New Mexicans are Worth More: Raising the State’s Minimum Wage

by Sarah Hyde, Research and Policy Analyst
August 2018

Download this report with appendix (Aug. 2018; 16 pages; pdf)

Introduction

New Mexico’s children will determine the future of the state, so ensuring that they have all the opportunities they need to succeed is crucial for our state’s prosperity. Children living in poverty are less likely to have enriching opportunities that help them reach their full potential, which is one of the reasons poverty is so difficult to escape. In New Mexico, nearly one in three – or 145,000 – children are living in poverty. Our high rate of child poverty is the main reason the state is ranked worst in the country for overall child well-being.[i] That does not bode well for the future of New Mexico.

High rates of child poverty are not surprising when we consider that one in five New Mexicans lives in poverty, and the median income in New Mexico is 17 percent lower than the national average.[ii] When looking at our hourly workforce, 31 percent are earning low wages, meaning their wage is at or near the state’s minimum wage of $7.50 an hour. This represents 245,894 hard-working New Mexicans. Add to that 100,596 children who have at least one parent earning low wages.

While a handful of New Mexico municipalities – including the cities of Albuquerque, Las Cruces, and Santa Fe, and Bernalillo and Santa Fe counties – have raised their minimum wages in recent years, the state-wide minimum wage has not been raised since 2009. Still at $7.50 an hour, its purchasing power has eroded considerably over that timeframe. In fact, when you factor in inflation, that $7.50 buys only $6.30 worth of goods today.[iii] If the wage had been adjusted for inflation, it would now be $8.95 an hour. While New Mexico’s minimum wage has remained stagnant and lost purchasing power, 28 states, including Colorado and Arizona, have increased their state minimum wages.[iv] As these states have found, raising the minimum wage benefits thousands of working families and local economies.[v]

In order for children to have nourishing environments where they can thrive, families need to be economically secure so they have the ability to invest in their children’s futures. If the state passes legislation to increase the minimum wage incrementally until it is $12.00 an hour by 2022 – and protects workers by prohibiting training wages and allowing municipalities to enact even higher wages – nearly a quarter of a million workers will see their wages rise as $204.8 million a year is added to their paychecks. This achievable policy reform will vastly improve the state’s overall well-being and give families, children, older adults, people of color, and women more opportunities to thrive. Local economies will see benefits as well.

The Impact of Economic Insecurity on Families

Economic insecurity affects every aspect of life, including physical and mental health, educational performance, and nutrition. For example, families of four living at the federal poverty level – meaning they earn less than $24,000 a year – suffer from worse health outcomes than their higher-paid contemporaries, even if they have access to quality health care.[vi] These populations are more likely to be diagnosed with health problems such as cardiovascular diseases, high blood pressure, and other chronic illnesses than their economically stable counterparts.[vii] And for economically insecure women, poor nutrition, health issues, and high stress levels often lead to premature and low-birthweight babies.

Mental health is negatively affected by economic insecurity as well, and children are especially susceptible to the effects of poor mental health. Research demonstrates that high stress levels in children, often exacerbated by poverty and economic instability, affect cognitive function and emotional regulation.[viii] Child poverty strongly correlates with poor outcomes during the teenage and early adult years, including teen pregnancy, engagement in risky health-related behaviors, and not finishing high school.[ix] Beyond early adulthood, continuous stress over long periods of time, known as toxic stress, physically alters the brain and can lead to life-long problems, including shorter lifespans.[x]

Poor health outcomes are also often associated with nutritional habits. Low socio-economic status and food insecurity are intrinsically linked, and when children suffer from food insecurity, their academic performance, behavior, and physical development may suffer as well. Simple dietary changes have the potential to counteract these effects and improve children’s health, school performance, behavior, and long-term outcomes. But access to fresh foods and a well-balanced diet is often impossible for low-income families. However, if families are able to increase their incomes, children suffering from food insecurity may see immediate positive impacts. For example, research consistently shows that food expenditures increase when family income increases.[xi] Even small income gains can make a tremendous difference – a study found that the cost of a healthy diet is only about $1.50 more per person per day than the cost of an unhealthy diet.[xii] Unfortunately, in New Mexico, even these small lifestyle changes are currently out of reach for many families.

