The minimum wage in Arizona rises to $7.25 an hour Thursday, thanks to a voter-approved increase that remains a flashpoint between those who seek living wages and those who say further job losses could result.
The annual increase is the third since voters approved the minimum-wage initiative by a 2-1 ratio in 2006. This year’s increase is 5 percent. At $7.25 an hour, the wage is up nearly 41 percent from December 2006 but still only about half of the state’s median wage of $14.25, according to the Arizona Department of Commerce.
Julie Kossak, a co-owner of three Zpizza restaurants and Pink Spot Ice Cream in Phoenix, said minimum-wage increases hurt small businesses. She has about 50 employees.
To get good workers, she has to pay employees more than minimum wage. And even though she’s not required to give a raise next year, she said minimum-wage increases pressure small-business owners to keep raising wages.
“I’m not a fan of it (a minimum wage) anyway,” she said. “I believe the market should take care of itself.”
Dana Kennedy, communications director for the Arizona AFL-CIO, which was involved in the battle for the 2006 proposition that led to the annual increases, said that even $7.25 is not adequate. She considers about $10 an hour to be a decent living wage.
One advantage of the increase, she said, is that the raise is likely to be quickly spent.
“Any increase the workers get will be put right back into the economy,” she said. “The problem with minimum-wage workers is they live paycheck to paycheck.”
Many opponents of an annual minimum-wage adjustment object to Arizona’s minimum wage being tied to the Consumer Price Index because it generally increases.
The Employment Policies Institute in Washington says that minimum-wage hikes reduce jobs for those who are the least skilled and who need jobs the most, especially young minority workers and high-school dropouts. It cites research estimating that for every 10 percent increase in the minimum wage, employment falls 8.5 percent for vulnerable groups. The raise would mean extra costs of about $85,000 a year for a company with 20 entry-level employees, the institute said.
Scottsdale-based economist Elliott Pollack agrees that raising the minimum wage takes a toll on entry-level jobs.
“If you have a minimum-wage job, yeah, it (a raise) helps you,” he said. “But it actually reduces the number of minimum-wage jobs available.”
He said such jobs are important for first-time workers because they teach basic skills like showing up for work on time.
But few workers hold minimum-wage jobs. The Arizona Department of Commerce says the bottom 10 percent of workers earned $7.57 or less in 2007.
Not all employees are eligible for the rate.
Tipped employees will earn $4.25 an hour, $3 below the minimum.
The current recession adds another question to the minimum-wage debate: What happens if the Consumer Price Index shrinks as the economy shifts from inflation to deflation? The Consumer Price Index in October fell 1 percent, the largest monthly drop in 61 years. In November it fell even more, 1.7 percent, largely because of the price of gasoline and other fuels, according to the U.S. Bureau of Labor Statistics.
Karen Axsom, investigation supervisor for the Industrial Commission of Arizona, which enforces the law, said she didn’t know what would happen because decreases were unanticipated.
“We are in some economic waters that we haven’t seen in decades, and so I think anything can happen,” she said. “But it certainly is not addressed in the statutes that I am aware of.”
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2009: $7.25
2006: $5.15
2007: $6.75
2008: $6.90
Source: Industrial Commission of Arizona
Proposition 202
By a 2-1 margin, Arizona voters in 2006 approved a measure that raised the state’s minimum wage and then allowed for annual increases – to match inflation – that began Jan. 1, 2007.
These arguments in favor of the initiative were included in voting materials:
• “All working Arizonans deserve to be paid a minimum wage that is sufficient to give them a fighting chance to provide for their families.”
• “70 percent of Arizona workers earning the minimum wage are adults.”
• “More than 145,000 working Arizonans will benefit by increasing the minimum wage, half of whom are working women struggling to live on less than $11,000 per year.”
• “Increasing the minimum wage reduces dependency on taxpayer-funded public services.”
Source: Industrial Commission of Arizona