you rather beat your wife or your dog?” It was a joke to think that businesses with fewer than 25 employees would not be impacted. It was a political gesture. The amendment is more realistic and manageable. The amendment will give us time to create a plan. I don’t see how it benefits my employees or the people they serve.

While they liked the biannual review in the original ordinance, they prefer

the delay of the increase to $10.50/hour.



$10.50 to me in January is scary. I think I can survive with the $9.50, I have a big problem with $10.50.

They proposed substituting a system of intermittent review (e.g., every three years) in place of the automatic increase.

I have a concern that this is mandated for the rest of your life. We don’t want to have council meetings on this every year, but there should be a 3-5 year review because the world is changing and the politicians will change.

One problem with the amendment is that many don’t trust the Consumer

Price Index as a basis for indexing the living wage increase because it doesn’t take all expenses into account.

Fuel surcharges don’t appear in the CPI but they do appear in invoices we have to pay.

Fuel and labor costs have really gone up dramatically. Everything is so much more expensive. The CPI figure is unrealistic.

Employers would also like to see more efforts to support skill-building for

the labor force.

The city needs to work on building the quality of the workforce (educational level, and work readiness). We can’t give them more money and expect that the quality is going to rise.

During the course of the above conversations, several employers

indicated that the ordinance “doesn’t seem fair” in several respects: one participant said that it tries to solve a complex social equity issue from a single angle (one that places a burden on businesses) when more elements of the big picture need attention (e.g., health care, housing costs, social services); others said they feel it’s not fair to those employees who experience wage compaction; and many indicated they feel it’s unjust for the government to dictate how much businesses must pay their entry-level workers and how much to increase that pay.

Why should workers have a cushion if businesses don’t? It’s not fair to my longer-term employees who have demonstrated their loyalty, but I can’t afford to give them a raise.



The City politicians talk about social responsibility… but it’s a real problem to explain why someone has been stuck at $11.00/hr. It’s unfair. We can’t help other employees and that hurts employee loyalty. I recognize that it was socially responsible, and none of us here could live on $8.50 or $9.50 an hour. But I have a real problem with continued escalation, because when the bad times come, you cannot constantly have this annual increase…a dollar or 50 cents every two years translates into a lot of money and my bottom line is not increasing at that same amount.

Other Consequences

Finally, employers at the focus groups were asked about other consequences of the living wage that arose in their businesses. Responses included a reduction in charitable giving, a hesitance to hire developmentally disabled persons, and a concern about their workers’ eligibility for social programs if their wages increase too much.

I didn’t expect to be losing my extras like charitable giving. I wonder if workers can make up the loss of benefits if they lose eligibility. That makes it a broader, long-term problem and not just a minimum wage issue.

I have an autistic employee who likes to work but doesn’t want to lose his benefits, so sometimes he’ll want to work off the clock and I have to encourage him to go home. I have a few retirees who have to limit their hours so they don’t lose their benefits, so I have to schedule using pools of hours.

Some participants said they are concerned that non-local workers might be

coming in from places like Española, Pecos, Las Vegas, and Rio Rancho and are therefore spending their earnings elsewhere, thus leaking revenues out of the Santa Fe economy. BBER investigated this scenario further, which is discussed in the “Unintended Consequences” chapter.



WORKER FOCUS GROUP FINDINGS

Questions asked of employees in their focus groups were designed to elicit how workers’ quality of life has been affected by the living wage ordinance.26 The following section summarizes workers’ responses. Quality of Life Improvements Reported

All the workers who participated in the focus groups said their lives have improved since the LWO took effect. Most have seen an increase in their wages, which has allowed them to work fewer jobs or hours than before, which in turn has given them more time to do other things that are important to them, such as spending time with family, taking classes and pursuing hobbies.

The improvement in quality of life was frequently mentioned. One worker was able to purchase a car. Another was able to quit her 2nd job and now works five days instead of seven days a week, allowing her to spend more time with her children.

The most important thing about the wage is that my quality of life greatly improved.

Working only one job allows me to have breakfast with my children and go to their parent-teacher conferences and so on. [Before the LWO,] I would be working ALL the time; I would be tired and it would be a rerun everyday. But when the living wage increased, I could take time off and spend time with my family.

Participants remarked that it would be impossible to live in Santa Fe with a

lower wage and that without the requirement many presume they would not be receiving a comparable wage.

I don’t think they would give me this wage if they weren’t forced to.

Incidentally, some people noted that their wage increase was not

necessarily related to the ordinance.

I got a raise when I got my college degree/certification. My wage increased due to a job transfer as a mechanic rather than [the increased] minimum wage. I got promoted after being there five years.

26 See Appendix C for a complete list of the questions asked in these focus groups.



Making Ends Meet Still a Major Challenge

Despite the positive changes the increased minimum wage has made in participants’ lives, however, surviving on the minimum wage is still very challenging to most. About half of the worker participants support a family on their wages, either as a single parent or the primary wage earner in their household. Almost all workers who participated in the focus groups said they live month-to-month, if not day-to-day. Younger workers rely on family support. Workers have to prioritize bills because too many come at once to pay them all at once.

We live month-to-month. One time I paid rent two days late and they charged me $80 so I feel pressure to pay rent on time. Gasoline is my big problem – I spend $50-$60 per week on gas. I commute 45 minutes each way to work. Car maintenance also takes away money from other parts of my budget. I can never pay my bills on time. I prioritize which ones to pay first. I work to keep paying the next bill and live day-to-day. We ask for a loan from family. I look for extra work if I need money (e.g. try to find more houses to clean) I also ask family for money and also need to help other family members too.

Some of the Spanish-speaking workers continue to work long days. One

restaurant worker works 7 days a week to support two children and a grandchild. Some work extra to send money to their families in their home countries. A few of these workers indicated that they are working more so that their high school-aged children don’t have to work.

I prefer working two jobs over having my kids in high school work and get distracted from school.

Workers in Santa Fe are struggling with increased cost pressures.

Participants reported that the rising cost of daily needs (gas, food, housing) has cancelled out and even exceeded the minimum wage increases.

Prices are through the roof. It helps that we earn a bit more, but it’s a balancing act.

I’m behind on my phone payment and it’s a big challenge keeping up with my truck payment.



But the biggest expenses by far for Santa Fe workers continue to be housing and health care. All participants said they spend more than 50% of their income on housing (with the exception of some of the participants who are students, who said they had moved back to their family home to save on housing costs). They observed that many people have to leave Santa Fe to buy a home.

Minimum wage is not the only issue – housing costs are significant and is the main reason people struggle to make ends meet. My rent increased $100 a month. My biggest expense is my home (70% of income). I earn more than my family in Albuquerque, but housing is higher here. If I pay rent late, I have to pay a 10% fee. I give about 75% of my income to my mom for housing.

Workers in the Spanish-speaking focus group had similar housing

problems. Housing is by far the most difficult expense for them to meet – people spend 55-90% of their income on housing (most in the 55-65% range). These workers prefer to work in Santa Fe, but some find housing so unaffordable that they have to move. Some described how the goal of seeking home ownership often means purchasing a less expensive mobile home. However, the cost of land and the unit still accounts for a large proportion of their income (60% or more). Health Benefits are Very Scarce

Workers with children (both English and Spanish-speaking) mostly receive Medicaid or other publicly funded health coverage for their children. The adults mostly do not have health insurance for themselves and go to La Familia Medical Center when necessary. The prevailing attitude was that this situation is inevitable because they see medical costs and medical insurance as financially unattainable.

One Spanish-speaking participant noted that they haven’t requested Medicaid for their child born in Mexico so people here won’t say that “Mexicans freeload off the system.” Most of the Spanish-speaking workers did not expect health or other benefits from a job. One worker receives pension, paid vacation, holidays, and Medicare because of his age. He was the only one with a package of traditional benefits in either focus group. One person participated in a dental plan.



I supposedly get one week of vacation but can’t take it because there aren’t enough people and they tell us we can’t take the time off. Each year you can ask but aren’t allowed to take it. No health insurance. My kids are on Medicaid.

I haven’t had health care since the 1980s. I have to look at the deal I’ll be offered at this job when I qualify for it. It costs $25 every paycheck, and I can’t afford $50-$60 a month. That’s my food money. My health care plan is to eat well, exercise, and get enough sleep. My children get Medicaid and I can’t afford the $200 from the paycheck to pay for all of us. Even $70 for me every month is too expensive.

Survival Strategies

Workers earning the minimum wage say they still need outside sources of income to survive, specifically “cash” or “informal” jobs. Others rely on loans from family members or their credit card. No one reported having a cushion for extra expenses.

I save my income tax refund through the year or borrow from my family.

Work on the side is necessary to pay all the bills.