However, there are real, tangible, and attainable policy solutions that will help reduce these challenges and improve opportunities for New Mexico families. An increased minimum wage would help thousands of New Mexican workers improve the quality of life for themselves and their children. And by reducing poverty, it would lead to improved health outcomes, heightened school and work performance, and enhanced well-being for some of New Mexico’s most challenged populations, including women, people of color, and children.

Benefits for Workers and Families

The Impact of Increasing the Minimum Wage to $12.00

A minimum wage increase to $12.00 an hour by 2022 would directly affect 150,901 workers, or nearly 20 percent of the total workforce in the state, meaning that these workers would see their wages rise as the new minimum wage exceeds their current pay. Another estimated 94,992 workers would be indirectly affected, meaning they already earn a wage just above the new minimum wage. Indirectly affected workers would also receive a raise as employer pay scales are adjusted upwards to reflect the new minimum wage.

Increasing the minimum wage to $12.00 would add a total of approximately $205 million a year to the paychecks of New Mexican workers who are earning at or near the minimum wage. The average annual wage increase would be $833 per worker. Directly affected workers would receive an annual increase of approximately $1,114, and indirectly affected workers would receive an annual increase of about $387.

Impact by Household Income

In New Mexico, 56 percent of low-wage workers live in households making less than $35,000 a year, and 41 percent of these workers live in households making less than $25,000 a year. Households with low-wage workers are often the most economically challenged, and they would benefit greatly from increased economic security.

Impact by Race and Ethnicity

Families of color in New Mexico often face the highest economic hurdles and would also see some of the biggest gains from an increase in the minimum wage. Due to systemic barriers to opportunity, families of color experience some of the highest poverty levels in the state, and New Mexico’s children of color are far more likely to live in low-income households than their white counterparts.[xiii] Median incomes of Hispanic households (at $38,924) and Native American Households ($33,893) are significantly lower than the median income ($57,069) of non-Hispanic White households[xiv] in New Mexico. Almost half (48 percent) of the state’s population is Hispanic, and this portion of New Mexico’s population represents about half (51 percent) of the workforce earning low wages. Fortunately, a minimum wage increase could significantly increase opportunities for people of color to reach economic security. About 21 percent of the Hispanic workforce would be directly affected, while 13 percent would be indirectly affected. This population would also see the largest wage increase among New Mexico workers for whom data exists, at approximately $102.7 million a year.

Impact by Household Type

New Mexico has diverse family structures and, fortunately, a minimum wage increase would benefit all types of families. Single adults without children are the portion of the population that would be most impacted by a minimum wage increase. That so many minimum wage workers are single and without children may be because they feel they cannot afford marriage or the cost of raising children. A minimum wage increase could result in more flexibility for these workers. Married couples with children would see a significant wage increase too, averaging about $1,241 per year in additional earnings for those directly impacted by a minimum wage increase. With this extra income, families could increase spending on groceries, pay for doctor appointments and medications, and pay other living expenses more easily. For example, an extra $90 a month would allow a family of three to increase their grocery spending by a dollar per person per day. This could result in a significantly healthier diet.

Impact by Age

The majority (70 percent) of low-wage earning workers who will be helped by a minimum wage increase are age 25 or older, with 35 percent being older than 40. Another 14 percent are older than 55. For seniors who need to supplement their retirement incomes, an increase could help pay for housing and medical expenses such as doctor’s appointments and medications. For young adults, an increase could help pay for higher education or the many expenses that come with raising children, such as the cost of child care.

Impact for Children in Families with Minimum Wage Workers

Approximately a fifth of all New Mexican children – that’s 100,596 kids – live in households that would be directly or indirectly affected by a minimum wage increase. Minimum wage increases could potentially pull children out of poverty, along with improving their health, nutrition, school performance, and more. As there is a strong connection between educational attainment and socio-economic status, an increased minimum wage could lead to higher graduation rates, fewer teen births, and more New Mexicans completing college degrees, especially among people of color, who are the most likely to drop out of school.^[xv]

Impact by Gender

A minimum wage increase is crucial for working women who are already earning less, on average, than their male counterparts. It is especially important for those women who are working to support their children. In New Mexico, 63 percent of all family households living in poverty are headed by single parents, and of those, 81 percent are headed by single mothers.[xvi] An increased minimum wage will benefit this population as more female workers will benefit from a statewide minimum wage increase than male workers. About 133,329 women and 112,565 men earning low wages would benefit from a raised minimum wage. However, despite the fact that more women will be affected, men will receive a slightly larger annual wage increase because they tend to earn more to begin with. This reflects the different mix of industries and occupations in which men and women work, as well as gender-based pay inequalities.

