番茄社区

Arizona businesses already struggling under a pandemic-induced downturn and multi-year mandated wage hikes that have increased incrementally over the past four years are closely watching the debate on Capitol Hill over whether to raise the federal minimum wage to $15 an hour.

On January 1, the state鈥檚 minimum wage rose to $12.15 an hour. That鈥檚 higher than many other states that have higher costs of living, business advocates said.

鈥淎rizona ranks 30th in affordability indexes and 24th in the cost of living index, yet we have the fourth highest minimum wage in the country,鈥� Amber Smith, the president and CEO of the Tucson Metro 番茄社区 of Commerce said . 鈥淭he top three states with the highest minimum wage have higher costs of living than the national average, and yet Arizona鈥檚 is three percentage points lower than that same national average.鈥�

That hurts cities like Tucson trying to compete for both employers and employees, Smith said. 

Small city of Flagstaff has state鈥檚 highest minimum wage 

Few business communities have been harder hit than Flagstaff in Northern Arizona. The city is experiencing firsthand the impacts of steep mandated wage hikes. 

Currently, it has the highest minimum wage in the state at $15 per hour. 

Due to a voter-approved measure that was amended by the City Council, the city鈥檚 minimum wage will rise to $17 an hour if Congress approves a proposal to increase the national minimum wage to $15.

鈥淭his has been ongoing for a few years and now we have the greatest disparity,鈥� said Joe Galli, vice president of government affairs for the Greater Flagstaff 番茄社区 of Commerce. 鈥淭he hardest hit are the industries with the smallest margins of profits, including restaurants, bars and tourism-related industries.聽

鈥淥ur business owners tell us all the time that when they鈥檙e told they have to pay a higher wage, they respond by streamlining, whether it鈥檚 automating, cutting employee hours, or reducing the overall number of employees. They pay the higher wage, but they pay it to less people and they pay it for less hours.鈥�

Raise the Wage Act stalled for now 

Now is not the time for high wage mandates, chambers of commerce and business advocacy groups are telling Congress.    

Earlier this month, the Raise the Wage Act of 2021 was introduced in the U.S. House. The bill calls for more than doubling the minimum wage from $7.25 to $15 an hour over the next four years. 

On Tuesday, Senate Republicans countered with a plan to raise the federal minimum wage to $10 an hour. Under their plan, businesses would be required to E-Verify employees electronically to prevent the hiring of undocumented workers. Arizona is one of about 11 states that already require use of the E-Verify system.

As some members of Congress call for higher wages, lawmakers will need to find solutions to raise the lowest incomes without hurting job creators, business advocates said. 

A recent report out of the Congressional Budget Office states that a $15 minimum wage would result in the loss of an estimated 1.4 million jobs and push the nation鈥檚 debt up to $54 billion over the next decade.

Losing competitive advantage  

In Arizona, restaurants, gyms and other industries are still operating under limited capacity requirements. They must have an opportunity to fully recover, business advocates said. 

In Flagstaff, which relies heavily on tourism, employers have seen the cost of business accelerating at 鈥渁n unprecedented rate鈥� under the wage hikes, affecting both employers and employees, Galli said. It鈥檚 not just small businesses. Some larger employers also report losing hundreds of thousands of dollars to their bottom line.  

Galli cited the example of a salaried employee whose child care costs went up $1,000 a year, forcing the individual to switch jobs. A local business owner reported having to cut labor hours from 250 to 200.

Mark Harris, general manager at Terry Marxen Chevrolet Cadillac in Flagstaff, told the earlier this year that the latest wage hike to $15 in January will increase the dealership鈥檚 personnel costs by about $65,000, not including overtime or other raises.

Raising vehicle prices to cover the costs is not an option, he said. That would only further hamper his ability to compete with other dealers across the state.

鈥淚’m all for everybody making $15 an hour. What I’m not calling for is that Flagstaff is the only one doing it because it puts us at a competitive disadvantage. If the whole state was at $15, it鈥檚 a no-brainer,鈥� Harris said. 鈥淚’m going to spend close to $200,000 extra in labor for the same number of labor hours in 2021 than my nearest competitors, and that puts us at a competitive disadvantage. That’s my biggest concern.鈥�

Higher wage mandates putting Arizona at disadvantage 

As Arizona鈥檚 minimum wage outpaces other states, employers here are less able to offer benefits like tuition waivers and stock options for employees, Smith of the Tucson Metro 番茄社区 stated. 

That puts Arizona at a disadvantage when employers and employees are looking for new locations to set up shop. 

鈥淪o, in spite of having one the highest minimum wages, and our cost of living lower than the national average, we are still ranked only 30th in affordability of 50 states, all the while losing competitive advantages of locally owned companies that significantly contribute to our local economy.鈥�

Minimum wage hikes in Arizona

January 1, 2018 $10.50

January 1, 2019 $11.00

January 1, 2020 $12.00

January 1, 2021  $12.15

Minimum wage hikes in Flagstaff 

2018 $11

2019 $12

2020 $13

2021 $15

2022 $15.50