I couldn’t make it without extra cash work.

I rely on credit cards and live very simply. I do some work under the table but the credit card is my only cushion.

A few participants benefited from having 2-3 months of utility bills paid by the Public Service Company of New Mexico’s (PNM) Good Neighbors Fund (a program supported by the Salvation Army, PNM, and private donations).

I got a utility benefit, which helped.

Some workers said that to make ends meet on one job, they make a choice to ‘live simply’.

We don’t eat out and I bargain shop. I don’t own a car, so I save on insurance and gas. I live within walking distance of my job.



Several participants said they reduce housing costs by sharing housing with family or friends. Conditions at the Workplace Improved Job Satisfaction

Both English- and Spanish-speaking participants reported overall satisfaction with their jobs. When asked what was important to them at work besides pay, participants mentioned respect (between bosses and workers and between coworkers), harmony at the job, doing the best work that they can, growing professionally, days off, and health benefits.

I want to enjoy my coworkers and have fun working together.

I try to do the best work possible and educate myself about the work to keep the employer satisfied.

Respect was far and away the most important to workers, however, and many indicated that earning more has translated into feeling more respect from their employers and for themselves.

You just feel better about yourself. My confidence level is better. By paying a decent wage, my employer is saying ‘we respect you enough’. I feel like I am more respected as a person, even in myself. Working with kids is difficult… I give better quality of care. Money isn’t everything – even if I made $20/hour I wouldn’t stay where I feel defeated.

Job Loyalty Varies

Some participants reported staying at their job 5+ years; others move around from job to job. Bonds to a job vary from person to person and depend upon whether they have responsibilities to support family members. Most of the Spanish-speaking participants were satisfied with their jobs and did not plan to leave. One person was upset about being paid less than the living wage ($9.00 for laying tile) and plans on seeking a new job. One person is nervous about a new manager who will take over – that would impact the decision to stay or quit.

I take these jobs to pay the bills. I just want to paint and preserve my health by not working too long at stressful jobs. I took a pay cut to leave a stressful job ($10.50 to <$10.00).



I am at SFCC and have plans to leave for UNM. I like my job and want money to do stuff with my friends. I like my job and plan on staying in it for awhile – it’s what I want to be doing as a career (got a raise from $10.00 to $11.00). I am comfortable with the atmosphere between coworkers and the boss. The money is good enough ($10.10/hour).

I’m more motivated to help the company make more money when I’m making more money.

Increased Job Responsibilities

Additional responsibilities were added to most worker participants’ jobs with the last minimum wage increase. A few people left their job when they were asked to do what felt like the work of two or three employees without additional pay.

They were so short-staffed – they wanted me to do the work of 3 people. I was making 50 cents more an hour, so they expected more to make up for it. I have more [responsibilities] for the same job.

We have to clean rooms in less time. I’m expected to do a supervisory role now without extra pay.

The last place I worked seemed to purposely short-staff to save money.

Other modifications to workplace routines reported include changes in

hours workers are allowed to work, stricter hiring practices, and employer tactics designed to avoid paying the minimum wage to employees.

We are not allowed to work overtime.

Many people where I work had their hours reduced. [My former employer] didn’t let people work the hours even if that person was needed. More qualified people are being hired – they’re more careful now and don’t just take anyone off the street. It makes others feel more secure because you never know these days.



I know a place where the employer fired people to have fewer than 25 employees.

[I know of] a hotel owner who avoided paying [the living wage] by having different company names.

Wage Compaction

Wage compaction seems to have become commonplace; nearly all participants described situations in which some employees were either hired at $9.50 or had their wage increased to that level while those earning that wage or slightly more did not have their wages increased. Whether this situation affects job satisfaction and employee relations depends on the workplace atmosphere.

For example, a child care worker felt like it was unfair that she was making

$9.75 and had to supervise people who were transitioning to $9.50. As there were other issues about the sense of fairness at the job, she left for a different position that offered $10.00/hour. She said it was not just the wage differential issue that caused her to leave; it was the fact that she felt a lack of respect from management toward employees. Others mentioned situations that hinted at increased competition between workers on a job.

I see ‘attitude’ against people who can’t speak English but get

$9.50/hour.

On the other hand, several workers said they could tolerate a 50 cent wage differential between themselves and those they supervise, especially when they consider that they won’t have to start over themselves at a lower wage.

I don’t resent new workers who start at $9.50, even though it took me time to work up to that wage.

I hear some people say ‘it’s not fair’, but I remind them that you never know what’s going to happen and it’s nice to know you will earn the $9.50 if you have to start over at the bottom. I don’t own my job, so it’s nice to know that I can get a $9.50 job anywhere so that if a job does not work out, we don’t have to start lower again.

A few participants suggested that wage compaction was occurring

because workers didn’t have the will or the power to demand higher wages for all.

We were told by our employer not to talk about our wages because when someone found out their coworker was making 50 cents



more, he asked for a raise – so our boss said ‘whoever asks for a raise will get fired’. People are afraid to ask for what wage they deserve. That’s only for the management class.

Other Concerns Education in Santa Fe Needs Improvement

One area in which workers agreed with employers was in the area of education. Many participants in both the English- and Spanish-speaking focus groups said improvements in education are needed in order to allow them to succeed in their careers. A few English-speaking workers attended Santa Fe public high schools and said:

Expectations were not that high. No one noticed when I didn’t do well. Socially, it was great, but I was looking for career prep workshops and how to get into college (scholarships, etc.); they didn’t teach us much about that.

None of the Spanish-speaking workers attended Santa Fe public high schools. They said that ESL classes are essential to obtain, retain, and get promoted in their jobs. Feelings about the Amendment

Most participants in the worker focus groups said they preferred the proposed amendment to the living wage ordinance to the present law. They liked the idea that an increase would be indexed automatically to cost of living increases and that all workers, regardless of the number of employees at the business, would be paid the same wage.

It’s good- I have friends that work at places with 5 employees. Everyone has the right to earn more.

A few workers said they understood how an increase to $10.50 in January might be difficult for businesses.

Workers were hopeful that no exemptions would be introduced (e.g., for teenagers or part-time workers) because employers might try to avoid paying the living wage by hiring these workers, leaving adults supporting a family with no job or fewer hours.



CONCLUSION

Comparing the 2007 focus group findings to the 2005 and 2004 findings, several trends appear. From the perspective of the employers, expectations of workers have increased as the wage has increased. Workers are expected to get more done and to be able to do more tasks; there is less tolerance for unreliability, and careful screening of new employees has become more of a priority than in the past to avoid turnover of employees.

As expectations of employees increase, frustration with the quality of Santa Fe public school graduates entering the labor force grows. A pervasive opinion persists among employers who participated in the focus groups throughout the years that the local labor force does not provide reliable, motivated applicants who possess critical thinking, math, and literacy skills.

The increase in minimum wage has occurred alongside increases in a number of costs (gasoline, rent, health care). These costs affect both employers and workers. Workers have consistently experienced a lack of ‘cushion’ for unexpected expenses through the years; now businesses report they are feeling the same strain. Participants recognized that the cost pressures on both employers and workers go beyond the reach of wage issues and that increasing the minimum wage is not the end-all solution.

For many businesses, raising prices to keep up with the overall escalation of costs is a disturbing proposition – they fear that if Santa Fe gets too expensive it might scare off their market. For workers, while they have enjoyed an increased quality of life as the wage has increased, making ends meet has not gotten easier.

Wages have compacted. The wage increases of employees who earn slightly more than the living wage don’t keep pace with the increases of those who earn the minimum wage. However, workers who have experienced wage compression over the years don’t indicate that they are harboring resentment against their co-workers earning the living wage, generally.

Access to affordable health care has become a much bigger issue since 2004, as health insurance costs approximately doubled in the last five years. More people rely on services for the uninsured provided by La Familia Medical Center and St. Vincent’s Hospital. Businesses who offered health benefits say more of their employees are declining them because the premiums are unaffordable. Both business representatives and workers said that, when given a choice, employees prefer cash in hand to a lower wage coupled with benefits.



CHAPTER 5: POTENTIAL UNINTENDED CONSEQUENCES OF THE LIVING WAGE (REVISED)

Unintended consequences are issues that arose during the course of this

study that were neither expected nor intended when the Living Wage Ordinance was created. Many of the issues which appear here were first examined during BBER’s study of the $8.50 minimum wage in Santa Fe.27 These issues have persisted as concerns among employers and workers, coming up again during the course of the current study of the $9.50 minimum wage in the study’s business survey and focus groups.