Impact by Industry

Twenty percent of low-wage workers in New Mexico work in the female-dominated industries of education and health care – and they are in dire need of a raise. Even though these industries have some very highly paid occupations, many of the workers who teach preschool-age children and take care of the elderly or disabled are very poorly paid. Human services employees are often paid low wages because of a cyclical effect.^[xvii] When the family members who need someone to care for their young children or aging parents make low wages themselves, they cannot afford caregivers who are well-paid. This often results in lower-quality care, which, in the case of young children, will be less likely to prepare them to succeed in school, leading to a lifetime of lower wages. Thus, an overall increase is imperative because it would lead to more flexibility for family members paying for care, better wages among caregivers and early childhood educators, and higher-quality care for the populations that need it the most. As the health care industry is the fastest growing sector in the state, it should be not be paying poverty-level wages. Other low-wage industries are retail, food service, and hospitality.

Impact by Worker Occupation

Workers in service occupations comprise the largest share of low-wage employees who would benefit from a raise, with 46 percent of low-wage workers employed in occupations such as food servers, retail clerks, and home health care providers. Of these workers, 28 percent work as sales clerks or in office administration jobs.

Impact by Hours Worked

The vast majority (nearly 90 percent) of New Mexico’s low-wage workers work more than 20 hours a week, with 61 percent working full time (more than 35 hours a week) and 29 percent working mid-time (20 to 34 hours a week). This data is significant as it alludes to the necessity for low-wage workers, such as mothers caring for their families, to work many hours. It is easier and more efficient to work one job with consistent hours than it is to balance multiple part-time jobs, which explains why 90 percent of low-wage earners work more than 20 hours a week.[xviii]

Impact by Education Level

As one may predict, workers with no high school diploma or equivalent are more likely to be in low-wage jobs than workers with higher levels of educational attainment. And that’s the case for New Mexico as well, but in our state, 63 percent of low-wage workers have completed high school and have some college education. Because our minimum wage is so low and the economy is not strong, too many workers regardless of their education level, are stuck in low-wage jobs. A minimum wage increase could help additional workers better afford credentials in high-growth industries that could help them attain higher-paying jobs and improve our workforce.

Impact by Type of Ownership

The majority (81 percent) of low-wage workers are employed in the for-profit sector. Another 13 percent of low-wage earners work in the government sector. It is commonly believed that government jobs tend to be high paying, but pay rates in the government sector – as in other sectors – are largely dependent on education level and job tenure.

Benefits for Local Businesses and Economies

Minimum wage increases are good for local economies and small businesses, as shown by multiple economic studies on the effects of wage increases on urban and rural counties. What’s more, the studies show that increasing the minimum wage actually improves both employment and economic activity.[xix] In a comparison of 1,381 contiguous counties across the country, researchers found strong earning effects after minimum wage increases occurred.[xx] They also found that, overall, there were no detectable employment losses.[xxi]

There are various channels that businesses can utilize to absorb increased operating costs, and often times, minimum wage increases actually reduce direct costs because they decrease employee turnover, which results in less money spent on recruiting and training new employees. Research also shows that when employees are paid higher wages, they are more productive.[xxii] Minimum wage increases also correlate with heightened morale, decreased absenteeism, and fewer lost sales.[xxiii]

Studies find that in small businesses such as restaurants, a 10 percent minimum wage increase can be absorbed by increasing prices by only 1 or 2 percent.[xxiv] This slight increase is not disadvantageous because all restaurants in an impacted area will increase their prices in similar ways. Moreover, minimum wage increases raise the purchasing power of low-wage workers.

