NOTE: As provided in LFC policy, this report is intended for use by the standing finance committees of the legislature.  The Legislative Finance Committee does not assume responsibility for the accuracy of the information in this report when used in any other situation.

Only the most recent FIR version, excluding attachments, is available on the Intranet. Previously issued FIRs and attachments may be obtained from the LFC office in Suite 101 of the State Capitol Building North.

(Parenthesis ( ) Indicate Revenue Decreases)

Duplicates/Conflicts with/Companion to/Relates to None

SOURCES OF INFORMATION

Labor Department

LFC Files

SUMMARY

Synopsis of SFC Amendment

The Senate Finance Committee amendment makes two changes to the bill:

• It strikes language that allows employers to consider tip income as part of wages for employees who regularly receive more than $30 dollars a month in tips, and replaces it with language that requires employees be paid equal to the provisions of the federal minimum wage act.
• It adds language making the provisions of the act contingent upon passage of SB14 or SB41 or similar tax reduction bills.




The SFC amendment does not alter the fiscal implications of the bill.





Synopsis of Original Bill





Senate Bill 39 increases the state minimum wage to equal the federal minimum wage rate. The bill also increases the minimum wage paid for employees regularly receiving more than $30.0 per month from tips to equal the federal minimum wage rate required for those employees.





The bill provides a training wage for employees below 20 years of age. The training wage must be at least 85% of the current minimum wage and is limited to 90 days.





Significant Issues




• •The current state minimum wage is $4.25 per hour; the federal minimum wage is $5.15 per hour. However, according to the New Mexico labor department, employers are required to pay the federal minimum unless a business can demonstrate it is not involved in interstate commerce. Discussions with labor department staff indicate that there are few if any businesses in the state paying below the federal minimum.



• •The New Mexico labor department reports that increasing the minimum wage could result in a small increase in the unemployment rate. This is consistent with standard economic theory which suggests that an increase in the minimum wage will result in increased unemployment. Many studies have found that for small increases, the impact is minimal if any. The impact in this case is likely to be minimal, given the Labor Department's report that currently very few, if any, employers pay less than the federal minimum.
• •Studies of the employment impacts of the minimum wage have generally found that those most impacted are teen age workers. The bill's inclusion of a training wage will help to mitigate this impact.




FISCAL IMPLICATIONS





Increasing the minimum wage has no direct fiscal impact to state revenues. Indirect impacts are difficult to assess and are expected to be minimal given the Labor Department's analysis that few employers or their employees will be affected by the change. The minimal impacts could be positive or negative. On the positive side, increased wages result in increased buying power and tax revenues. On the negative side, the increase could result in fewer persons being employed or decreased business profits than would otherwise be the case, resulting in lower incomes and purchasing power for those groups.





TECHNICAL ISSUES





The bill does not carry an effective date. Thus, the proposed increase would become effective 90 days after the end of the session.





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