This chapter is an attempt to assess the validity of these concerns. In some cases, such as concerns about increased student drop-out rates, making these assessments is difficult because data sources are either incomplete or the methods used to gather the data raise questions about the data’s reliability. Absent stronger data sources, further study, or the implementation of more reliable collection methods, quantifying the depth of these issues will remain difficult, and perceptions, accurate or not, will persist.

In other cases, such as concerns about decreased youth employment and increased employment of non-resident workers, data is available to quantify the extent of these concerns and whether these are issues that should be addressed by local government. NEGATIVE EFFECTS ON HIGH SCHOOL STUDENTS

There are two main concerns about the effect of Santa Fe’s increased minimum wage on youth, both of which are explored further below. The first concern is that the minimum wage has reduced employment opportunities for high school students. The second concern is that the higher minimum wage is encouraging students to drop out of school in larger numbers in order to enter the workforce.

In the case of youth employment, there is reliable data available that shows there has been an increase in youth employment over the past few years. As for the drop-out rate, there are data sources available of varying reliability. All the data sources except one - the 2000 decennial census - are unreliable for different reasons. As for the Census data, it is too old to be of any significant use in this discussion. What can be discerned about this drop-out issue with the available, albeit insufficient, data is described below. However, given the lack of usable data, it is impossible at this point to say definitively whether or not high school drop-out rates have increased since the LWO went into effect. 27 Reynis, Lee A., Myra Segal, Molly J. Bleecker, Preliminary Analysis of the Impacts of the $8.50 Minimum Wage on Santa Fe Businesses, Workers, and the Santa Fe Economy. UNM-Bureau of Business and Economic Research, 2005.



REDUCED EMPLOYMENT OPPORTUNITIES REDUCED EMPLOYMENT OPPORTUNITIES

35003700

39004100

430045004700

49005100

53005500

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

age 14-18

age 19-21

age 22-24

A concern raised during this study that also came up in the 2005 study is that the living wage would have a negative impact on low- and unskilled workers still in high school. Simply put, people wouldn’t hire young, unskilled workers at the higher wage rate. Indeed, both respondents to the 2007 business survey and participants in the 2007 employer focus groups stated that they did not currently and/or would not when the wage increased to $10.50 hire unskilled or untrained employees. In 2005, respondents said the same about the increase of the minimum wage to $9.50.28 This may be happening with a few businesses, but it does not appear to be a widespread trend in Santa Fe. In fact, as Figure 5.1 indicates, since the living wage went into effect, the number of young workers between the ages of 14-24 has increased steadily. (This is not to say that the increased minimum wage has caused this increase.) As Figure 5.2 indicates, youth aged employment has increased since the living wage, but is on par with state trends.

A concern raised during this study that also came up in the 2005 study is that the living wage would have a negative impact on low- and unskilled workers still in high school. Simply put, people wouldn’t hire young, unskilled workers at the higher wage rate. Indeed, both respondents to the 2007 business survey and participants in the 2007 employer focus groups stated that they did not currently and/or would not when the wage increased to $10.50 hire unskilled or untrained employees. In 2005, respondents said the same about the increase of the minimum wage to $9.50.

Figure 5.1: Santa Fe City Employment Quarter over Quarter, Second

Quarter 1996 through 2006 Figure 5.1: Santa Fe City Employment Quarter over Quarter, Second

Quarter 1996 through 2006

Source: U.S. Census Bureau and NM Dept. of Workforce Solutions, Economic Research and Analysis Source: U.S. Census Bureau and NM Dept. of Workforce Solutions, Economic Research and Analysis

Figure 5.1 shows the total number of employees in three age groups in the second quarter of each year from 1996 and 2006, the most recent data available. It is important to note that the major dip in employment, especially in the 14-18 year old cohort, began in 2001 and mirrors statewide and national trends resulting from the dot com bust in the early part of the decade, a decline in tourism after Sept. 11, 2001, and mild winters during the same period, which had a negative impact on winter recreation. The employment numbers bottom-out in

Figure 5.1 shows the total number of employees in three age groups in the second quarter of each year from 1996 and 2006, the most recent data available. It is important to note that the major dip in employment, especially in the 14-18 year old cohort, began in 2001 and mirrors statewide and national trends resulting from the dot com bust in the early part of the decade, a decline in tourism after Sept. 11, 2001, and mild winters during the same period, which had a negative impact on winter recreation. The employment numbers bottom-out in



28 This may be happening with a few businesses, but it does not appear to be a widespread trend in Santa Fe. In fact, as Figure 5.1 indicates, since the living wage went into effect, the number of young workers between the ages of 14-24 has increased steadily. (This is not to say that the increased minimum wage has caused this increase.) As Figure 5.2 indicates, youth aged employment has increased since the living wage, but is on par with state trends.

35003700

39004100

430045004700

49005100

53005500

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

age 14-18

age 19-21

age 22-24

28 Ibid, p. 60.



the second quarter of 2004, at the end of which the first living wage was implemented (the living wage of $8.50 went into effect June 24, 2004; the second quarter covers the months April through June). The second quarter was chosen for a few reasons, one the limit of the data available which ended in second quarter of 2006. Two, by including both quarters of 2006 the data captures a portion of the period after the minimum wage increased to $9.50. Another reason for choosing the second quarter is that the first minimum wage increase was enacted at the end of the second quarter of 2004. A further analysis examining quarter over quarter employment numbers show similar patterns with employment increasing in the earlier part of 2004 and trending upward, a trend similar to the state trend.

Figure 5.2, below, shows the total number of employees in the 14-18 age cohort for both the state of New Mexico and the city of Santa Fe for the second quarter of each year between 1997 and 2006. The values have been indexed to second quarter employment in 1997 and compare percentage changes in overall employment in both New Mexico and Santa Fe annually. Employment of the 14-18 age cohort in both Santa Fe and the state follows a similar trend, with a decline between late 2001 and early 2004 and a steady increase in employment for this age cohort in the years following the implementation of the living wage. Figure 5.2: New Mexico and Santa Fe High School Age Cohort Normalized

to 1997

0.9

0.95

1

1.05

1.1

1.15

1.2

1.25

1997

q2

1998

q2

1999

q2

2000

q2

2001

q2

2002

q2

2003

q2

2004

q2

2005

q2

2006

q2

State 14-18SF 14-18

Source: U.S. Census Bureau and NM Dept. of Workforce Solutions, Economic Research and Analysis

In sum, a review of quarter-by-quarter data since the wage was implemented shows that youth employment has continued to increase since the second quarter of 2004, when the LWO first went into effect. This data suggests that youth seeking employment are not disadvantaged by either the $8.50 or $9.50 minimum wage (the second increase went into effect January 1, 2006).



A review of BBER population estimates in Santa Fe County from 2000 to

2006 show that the total number of people in the 14-18 age cohort rose between 2000 and 2003 before declining by 3.4 percent between its peak in 2003 and the last year of available data in 2006. As the total number of jobs for this cohort has increased the total number of people in this population has decreased which indicates there is a larger net gain in jobs for young people in Santa Fe.

Despite recent increases, volatility remains in youth employment numbers especially on a seasonal basis. It may be that Santa Fe employers have moved to consolidate their workforce and are only looking to youth when demand, especially in tourism-dependent industries, is high. If in fact this is occurring, this would be a disadvantage to unskilled youth workers, but more study would be needed to quantify the extent of the problem. INCREASED NUMBER OF HIGH SCHOOL DROPOUTS

It has been suggested that the increased minimum wage provides incentive to “at-risk” students to drop out of high school. The data for the school year following the implementation of the $8.50 minimum shows a significant decrease in the dropout rate over the previous two years (see Table 5.1): the reported dropout rate for the 2005-2006 school year in Santa Fe was 5.7 percent, down from 10.5 percent for the 2004-2005 school year and 10 percent in 2003-2004. Table 5.1: 2000-2001 through 2005-2006 Dropout Rates for Santa Fe Public

School District

School Year 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006

Rate 7.5% 6.9% 3.8% 10.0% 10.5% 5.7% S ( Accountability Report 2003

http://www.sde.state.nm.us/div/ais/data/account/dl/ar0203.pdf)

ouces: NM PED Accountability Resources Annual Dropout Reports http://www.ped.state.nm.us/div/ais/data/resources/index.html) and NM PEDS

(

However, the reliability of the data used to draw these conclusions, which come from the New Mexico Public Education Department (PED) and the Santa Fe School District, is highly questionable. Part of the problem is that the data available on dropout rates for the school year immediately following the implementation of the $9.50 minimum wage is not yet available. Other problems with the data stem from the ways in which the data are gathered.