While middle- and higher-income earners can afford to set some of their extra income aside in savings, low-wage workers generally must spend all of their income each month just on day-to-day necessities. So when they receive pay raises, all of that money is plowed back into the economy because it is spent. Research shows that this impact is especially evident in rural economies, where consumer demand is often weaker.[xxv]

Moving Towards a Living Wage

While increasing the state-wide minimum wage to $12.00 an hour will result in heightened economic security for many of New Mexico’s hardest-working populations, it must be the beginning of a larger movement to transform the minimum wage into a living wage. The Economic Policy Institute’s Family Budget Calculator estimates that in Bernalillo County, a single adult with no children needs to earn an hourly wage of $16.00 to reach a modest but adequate standard of living without any public assistance.[xxvi] As the minimum wage continues to move towards a living wage, more New Mexican workers and families will be able to escape poverty. As individuals and families continue to reach economic security, local economies will flourish, and New Mexico will be a much more desirable state in which to live, work, and raise a family.

Policy Recommendations

As noted above, nowhere is the need for this type of policy improvement greater than in New Mexico. We are at the bottom of too many lists that quantify and rate the health and well-being of our families, workers, and children. However, along with great need comes a unique opportunity to turn the course for New Mexicans and put us on a path where all workers and their families have a foundation for success. With a new governor in office, 2019 is a pivotal year for making policy improvements that will help families reach economic security.

Increase the minimum wage: In the 2019 legislative session, lawmakers should pass legislation that enacts at least a $10.00 an hour minimum wage beginning January 1, 2020, with incremental increases each year, until the state-wide minimum wage is $12.00 an hour or higher by 2022. Fiscal impact analyses for an increase of this nature are included in the appendix of this report.
Index for Inflation: The reason’s the state wage has lost so much purchasing power is that it has never been indexed – meaning tied to inflation so that it rises as prices for goods and services rise. Some of the local minimum wage laws include indexing, but the state law does not.
Prevent preemption: In past years, attempts to raise the state minimum wage have been countered with attempts at preemption. Preemption impedes local governments from enacting higher minimum wage policies. But because the cost of living varies drastically from county to county, local governments need flexibility to determine the most effective policies for their communities. Therefore, minimum wage legislation needs to be free of any preemption.
Prohibit a training wage: Legislation also needs to prohibit a training wage, which is a lowered wage for the first 90 days of someone’s employment, while they are being trained for their position. Often times, a training wage hurts low-wage workers because employers abuse it by firing new employees after the training period ends. In order for minimum wage legislation to fully support the well-being of low-wage workers and their families, training wages must be prohibited.

