Minimum wage increase

Even though the minimum wage is increasing in the state, economic indicators point to positive business news for Arizona.

Arizona received its second bump in minimum wage this year as a result of 2016’s Proposition 206, but the unemployment impact predicted by most economists has yet to take hold.

The proposition passed by voters in November, 2016 initiated an increase in the state’s minimum wage, from $8.05 to $10, an hour effective Jan. 1, 2017. Minimum wage will continue to increase across the state by a dollar on the first day of each year until it hits $12 in 2020, when it will match rises in inflation.

The proposition’s opponents predicted this change would lead to a decrease in low wage employment, in line with most economic models. However, between November, 2016 and November, 2017 Arizona employment increased faster than the national average with unemployment dropping from 5 to 4.3 percent.

Tucson Metro Chamber President Mike Varney attributes this increase employment to improving economic conditions overcoming the effects of the minimum wage increase.

“In the last year, the economy has enjoyed some enormous traction and expansion,” he said.

George Hammond, director of the University of Arizona Eller College of Management’s Economic and Business Research Center, related as much during his 2017 economic outlook presentation. 

Arizona’ job growth has risen steadily since 2012, coupled with increased wage growth per job in the past year, according to Eller’s economic research. Additionally, the restaurant and bar industry has reportedly experienced an increase of 12,000 jobs across the state in the past year.

“Business is pretty resilient,” Varney said. “It’s going to find a way to do two things: cut expenses or increase revenue, and most businesses eventually are doing both.

Varney cites his own “Mickey Mouse” research project, asking employees at local businesses if prices have increased. Sure enough, most have anecdotally relayed that prices increase around the first of the year for the past two years.

“The irony of all of that is the person who is getting 50 cents more in their hourly pay is going to be paying some part of that the next time they buy a Big Mac,” he said.

Micah Blatt, owner of Mr. Head’s Art Gallery and Bar and co-owner The Drunken Chicken on Fourth Avenue, which opened in August 2017, said the minimum wage increase barely affected his employees’ wages, which were already above minimum wage, but are now at the minimum.

But the increase, he said, didn’t affect his decision to open a new restaurant.

“I think it’s great to help people, but there’s better ways to do that,” Blatt said, such as encouraging students to succeed in school by decreasing costs based on metrics like grades.

Varney also prefers alternative methods of economic stimulus, such as those reflected in two Tucson Metro Chamber of Commerce programs, Intern to Career and Earn to Learn.

“If we spent more time working on maximum wage instead of minimum wage, imagine what we could do if we were to come up with ways to keep kids in school and reduce the ridiculous high level of high school dropouts in our community,” Varney said.

The Intern to Career program supports high school juniors by linking them to paid internships in five job sectors across Tucson, about two-third of who end up working where they interned after graduating.

Earn to Learn helps college students from low- to moderate-income families develop financial skills and graduate from four-year universities. Many of those students, Varney said, are first-generation college students.

“We’re working on the other side of this whole thing the best we can,” Varney said. “I just don’t see any wisdom in government stepping in.”

Another concern of Varney’s is the trend of businesses turning to automation in the face of increased employment costs, such as customers using kiosks to take food orders as opposed to cashiers.

As labor costs increase, and technology costs decrease, many businesses look for ways to automate processes and decrease business costs.

“Automation has been replacing people in places like factories for several years now,” he said. “Whether it happened because it was forced on businesses because of state law or if it just happened because of advancements in technology, the net effect is the same: some person doesn’t have that job anymore.”

However, Varney is concerned about the costs associated with the time businesses are forced to make such a switch. Early adapters of new technology, he said, often face higher costs than in the future after such technology has been perfected and more buyers bring down the price.

“Typically that’s the path new technology takes,” he said. “Would businesses who paid a little bit more than they would two or three years from now, was that forced on them by the new state law? Who knows. But I don’t see any upside to that.”

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