The most reliable and usable data on dropout rates are ones that follow a cohort of students through their years in the educational system. Instead, what the NM PED uses to calculate dropout rates is data reported by districts, which



collect it from the individual schools within the district. Individual schools are required to supply the name of the student, his/her grade, the reason (according to the student) for dropping out, the date the student dropped out, and whether or not the student is in special education. According to an official who deals with the collection of this data for one school district, the data used in these reports is inherently unreliable because some of the individual schools are very forthcoming and report accurately and thoroughly, and some are not. Therefore, the state is given “very subjective figures” to work with. The percentages from 2003-2004 and 2004-2005 stand out, but the NM PED was unable to explain the fluctuation from the previous years’ percentages and the final reported percentage from 2005-2006.

The data the NM PED receives, accurate or not, is then used to calculate the dropout rate, which is figured by dividing the number of dropouts in a school year by the number enrolled on the 40th day of the school year. The NM PED website gives the following example:

In October of this school year, 100 students were enrolled in a certain school; during the year, ten students dropped out. The dropout rate is calculated by dividing the number of dropouts by the membership. Thus, the dropout rate for this example is computed as follows:

The NM PED also publishes statistics on the reasons for dropout. There are sixteen possible reasons in the report available for SY 2005-2006, including “Left School to Work.” Unfortunately, these data suffer from the same reliability problems as discussed above, since they are compiled from the same numbers. That this is a problem is apparent when one looks at the number of dropouts in the “Other (Unknown)” column. The most recent data provided by the state provides only statewide totals for reasons cited for dropping out, with the “Other (Unknown)” category cited the most often at every grade level. In 2005-2006, only 2.5 percent of all high school dropouts statewide reported “Left to Work” as the reason for dropping out, however, 35 percent were reported as “Other (Unknown).” This is a major portion of the population whose reasons for leaving school remain a mystery.

An official with the Santa Fe public schools said the impact of the wage on dropouts was “negligible,” adding that only five dropouts said they were leaving school because of the wage since 2005. But, the official added that the data was unreliable and was gleaned from a random sample that was unscientific in nature.



A recent story by the Associated Press covered an analysis of U.S. Education Department data by researchers at Johns Hopkins University.29 This analysis used cohort graduation rates to analyze drop out rates across the country. Cohort graduation rates look at the number of students that started at a particular high school as freshmen and the number that graduated four years later at the same high school. It does not track individual students, only the total number of students. By using this analysis method, Santa Fe High School and Capital High School have dropout rates of 40 and 50 percent, respectively. These figures are highly suspect. While it does provide a percentage, there is little more these numbers reveal than the total number that entered as freshmen and the total number that graduated four years later. It does not account for transfers, those that earned a GED, summer graduates, students who have repeated a grade, or any number of other reasons a student may no longer be enrolled in the same school or class after four years. It is not an effective or useful method of measuring drop outs.

The Santa Fe Public Schools recently issued a response to the AP report published in the Santa Fe New Mexican, pointing out the issues associated with labeling cohort graduation rates as dropout rates.30 In its response, the district issued what it called an event drop out rate for the two high schools in Santa Fe. This rate was determined by making a simple comparison of senior students enrolled on the 40th day of classes with the number of students enrolled on the 40th day of classes the year previous. The reported result was: Santa Fe High School 5 % Capital High School 6 %

There are problems with this measure as well, given that it only measures students in one grade level on one day of the year. But the rates are much lower than the graduation cohort measure and seem more in line with the numbers from the decennial census in 2000 for the City of Santa Fe and the 2006 county estimates from the American Community Survey released by the U.S. Census, which looks at sex by school enrollment and educational attainment by employment status for the 16 to 19 age cohort.

The decennial census is the closest measure with the largest sample available. The 2000 Census places the number of youth between the ages of 16 and 19 in the workforce not enrolled in school and not a graduate at 14.9 percent. This number is well below the number reported in the study by Johns Hopkins University and close to the estimate in the 2006 American Community 29 Zuckerbrod, Nancy. “Report: 1,700 High Schools Breeding Dropouts”, Santa Fe New Mexican, October 29, 2007. The New Mexican, “Santa Fe District Home to 2 ‘Dropout Factories’”, Santa Fe New Mexican, October 30, 2007. 30 Superintendent Leslie Carpenter, Letter to Colleagues, “No ‘Factory’”, http://www.sfps.k12.nm.us/education/sctemp/5d5369155b7c140ffabe9e430800e3f4/1195581022/Dropout_information_for_web.pdf, accessed November 19, 2007.


http://www.sfps.k12.nm.us/education/sctemp/5d5369155b7c140ffabe9e430800e3f4/1195581022/Dropout_information_for_web.pdf

http://www.sfps.k12.nm.us/education/sctemp/5d5369155b7c140ffabe9e430800e3f4/1195581022/Dropout_information_for_web.pdf


Survey for Santa Fe County. The census number is nearly twice that reported by the New Mexico Department of Education.

According to the estimates in the American Community Survey, approximately 12.6 percent of the 7,485 youth in the above age cohort are not enrolled in school and are not graduates.31 The issues with this data are twofold, one, the estimate is at the county level and not the city level, and two, there is a wide margin of error of plus or minus 11.5 percentage points for the largest estimate. The margin of error increases greatly the more refined the category, such as educational attainment and employment. In 2008, the American Community Survey will release three-year estimates which will include the City of Santa Fe and should be more reliable. But again, this estimate is close to that in the 2000 Census data.

Whether the perception that students are leaving school to work is accurate or not therefore cannot be definitively ascertained with the data available. This issue needs further explanation, which requires data that is consistent, reliable and dependable. WORKERS WITH DISABILITIES

In the opinion of some non-profits in Santa Fe, the increased minimum wage has had a major impact on organizations providing vocational services to people with disabilities. These impacts include increased difficulty in finding employment for workers trained by these organizations, finding employees to work in assisted-living facilities and in vocational programs, and budgetary constraints that have led these organizations to eliminate programs and reduce the number of employees. In a market with limited funds and a business model that is not based on profit, many of these organizations in Santa Fe have reorganized, restructured, and refocused to meet the needs of those with disabilities in the city. Some have closed up shop, others have shifted their operations to locations outside Santa Fe, and some have found useful partnerships with national organizations to lessen the impacts of the living wage.

31 Data are based on a sample and are subject to sampling variability. The degree of uncertainty for an estimate arising from sampling variability is represented through the use of a margin of error. The value is the 90 percent margin of error. The margin of error can be interpreted roughly as providing a 90 percent probability that the interval defined by the estimate minus the margin of error and the estimate plus the margin of error (the lower and upper confidence bounds) contains the true value. In addition to sampling variability, the ACS estimates are subject to nonsampling error (for a discussion of nonsampling variability, see Accuracy of the Data). The effect of nonsampling error is not represented in these tables: http://factfinder.census.gov/servlet/DTTable?_bm=y&-context=dt&-ds_name=ACS_2006_EST_G00_&-mt_name=ACS_2006_EST_G2000_B14005&-mt_name=ACS_2006_EST_G2000_C14005&-CONTEXT=dt&-tree_id=306&-geo_id=05000US35049&-search_results=01000US&-format=&-_lang=en.


http://factfinder.census.gov/servlet/DTTable?_bm=y&-context=dt&-ds_name=ACS_2006_EST_G00_&-mt_name=ACS_2006_EST_G2000_B14005&-mt_name=ACS_2006_EST_G2000_C14005&-CONTEXT=dt&-tree_id=306&-geo_id=05000US35049&-search_results=01000US&-format=&-_lang=en





In 2005, BBER conducted interviews with three organizations providing vocational services for people with disabilities. Follow up interviews with these were conducted in the fall of 2007.

The issues facing these organizations were similar to those mentioned in the fall of 2005, but are more severe and have impacted their day-to-day operations and the services they provide. These organizations claimed the $8.50 minimum wage made it more difficult for them to place people with disabilities in jobs and had a negative impact on business operations, these organizations again report that the $9.50 minimum wage has increased these difficulties. Two of the organizations, both Santa Fe-based non-profits, said the increase in the minimum wage created a situation that required the reduction and elimination of program offerings. Despite eliminating these programs, both organizations reported success in placing clients with other organizations offering the same services. Neither organization said services in Santa Fe had declined overall, but did add the number of organizations providing these services had decreased. One interviewee said the increased minimum wage had been effective in “weeding out poorly managed” non-profits.

All three organizations have found continuing difficulty in placing people with disabilities in the workforce. One organization closed up shop earlier this year and no longer provides vocational training. The two organizations still providing services in this area said they have turned to smaller businesses that aren’t required to pay the living wage to place their trainees.

One issue that has made placement difficult since the implementation of the minimum wage is employers’ increasing demand for workers that can multi-task. This is difficult for these organizations that for years have specialized in carving out jobs that match the specific skills of their trainees with the needs of the employer. According to one interviewee, there is no benefit to the organization, the employer, or the employee if the job is given “only as a token.”