Endnotes

[i] Annie E. Casey Foundation. (2018). 2018 Kids Count Data Book: State Trends in Child Well-Being.
[ii] New Mexico Voices for Children. (2017). New Mexico Kids Count Data Book.
[iii] U.S. Bureau of Labor Statistics, Consumer Price Index Inflation Calculator
[iv] Labor Law Center. (2018). State Minimum Wage Rates. Retrieved June 28, 2018, from https://www.laborlawcenter.com/state-minimum-wage-rates/
[v] Wolfson, P. & Belman, D. (2016). 15 Years of Research on U.S. Employment and the Minimum Wage. Tuck School of Business Working Paper No. 2705499. http://dx.doi.org/10.2139/ssrn.2705499
[vi] Gallup (2010). In U.S., Health Disparities across Incomes are Wide-Ranging. Retrieved July 3, 2018, from http://www.gallup.com/poll/143696/Health-Disparities-Across-Incomes-Wide-Ranging.aspx
[vii] Paulsen, M. S., Anderson, M., Munck, A. P., Larsen, P. V., Hansen, D. G., Jacobsen, I.A., & Sondergaard, J. (2012). “Socio-economic status influences blood pressure control despite equal access to care.” Family Practice, 29(5), 503-510. http://doi.org/10.1093/fampra/cmr130
[viii] Shonkoff, P. J. & Garner, S. A. (2011). “The Lifelong Effects of Early Childhood Adversity and Toxic Stress.” American Academy of Pediatrics, 121(1), e232-e246. doi:10.1542/peds.2011-2663 http://pediatrics.aappublications.org/content/early/2011/12/21/peds.2011-2663.short
[ix]Annie E. Casey Foundation. (2018). 2018 Kids Count Data Book: State Trends in Child Well-Being.
[x] Shonkoff, P. J. & Garner, S. A. (2011). “The Lifelong Effects of Early Childhood Adversity and Toxic Stress.” American Academy of Pediatrics, 121(1), e232-e246. doi:10.1542/peds.2011-2663 http://pediatrics.aappublications.org/content/early/2011/12/21/peds.2011-2663.short
[xi] Bureau of labor Statistics. (2014). Consumer Expenditure Survey, 2013.
[xii] Mozaffarian, D. (2014). “Off the Cuff: The $1.50 difference.” Harvard School of Public Health Magazine.
[xiii] American Community Survey, 2016 data.
[xiv] U.S. Census, American Community Survey, 2016
[xv] Alschul, I. (2012). “Linking Socioeconomic Status to the Academic Achievement of Mexican American Youth through Parent Involvement in Education.” Journal of the Society for Social Work and Research, 3(1), 13-30. doi:10.5243/jsswr.2012.2
[xvi] American Community Survey, 2016 data
[xvii] Thomason, S., Austin, L., Bernhardt, A., Dresser, L., Jacobs, K., & Whitebook, M. (2018). At the Wage Floor. Center for the Study of Child Care Employment. Retrieved July 3, 2018, from http://cscce.berkeley.edu/at-the-wage-floor/
[xviii] Thomason, S., Austin, L., Bernhardt, A., Dresser, L., Jacobs, K., & Whitebook, M. (2018). At the Wage Floor. Center for the Study of Child Care Employment. Retrieved July 3, 2018, from http://cscce.berkeley.edu/at-the-wage-floor/
[xix] Reich M., Jacobs, K., & Bernhardt A. (2014). “Local Minimum Wage Laws: Impacts on Workers, Families, and Businesses”. IRLE Working Paper No. 104-14. Retrieved June 26, 2018, from http://irle.berkeley.edu/workingpapers/104-14.pdf; Schmitt, J. (2013). Why Does the Minimum Wage have no Discernible Effect on Employment? Center for Economic and Policy Research. Retrieved June 26, 2018, from http://cepr.net/publications/reports/why-does-the-minimum-wage-have-no-discernible-effect-on-employment
[xx] Dube, A., Lester T. W., & Reich, M. (2010). “Minimum Wage Effects Across State Borders: Estimates Using Contiguous Counties.” IRLE Working Paper No. 157-07. Retrieved June 26, 2018, from http://irle.berkeley.edu/workingpapers/157-07.pdf
[xxi] Dube, A., Lester T. W., & Reich, M. (2010). “Minimum Wage Effects Across State Borders: Estimates Using Contiguous Counties.” IRLE Working Paper No. 157-07. Retrieved June 26, 2018, from http://irle.berkeley.edu/workingpapers/157-07.pdf
[xxii] Schmitt, J. (2013). Why Does the Minimum Wage have no Discernible Effect on Employment? Center for Economic and Policy Research. Retrieved June 26, 2018, from http://cepr.net/publications/reports/why-does-the-minimum-wage-have-no-discernible-effect-on-employment
[xxiii] Schmitt, J. (2013). Why Does the Minimum Wage have no Discernible Effect on Employment? Center for Economic and Policy Research. Retrieved June 26, 2018, from http://cepr.net/publications/reports/why-does-the-minimum-wage-have-no-discernible-effect-on-employment
[xxiv] Reich M., Jacobs, K., & Bernhardt A. (2014). “Local Minimum Wage Laws: Impacts on Workers, Families, and Businesses”. IRLE Working Paper No. 104-14. Retrieved June 26, 2018, from http://irle.berkeley.edu/workingpapers/104-14.pdf
[xxv] Aaronson, D., Agarwal, S. & French, E. (2008). “The Spending and Debt Response to Minimum Wage Hikes.” FRB of Chicago Working Paper No. 2007-23. http://dx.doi.org/10.2139/ssrn.1144222
[xxvi] Economic Policy Institute. (2018) Family Budget Calculator. Retrieved July 16, 2018, from https://www.epi.org/resources/budget/