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Restaurant owners say minimum wage initiative hurts them

PHOENIX — A voter-approved measure that has Arizona’s minimum wage above the federal requirement is forcing some restaurant owners to lay off and reduce health benefits for employees, industry leaders told state lawmakers Tuesday.

“Local restaurants support our communities, and right now we’re in trouble,” said Matt McMahon, owner of 19 Outback Steakhouse locations in Arizona. “The economy is not the problem; bad laws are the problem.”

The Arizona Minimum Wage Act, approved in 2006, requires the minimum wage to adjust each January based on the U.S. Department of Labor’s Consumer Price Index. Arizona’s minimum wage rose to $7.25 per hour this year from $6.90 in 2008.

The federal minimum wage stands at $6.55 but will rise to $7.25 in July.

Members of the Arizona Restaurant and Hospitality Association told the Senate Commerce and Economic Development Committee that the state requirement is hurting their industry.

McMahon and three other restaurant owners told lawmakers that it isn’t realistic to base Arizona’s minimum wage on the constantly changing CPI. They said that having to pay progressively higher wages has strained their revenues, making layoffs inevitable.

Stephen Johnson, owner and president of Macayo’s Mexican Kitchen, said that having to pay the increased minimum wage forced him to lay off employees even before the economic crisis.

“I was paying 95 percent of my employees’ health insurance; I had to cut it to 65 percent to make up the loss of revenue,” Johnson said. “That has harmed my employees more than they benefited from the raise.”

Another restaurant owner asked lawmakers to look at a provision of the act calling for employees who regularly receive tips to be paid $3 less than minimum wage.

Mike Head, vice chairman of the Arizona Restaurant Association and operating partner of a Fleming’s Prime Steakhouse and Wine Bar in Scottsdale, said that his employees who get tips now make considerably more than cooks and servers assistants who work without tips.

“I appreciate the contribution of everyone on my team; however, now the hardest-working people are not the highest-paid people,” Head said.

Because voters approved the change, it would take a three-quarters vote of both houses of the Legislature to overturn it.

Dana Kennedy, communications director of the Arizona AFL-CIO, said in an interview that the act is necessary to protect Arizona’s lowest-income employees. She said she doesn’t believe the minimum wage act could affect Arizona businesses this dramatically.

“I think they’re looking to point fingers in this economic downturn,” Kennedy said.


Arizona Minimum Wage Act

— Approved: 2006

— Key Provision: Adjusts the minimum wage each January based on the federal Consumer Price Index.

— State Minimum Wage: $7.25 per hour as of January.

— Federal Minimum Wage: $6.55 per hour, rising to $7.25 in July.

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