In response to the demands of employers, one organization said it was evaluating its training model to include additional skill sets, but in the meantime was working to recruit more “mom and pop” businesses that did not have to pay the minimum wage. The organization said this effort had been relatively successful and that smaller businesses were willing to work with their organization.

A major issue cited by exempt non-profits with state contracts is an inability to attract workers when paying less than the living wage. According to the organizations interviewed, finding workers qualified or able to work without paying the minimum wage was “impossible.” These organizations characterized their efforts to find employees to work at assisted-living facilities and in vocational training programs as a “struggle.” Beyond the living wage, they pointed to the



area’s unemployment rate, which has hovered at about 3 percent, as a contributor to this situation.

All three organizations cited Santa Fe’s low unemployment as a major issue. State contractors are exempt from the living wage and those organizations operating state-funded programs in the city find it difficult to attract “quality” employees to fill open positions because they are not paying the living wage. The ability for workers to take higher paying jobs elsewhere and the lack of money in non-profit budgets to raise wages for all employees has made the Santa Fe labor market a difficult place to compete. As one interviewee put it, “we are left with the people that can’t get a job anywhere else.”

One non-profit said it had shut down its employment placement programs entirely and let go of the majority of its workers because of this issue. This person said that the organization was unable to pay the living wage with the funds provided under state contracts. In two years, the organization’s multi-million dollar budget has fallen to a few hundred thousand. The organization went from over 100 employees to just a handful, and ultimately left the city. This organization’s decline is quite stark, but they also said it was a choice to change focus, as providing services, acquiring funding, and finding qualified employees became more difficult. The organization characterized the living wage as “the straw that broke the camel’s back.”

But there is variability in the impact of the increased minimum wage on the three organizations’ business operations. This appears to come from the differences in funding and total services provided by the organizations. Two of the three organizations rely heavily on government funding, such as state contracts or incentive-based funding from the Division of Vocational Rehabilitation and both organizations’ central focus is finding employment for individuals with disabilities. These organizations have either abandoned all or some of the state contracts they previously held. These organizations say they have also begun expanding services in other parts of the state, such as in Espanola and Las Vegas, while decreasing operations in Santa Fe. These organizations felt they were severely impacted by the increased minimum wage because funding has not increased at a rate to cover the higher wages they must pay employees to compete with other businesses in the area. According to these organizations, this funding issue exists at all levels, from the state to outside grants.

The third organization is one branch of a national organization with state-level management that provides more services and relies on more sources of income, and was thus better able to absorb the cost of the higher wages in Santa Fe. However, this organization said it remains difficult to place workers in Santa Fe. This organization said the recent statewide increase in the minimum wage and the Albuquerque increase had both coincided with initial drop-offs in placement, but that after a period of adjustment, placement numbers had



returned to pre-increase levels in other parts of the state. This is not the case in Santa Fe where placement remains below levels prior to the implementation of the living wage, the organization said.

Another concern raised in 2005 and again in 2007 was the impact of the increased minimum wage on workers that receive SSI or SSDI benefits. According to organizations working with these individuals, in rare cases workers have had to reduce hours to continue receiving benefits. The larger issue, according to one organization, was employers reducing hours for workers to avoid paying benefits. HEALTH INSURANCE BENEFITS

The increasing cost of health insurance is a continuing concern for both employers and employees. Increasing health care costs are a nation-wide issue and employers are cutting benefits in many areas. This concern raised by the Santa Fe Chamber of Commerce earlier this year, was that employers were offering fewer benefits to their employees or were asking their employees to pick up a larger portion of the premiums because of the $9.50 minimum wage. Cutting health insurance appears to be a common strategy when cost-saving measures are needed by businesses. In response to these concerns, BBER added questions regarding benefits to its employer survey for this study. The issue also came up in focus groups.

Survey results showed that, of those responding that offered benefits before the most recent minimum wage increase, 13 percent chose to cut those benefits citing the increase in the minimum wage. This is the first time the survey asked directly about healthcare benefits and there is no data from previous studies to compare to this information. Though the cutting of benefits and the increase in minimum wage have occurred over the same period, it is not possible to say one caused the other. The increasing cost of healthcare is an issue faced nationwide and some employers have had to cut benefits because the cost of providing healthcare is prohibitive whether there is a mandated minimum wage or not.

While a limited number of employers cut benefits, respondents and focus group participants said they would consider cutting benefits if the wage increased to $10.50 because it would save money if times were tight. This is an issue that should be watched carefully in the future if another wage increase occurs.

Wage costs are not the only concern for employers looking at offering benefits to employees. In the 2005 study, many employers mentioned recent annual increases of 18-20 percent in healthcare costs. In some ways, this creates a catch-22: the higher the cost, the fewer employees who enroll, and when the number of enrolled employees drops below 75 percent, the premiums



charged by insurance companies go up, making it even less attractive to employees.

As was the case in 2005, healthcare costs continue to rise and the availability of employment-based insurance is in decline, but this trend is also occurring at the state and national level. Data that would allow one to track trends in employer-provided healthcare is unavailable. But even then, it would not tell us if those changes were related to the minimum wage increase.

The LWO includes a provision that allows employers to count the value of health benefits toward wage compliance, but in the surveys and focus groups during the 2007 and 2005 studies, workers showed more interest in higher wages than in health benefits. Employers said offering a lower wage with higher benefits made them less attractive to workers.

In the business survey, an additional 13 percent of respondents stated they had cut other non-health-related benefits to reduce costs in the past yea in response to the increase in the minimum wage. But again, increasing health care costs are a nation-wide issue and employers are cutting benefits in many areas. EXEMPTION OF BUSINESSES WITH FEWER THAN 25 EMPLOYEES

The city of Santa Fe is currently considering a proposal that would require all businesses to pay the living wage. The current proposal leaves the starting wage at $9.50, with annual adjustments for inflation.

With low unemployment in the city of Santa Fe, there is competition for employees. In the 2007 survey, responses indicated that the exemption for businesses with fewer than twenty-five employees does not seem to exist in practice. Respondents who own or run businesses with fewer than 25 employees seem to have found that paying wages comparable to the living wage was necessary to compete for workers. As mentioned earlier in this chapter, non-profits that provide vocational training and placement services for people with disabilities have found businesses which are currently exempt from the living wage to be willing partners in placing these workers. INFLUX OF NON-LOCAL WORKERS AND LEAKAGE OF WAGE REVENUES

In this study and the 2005 study, several businesses mentioned that they believe workers from outside Santa Fe are commuting into Santa Fe in order to earn more for the same job they performed outside the city. The perception is that these workers then compete with Santa Fe workers for minimum wage-level jobs and subsequently spend their earnings outside of Santa Fe. An analysis of wage earners by address showed that, on average, 27 to 30 percent of Santa Fe’s workforce lives outside the city.32 This data shows very 32 BBER staff analysis of ES-202 Wage Records from 2003 through 2006.



little change in the percentage of workers living outside of Santa Fe since the living wage went into effect (see Figure 5.3). Roughly 8 percent of the non-resident workers live in Rio Rancho or Albuquerque. Many of these workers are from the Santa Fe area originally but have chosen to commute because of affordability issues related to raising a family in Santa Fe.33

Figure 5.3: Percentage of Workers Both Employed and Living in Santa Fe,

2003-06

50%

55%

60%

65%

70%

75%

80%

85%

90%

95%

100%

2003

Q1

2003

Q2

2003

Q3

2003

Q4

2004

Q1

2004

Q2

2004

Q3

2004

Q4

2005

Q1

2005

Q2

2005

Q3

2005

Q4

2006

Q1

2006

Q2

2006

Q3

2006

Q4(

p)

Percent

Source: E202 quarterly census of employment and wages. The attendant leakage of wage revenues into other communities is unlikely to have increased since the living wage went into effect, since the number of non-resident employees in Santa Fe has shown little increase. However, further analysis could be done to attempt to measure the actual amount of leakage occurring. Reduced Business Philanthropy This year, as in the 2005 study, the increased minimum wage was seen as discouraging business philanthropy. One focus group member said having less money for charitable giving was an unexpected consequence of the minimum wage. While it is difficult to track business giving, BBER did contact the New Mexico Association of Grantmakers to inquire if this organization had seen any decline in giving. Though the organization could not address business giving directly, the association said the minimum wage had not been an issue for their members. “We haven’t seen any impact and I haven’t heard anybody talk about it, which means they aren’t worried about it,” a member of the association said.

