Economic Analysis of the 2025 Santa Fe, New Mexico Living Wage Proposal

The City of Santa Fe, New Mexico is considering a proposal to increase the citywide living wage minimum from its current level of $15.00 per hour to $17.50 per hour.  This would be a 17 percent increase in the city’s living wage minimum.  In this brief study, we estimate how workers and businesses in Santa Fe would be affected by this proposal.  Our overall estimates as to the impacts of the proposal to raise Santa Fe’s living wage minimum from $15.00 to $17.50 an hour are as follows:

1.  A total of 8,923 workers will receive raises, equal to roughly 20 percent of the Santa Fe workforce.
2. This includes 4,131 who receive mandated wage increases averaging 8 percent and 4,792 workers who receive non-mandated “ripple-effect” wage increases averaging 4 percent.
3. The average age of workers receiving any pay increases is 41.  Roughly 7 percent of the workers receiving raises are teenagers; 93 percent are adults.
4. The average impact of these wage increases on the costs of affected firms in Santa Fe will be minimal relative to the overall level of sales revenue of these firms.  These include:  a) For all firms and retail sector firms specifically, the average cost increase will be 0.2 percent of sales: b)  For hotels in Santa Fe, the average cost increase will be 0.8 percent of sales; and c) For restaurants and bars, the average cost increase will be 1.0 percent of sales.
5. The firms whose costs will be affected by these minimal cost increases relative to sales will most likely adjust to these cost increases relative to their sales through two primary measures: a) Productivity in the firms will improve modestly through reductions in employee turnover and absenteeism: and b)  Firms will pass on cost increases to customers through small price increases.

As illustrative examples, we estimate these higher-end estimates of price increases for specific Santa Fe firms as follows:

• • The price of a $400 couch at Jackalope rises to $401.
  • The price of a $50 entrée item at Santacafe rises to $50.50
  • The price of a Big Mac at McDonalds rises from $7.29 to $7.38.

We conclude from these findings that, for the most part, the adjustments that Santa Fe’s business firms will make to adjust to the increased living wage minimum to $17.50 an hour will be minimal, either within the firms’ operations or in the prices they charge to their customers.  These overall findings suggest that, if anything, conditions in the Santa Fe economy at present offer the prospect of raising the city’s living wage minimum by a larger amount without inducing significant cost impacts on its business firms, including, in particular, on these firms’ profitability.