33 Julie Ann Grimm, “Rio Rancho Boom”, Santa Fe New Mexican. April 24, 2005.



APPENDICES



APPEDIX 1A: STATISTICAL DATA FOR TABLES AND FIGURES The tables in Appendix 1A present statistical data on the tables and figures used in Chapter 2. For example, Table A1 corresponds to Table 1 in the text. Table A-F4 corresponds to Figure 4 in the text.

Table A1: Difference-in-Differences in Mean Quarterly Earnings by Job

$8.50 Dif $9.50 Dif $8.50 Dif $9.50 Dif

Santa Fe Cty 34.88 10.89 Santa Fe 43.43 18.3238490, 37194 0.03 0.33 61630, 58990 0.00 0.00

Albuquerque 47.25 -5.19 Santa Fe Cty 41.96 18.16345576, 349119 0.00 0.22 74363, 72933 0.00 0.00

Albuquerque -10.00 9.59465232, 459008 0.00 0.00



NOTE: Population size is listed underneath each heading, and significance (p-value) is listed under each value. Italicized values are not significant at the 10% level.

Table A2: Difference in Differences in Mean Quarterly Earnings by Job,

Female Workers

$8.50 Dif $9.50 Dif $8.50 Dif $9.50 Dif

Santa Fe Cty 9.28 26.09 Santa Fe 36.39 19.2319400, 18705 0.69 0.11 32152, 30850 0.00 0.03

Albuquerque 58.53 4.50 Santa Fe Cty 41.02 13.23162982, 162943 0.00 0.44 37693, 36876 0.00 0.11

Albuquerque -16.27 -2.1807220236, 218774 0.00 0.49






Table A3: Difference in Differences in Mean Quarterly Earnings by Job, Worker Age 18-22

$8.50 Dif $9.50 Dif $8.50 Dif $9.50 Dif

Santa Fe Cty 50.25 -29.85 Santa Fe 68.32 19.236861, 6305 0.21 0.31 9920, 9150 0.00 0.85

Albuquerque 43.92 -11.39 Santa Fe Cty 62.54 13.2374902, 68619 0.00 0.26 11917, 11141 0.00 0.64

Albuquerque -31.77 -2.1897128, 86163 0.00 0.76

Large Santa Fe Businesses Compared to Large Businesses Compared to Small by


Table A4: Difference in Differences in Mean Quarterly Earnings by Job,

Worker Age 15-18

$8.50 Dif $9.50 Dif $8.50 Dif $9.50 Dif

Santa Fe Cty -68.49 -102.71 Santa Fe 64.95 8.97404, 2272 0.46 0.05 5569, 3374 0.00 0.75

Albuquerque 48.63 -53.03 Santa Fe County 51.20 32.6533393, 19389 0.00 0.00 6809, 4179 0.01 0.18

Albuquerque -23.83 -6.4642540, 23780 0.00 0.53

Large Santa Fe Businesses Compared to Large Businesses Compared to Small by




Table A5: Difference-in-Differences in Mean Quarterly Earnings by Industry, Worker Age 15-18

$8.50 $9.50Arts and EntertainmentSF vs Abq 99.59 165.19 1959, 1376 0.03 0.00 SF lg vs SF sm 134.97 154.64 333, 215 0.08 0.04

AccommodationsSF vs Abq 57.76 (34.11) 1046, 653 0.41 0.49 SF lg vs SF sm (15.01) (137.30) 362, 201 0.90 0.32

Food ServicesSF vs Abq 57.76 (34.11) 12432, 7654 0.01 0.22 SF lg vs SF sm 85.50 51.40 1681, 1078 0.04 0.29


Table A-F4: Difference-in-Differences of Quarterly Earnings of Female

Employees in the Manufacturing Industry

$8.50 $9.50

SF vs SFC 471.08 (153.05) 388, 227 0.00 0.14 SF vs ABQ 128.36 (101.53) 5265, 5139 0.05 0.24 SF Lg vs SF sm 145.02 (52.04) 532, 772 0.14 0.51




Table A-F5: Difference-in-Differences of Quarterly Earnings of Female Employees in the Health Care Industry

$8.50 $9.50

SF vs SFC (136.58) 246.90 5026, 4851 0.00 0.00 SF vs ABQ 80.62 63.08 31326, 30824 0.00 0.00 SF Lg vs SF sm 47.81 68.57 6925, 7913 0.08 0.01



Employees in the Accommodations Industry

$8.50 $9.50

SF vs SFC (244.19) (4.29) 1678, 1600 0.03 0.96 SF vs ABQ 11.76 54.20 7049, 7271 0.68 0.01 SF Lg vs SF sm 78.15 70.68 2171, 2360 0.15 0.16



Employees in the Food Services Industry

$8.50 $9.50

SF vs SFC 129.58 (61.45) 3711, 3744 0.01 0.04 SF vs ABQ 42.67 (24.48) 31206, 28472 0.01 0.05 SF Lg vs SF sm 62.45 33.01 5134, 6092 0.03 0.19




Table A-F8: Difference-in-Differences of Quarterly Earnings of Employees Age 18-22 in the Manufacturing Industry

$8.50 $9.50



Table A-F9: Difference-in-Differences of Quarterly Earnings of Employees

Age 18-22 in the Arts and Entertainment Industry

$8.50 $9.50

SF vs SFC 37.21 (121.42) 435, 481 0.71 0.06 SF vs ABQ 302.93 (35.52) 1825, 2063 0.00 0.27 SF Lg vs SF sm 206.03 116.93 436, 424 0.03 0.13


Table A-F10: Difference-in-Differences of Quarterly Earnings of Employees

Age 18-22 in the Accommodations Industry

$8.50 $9.50

SF vs SFC (331.13) 82.37 714, 636 0.05 0.54 SF vs ABQ 7.25 32.83 2949, 2895 0.87 0.39

SF Lg vs SF sm (43.56) 94.87 839, 815 0.66 0.15




Table A-F11: Difference-in-Differences of Quarterly Earnings of Employees Age 18-22 in the Food Services Industry

$8.50 $9.50



Table A-F12: Difference-in-Difference of Mean Quarterly Earnings of

Employees of Large Santa Fe Businesses versus Control Groups

$8.50 $9.50

Lg Santa Fe Cty 45.37 14.295654, 5144 0.21 0.67

Lg Albuquerque 59.03 2.9642408, 40759 0.00 0.86

Sm Santa Fe 41.55 38.938936, 7711 0.05 0.08




Table A-F13: Difference-in-Difference of Mean Quarterly Earnings of Employees of Large Santa Fe Businesses versus Control Groups, Food

Services Industry

$8.50 $9.50

Lg Santa Fe Cty 295.97 -36.191326, 1280 0.00 0.54

Lg Albuquerque 175.81 -34.528956, 7713 0.00 0.29

Sm Santa Fe 147.68 34.651764, 1457 0.00 0.50


Table A-F14: Earnings Differences for Low Earning Employees of Large

Multiple Location Businesses by City of Residence

$8.50 $9.50

Santa Fe 242.94 160.635826, 7975 1007.36 1039.70

Albuquerque -28.86 112.6837505, 34762 956.11 938.34

NOTE: Population size is listed underneath each heading, and standard deviation is listed under each value. Italicized values are not significant at the 10% level.

Table A-F17: Difference in Mean Quarterly Earnings after the $8.50 Living

Wage by Worker Category

All Men Women College High SchoolSanta Fe 193.81 194.50 193.18 284.60 423.00

std deviation 1019.84 1030.39 1009.90 1072.11 873.38pop size 12,259 5,943 6,316 1,520 757

Albuquerque 145.83 173.03 119.35 193.43 215.16std deviation 965.72 997.31 933.20 975.09 764.61pop size 73,472 36,238 37,234 9,823 3,728




Table A-F18: Difference in Mean Quarterly Earnings after the $9.50 Living Wage by Worker Category

All Men Women College High SchoolSanta Fe 142.45 143.66 141.32 107.83 120.36

std deviation 1007.30 1022.80 992.60 1038.97 914.03pop size 12,606 6,107 6,499 1,596 739

Albuquerque 144.22 152.27 136.50 139.69 127.67std deviation 962.20 990.11 934.59 995.39 834.63pop size 77,926 38,153 39,773 10,313 3,748




Table A-F19: Difference in Mean Quarterly Earnings for Employees at Multiple Location Businesses after the $8.50 Living Wage by Industry

Santa Fe Albuquerque

Construction 119.51 205.071837, 7040 1,105.48 1,060.20Manufacturing 7.61 140.67603, 7797 1,027.67 977.88Wholesale Trade 167.09 199.63607, 6273 994.35 943.64Retail Trade 160.77 152.555356, 21956 1,020.32 951.66Tranport & Ware 209.63 249.21459, 3820 1,046.08 992.50Information 219.38 150.35664, 5022 964.29 1,027.16Finance and Ins 270.38 243.211087, 6911 1,071.75 968.86Real Estate 138.38 173.89540, 2678 1,036.03 938.97Prof and Tech 186.82 239.841451, 9416 1,044.06 1,006.34Administrative 105.89 111.451356, 12213 1,018.37 951.24Education 239.76 232.89826, 2376 953.72 805.47Health Care 239.52 99.673425, 19307 1,026.06 961.58Arts & Entertain 255.85 91.73831, 2370 865.87 710.59Accomm 150.27 108.901404, 2461 1,025.78 962.50Food Services 135.83 75.932914, 14569 986.14 905.74Other Services 121.37 111.971590, 5606 923.53 891.52




Table A-F20: Difference in Mean Quarterly Earnings for Employees at Multiple Location Businesses after the $9.50 Living Wage by Industry

Santa Fe Albuquerque

Construction 143.84 229.621741, 7079 1,075.44 1,082.12Manufacturing 83.13 185.30515, 7752 1,031.87 962.32Wholesale Trade 1,983.60 115.88590, 5965 953.18 978.23Retail Trade 118.31 88.665407, 21820 1,014.45 933.77Tranport & Ware 186.84 118.06428, 3739 1,045.64 992.55Information 78.36 176.00640, 3931 1,050.12 978.20Finance and Ins 264.81 284.011100, 6540 1,037.31 998.50Real Estate 107.35 109.45521, 2542 969.92 930.61Prof and Tech 153.02 190.041435, 9426 1,005.88 1,003.96Administrative 89.61 58.861307, 12310 1,003.17 940.10Education 177.77 184.10868, 2112 982.61 875.67Health Care 195.38 172.243322, 18783 1,028.59 971.11Arts & Entertain 35.72 38.21749, 1999 841.41 726.18Accomm 32.88 49.131223, 2283 977.26 948.31Food Services 41.43 52.002462, 13039 957.32 888.37Other Services 142.96 88.801512, 5305 905.36 894.25




APPENDIX 1B: SUPPLEMENTAL FIGURES AND DATA Appendix 1B contains supplemental data that was referenced in the Chapter 2 text or is otherwise important. Tables supply statistical data for figures of the same number, such that Table B1 provides the data for Figure B1.

Figure B1: Difference-in-Differences of Quarterly Earnings of Employees of Large Non-Chain Businesses, $8.50 Living Wage

-400 -300 -200 -100 0 100 200 300 400

Other ServicesFood Services

AccommodationsArts & Entertain

Health CareEducation

AdministrativeProf and Tech

Real EstateFinance and Ins

InformationTranport & Ware

Retail TradeWholesale

ManufacturingConstruction

Indu

stry

Difference-in-differences

SF vs ABQSF vs SFC



Figure B2: Difference-in-Differences of Quarterly Earnings of Employees of Large Non-Chain Businesses, $9.50 Living Wage

-400 -300 -200 -100 0 100 200 300 400

Other ServicesFood Services

AccommodationsArts & Entertain

Health CareEducation

AdministrativeProf and Tech

Real EstateFinance and Ins

InformationTranport & Ware

Retail TradeWholesale Trade

ManufacturingConstruction

Indu

stry


SF vs ABQSF vs SFC



Table B1: Difference-in-Differences of Quarterly Earnings of Employees of Large Non-Chain Businesses, $8.50 Living Wage

Santa Fe Cty Albuquerque

Construction 96.49 (48.40) 2399, 26849 0.06 0.05 Manufacturing 169.92 (32.87) 915, 14005 0.02 0.49 Wholesale Trade (322.75) (50.52) 440, 7358 0.01 0.33 Retail Trade 166.17 14.96 3324, 35107 0.06 0.39 Tranport & Ware 319.35 (10.79) 406, 6711 0.06 0.84 Information 348.43 371.24 1111, 17018 0.02 0.00 Finance and Ins - 42.99 -, 7555 - 0.22 Real Estate - 69.59 -, 4770 - 0.21 Prof and Tech - (140.45) -, 14128 - 0.00 Administrative 273.46 67.71 4255, 75111 0.01 0.00 Education (155.66) (52.21) 1847, 5951 0.01 0.04 Health Care (98.17) 86.92 6645, 40749 0.02 0.00 Arts & Entertain (116.86) 95.07 2008, 6794 0.01 0.00 Accomm (203.97) 31.35 3505, 13006 0.01 0.13 Food Services 135.57 47.76 7618, 59839 0.00 0.00 Other Services (67.47) (41.87) 1722, 9719 0.22 0.11




Table B2: Difference-in-Differences of Quarterly Earnings of Employees of Large Non-Chain Businesses, $9.50 Living Wage


Santa Fe Cty Albuquerque

Construction (37.20) 3.34 2439, 25611 0.29 0.87 Manufacturing (45.88) (61.02) 644, 13876 0.49 0.28 Wholesale Trade 202.01 (9.80) 419, 6634 0.03 0.82 Retail Trade 98.23 53.35 3499, 37244 0.09 0.00 Tranport & Ware (6.28) (42.86) 421, 6569 0.96 0.29 Information (180.36) (120.02) 806, 13132 0.18 0.00 Finance and Ins 106.03 (62.61) 878, 7608 0.48 0.03 Real Estate - (226.52) -, 4836 - 0.00 Prof and Tech (238.40) 3.06 677, 14229 0.11 0.92 Administrative 86.54 (41.25) 3870, 87215 0.01 0.00 Education 44.85 62.56 1705, 5282 0.37 0.01 Health Care 212.96 61.39 6433, 40066 0.00 0.00 Arts & Entertain (144.28) (49.88) 2146, 7013 0.00 0.00 Accomm (25.38) 45.24 3376, 13863 0.66 0.00 Food Services (21.90) (24.07) 7507, 55110 0.35 0.01 Other Services (0.73) (8.67) 1789, 9947 0.99 0.65




Figure B3: Difference-in-Differences of Quarterly Earnings of Employees of

Large vs. Small Non-Chain Businesses, $8.50 Living Wage

-400 -300 -200 -100 0 100 200 300 400

Other Services

Food Services

Accommodations

Arts & Entertain

Health Care

Education

Administrative

Prof and Tech

Real Estate

Finance and Ins

Information

Tranport & Ware

Retail Trade

Wholesale Trade

Manufacturing

Construction

Indu

stry


Albuquerque

Santa FE Cty

Santa Fe

Figure B4: Difference-in-Differences of Quarterly Earnings of Employees of

Large vs. Small Non-Chain Businesses, $9.50 Living Wage

-350 -300 -250 -200 -150 -100 -50 0 50 100 150

Other Services

Food Services

Accommodations

Arts & Entertain

Health Care

Education

Administrative

Prof and Tech

Real Estate

Finance and Ins

Information

Tranport & Ware

Retail Trade

Wholesale Trade

Manufacturing

Construction

Indu

stry


Albuquerque

Santa FE Cty

Santa Fe



Table B3: Difference-in-Differences of Quarterly Earnings of Employees of Large vs. Small Non-Chain Businesses, $8.50 Living Wage

Santa Fe Santa Fe Cty Albuquerque

Construction 19.60 (14.02) 10.46 5255, 8354, 40130 0.55 0.61 0.30 Manufacturing 78.72 (53.35) 37.15 1280, 2058, 19794 0.22 0.26 0.01 Wholesale Trade (89.05) 13.02 3.48 891, 1207, 14543 0.25 0.85 0.83 Retail Trade 13.13 16.63 19.99 8625, 9843, 55121 0.59 0.47 0.01 Tranport & Ware 62.35 2.59 46.23 600, 800, 8938 0.50 0.97 0.04 Information 117.38 114.84 (11.21) 1501, 1604, 18213 0.04 0.04 0.60 Finance and Ins 28.27 33.14 33.52 1561, 1616, 11589 0.61 0.54 0.07 Real Estate 144.39 168.88 26.48 1301, 1521, 8986 0.04 0.01 0.19 Prof and Tech (18.89) (19.04) 101.86 3235, 3692, 27005 0.68 0.67 0.00 Administrative 53.85 57.83 (34.98) 5236, 5857, 87737 0.12 0.05 0.00 Education (72.25) (12.48) 81.23 2113, 2566, 6165 0.14 0.78 0.00 Health Care 69.40 84.32 (26.70) 8952, 10176, 55046 0.00 0.00 0.00 Arts & Entertain 26.58 69.10 (42.28) 2152, 2981, 7953 0.53 0.06 0.01 Accommodations 74.65 77.63 106.41 4210, 4582, 12236 0.07 0.04 0.00 Food Services 56.03 34.57 5.16 10301, 12074, 69476 0.01 0.06 0.50 Other Services (68.72) (70.39) (24.18) 3785, 4704, 20681 0.04 0.02 0.05




Table B4: Difference-in-Differences of Quarterly Earnings of Employees of Large vs. Small Non-Chain Businesses, $9.50 Living Wage

Santa Fe Santa Fe Cty Albuquerque

Construction 42.42 65.08 35.65 5157, 8435, 38769 0.09 0.00 0.00 Manufacturing (0.41) 13.37 23.17 1195, 1967, 20334 1.00 0.74 0.04 Wholesale Trade 15.20 (38.95) 29.56 809, 1150, 13309 0.80 0.45 0.02 Retail Trade 58.01 45.19 4.07 8313, 9463, 54726 0.00 0.01 0.51 Tranport & Ware 11.87 (0.96) 58.37 590, 804, 8962 0.87 0.99 0.00 Information (9.38) (26.04) 60.88 1131, 1258, 14000 0.87 0.61 0.00 Finance and Ins 60.54 59.93 126.81 1491, 1574, 12241 0.18 0.17 0.00 Real Estate (318.74) (314.82) 7.88 1179, 1385, 8504 0.00 0.00 0.62 Prof and Tech 29.04 39.71 (4.54) 3056, 3556, 26829 0.41 0.25 0.63 Administrative (32.43) (37.25) 23.32 4853, 6004, 94169 0.15 0.06 0.00 Education 109.40 83.90 30.80 2030, 2485, 6066 0.00 0.01 0.11 Health Care 53.83 24.48 (66.29) 8440, 9637, 54463 0.01 0.18 0.00 Arts & Entertain 9.66 59.98 14.88 2116, 2873, 7578 0.77 0.04 0.31 Accommodations 41.53 58.41 (8.27) 4347, 4716, 14129 0.13 0.02 0.58 Food Services (2.25) 11.70 11.67 10009, 11988, 64194 0.88 0.40 0.05 Other Services (8.91) (12.98) 30.97 3893, 4883, 19579 0.72 0.55 0.00




Figure B5: Frequency of Jobs at Santa Fe County Businesses by Earnings Category

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Figure B6: Frequency of Jobs at Albuquerque Businesses by Earnings Category

0%10%20%30%40%50%60%70%80%90%

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Figure B7: Frequency of Jobs at Large Santa Fe County Businesses by Earnings Category

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Figure B8: Frequency of Jobs at Large Albuquerque Businesses by Earnings Category

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Figure B9: Frequency of Jobs at Multiple Location Businesses with Worker’s Residence in Albuquerque by Earnings Category

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APPENDIX 2: 2007 LIVING WAGE BUSINESS SURVEY









APPENDIX 3: SANTA FE LIVING WAGE 2007 EMPLOYER AND WORKER FOCUS GROUP QUESTIONS

EMPLOYER FOCUS GROUP QUESTIONS

Main Objectives to Explore:

How have overall market conditions for your business changed in the last couple years? How has the increased minimum wage affected your business operations?

Setting the Stage Please describe your business

Goods & services provided How long has it been located in Santa Fe? Please describe your market (local, national...)

What are the prime factors for the location of your business? Demand/Market Would you characterize the last couple years as ‘good times’ or ‘bad times’ for your business? What contributed to this characterization? What weighs on your day-to-day business:

Competitive pressures? Locally Nationally Internationally Cost pressures? wages real estate insurance fuel

Supply and Operations What operational (or other) adjustments have you made since the Living Wage Ordinance went into effect?



EMPLOYER FOCUS GROUP QUESTIONS, CONTINUED

Would your answer be different if you just look at the increase from $8.50 to $9.50? Let’s compare the make-up of your current workforce in 2006 & in 2004. Workforce Profile:

# employed FT/ PT/Seasonal Contract/Outsource Skills/Education required Job types Work assignments per job type Pay levels

Has the ability to attract & retain workers changed since 2006? Has the quality of your workforce changed? For those of you with <25 employees:

What changes have you made in wages? Benefit packages? The job you ask workers to do?

Over the last couple years: Did your benefit package change? Have you changed hiring strategies? Has the morale of your workforce changed?

Wrap-Up Since the law went into effect:

Have there been developments which surprised you? Unforeseen consequences - (positive or negative)?



EMPLOYER FOCUS GROUP INDIVIDUAL FEEDBACK FORM

Institute for Applied Research Services Bureau of Business and Economic Research 1920 Lomas Blvd. NE Albuquerque, NM 87131 (505) 277-2216 2007 Economic Impact Study on the Santa Fe Living Wage: Focus Groups

What positive outcomes have you seen resulting from the implementation of the living wage ordinance?

What negative outcomes, including unintended consequences, have you seen resulting from the living wage ordinance?

Background information for the following question: Current law: Subject to City Council review of economic impact analyses, the minimum wage would increase to $10.50 in January, 2008 for businesses with more than 25 employees. Starting in January 2009, there would be an annual review of increasing the minimum wage according to the consumer price index (CPI-Western region for urban wage earners & clerical workers). Proposed amendment: No increase in January 2008. Starting in January 2009, the minimum wage would automatically increase based on the CPI-W each January and the law would be extended to cover businesses with fewer than 25 employees. FYI [for illustration purposes only] : From 1987-2007, the CPI-W averaged 3% which, if applied to $9.50 would be ~$0.29 increase the first year.

What impacts on your business do you anticipate if the proposed amendment passes? What impacts on your business do you anticipate if the proposed amendment does not pass?



WORKER FOCUS GROUP QUESTIONS

Main Objectives to Explore: How have things changed for you since the minimum wage increased from $8.50 to $9.50/hr.? Is there a notable difference since it increased in 2004?

Introductions: TYPE of job (what you do, not where)

Increased Minimum Wage Law Phase 1: $8.50.hr. July 1, 2004;

Phase 2: $9.50/ hr. Jan. 1, 2006; Phase 3: For City Council approval:

$10.50/hr. January 1, 2008

Or Amendment – starting in 2009, automatically increase minimum wage by Consumer Price Index

Proposed Amendment Extend minimum wage for small businesses (fewer than 25 employees) No increase in 2008 Automatic consumer price index (CPI) increases starting in 2009 (e.g. 20-year average CPI was

3%, ~ $0.29 increase the 1st year)

Do you have more than 1 job?

What is a ‘typical day’ like, and has it changed since the minimum wage increased? If so, How? Have your responsibilities changed in the last couple years? Have your hours changed? Are you offered benefits? Have you changed jobs in the last couple years? How often and why? Do you see yourself in this job for a while? What's important to you at your job besides your pay?



WORKER FOCUS GROUP QUESTIONS, CONTINUED Have your feelings about your job and pay changed over the past couple years? Did the increase in minimum wage make a difference in how you feel about your job? Has the mood or morale at work changed since the minimum wage increased? Please describe how you make ends meet. Does your household have other sources of income? Do you have a cushion for unexpected expenses?

Has this changed since the minimum wage increased to $9.50? What is your biggest challenge? How many of you live in the city of Santa Fe? Has your living situation changed over the last couple years? What portion of your income do you spend on housing? Have you noticed changes in the cost of goods or services in the last couple years? For instance…. What has the biggest impact been for you from the increase in minimum wage? What did this wage increase allow you to do that wasn’t possible before? Since the law went into effect:

Have there been developments which surprised you? Unforeseen consequences (positive or negative)?



WORKER FOCUS GROUP INDIVIDUAL FEEDBACK FORM

Institute for Applied Research Services Bureau of Business and Economic Research 1920 Lomas Blvd. NE Albuquerque, NM 87131 (505) 277-2216 2007 Economic Impact Study on the Santa Fe Living Wage: Focus Groups

What outcomes have you seen resulting from the increase in minimum wage? ($8.50/hr and $9.50/hr.) Positive Negative

Background information for the following question: Current law: Increase the minimum wage to $10.50 in January, 2008 for businesses with more than 25 employees. Starting in January 2009, annually review a cost of living increase (CPI - western region for urban wage earners & clerical workers) Proposed amendment: No increase in January 2008. Starting in January 2009, automatically increase the minimum wage by the CPI each January; extend the minimum wage requirements to businesses with fewer than 25 employees. FYI [for illustration purposes only] : From 1987-2007, the CPI-W averaged 3% which, if applied to $9.50 would be ~$0.29 increase the first year.

How would it affect you if the proposed amendment: Passes Does not Pass What have your wages been since 2004?

2004:

2005:

2006:

2007:

Do you work for a large or small employer (circle one) How many people do you think work there?


Documents

THE IMPACTS OF THE $9.50 LIVING WAGE ON THE ECONOMY … · impacts of the living wage. To that end, BBER conducted a baseline study of the Santa Fe economy in 2004. In 2005 and 2007,