Proposition 206 would raise the state minimum wage to $10 in 2017, then incrementally increasing the minimum wage to $12 per hour by the year 2020. It also entitles employees to earn an hour of paid sick time for every 30 hours they work.
While we are in favor of raising wages and wish all our state’s workers earned gobs of money for their labor, 206 has some major flaws that make it an ill-advised proposition.
Firstly, the sudden rise in salaries would likely decrease overall employment. A full-time minimum wage worker earns $16,744 per year, which would jump to $24,960, an increase in $8,216 per employee.
For a small retail company with 30 minimum wage workers, that would increase costs $246,480, but it’s highly unlikely a company would see increased revenues all of the sudden. There are only three ways to recoup that expense. One is to raise prices, which consumers would have to pay; the company has to cut benefits; or finally, offset those costs by cutting staff 33 percent, i.e., firing one of every three employees, which means 10 workers lose their jobs at that small company and the remaining 20 have to do the work of 30 and keep revenues up.
We all remember how devastating layoffs were during the Great Recession and the first few months of 2017 would echo those dark years.
The bill would only affect the salaries of an estimated 706,845 workers, mainly teens and 20-somethings who have yet to enter the job market in their chosen career fields. Most of us worked a minimum wage job our youth and remembered with pride the first job we had afterward with a higher salary in our field. Under Proposition 206, more dead-end jobs would be on par financially with entry-level career-building jobs, so there would be less or no financial incentive for workers to leave a low-skilled job for one requiring more skills and slightly more pay, delaying workers’ transition to the career economy.
The proposition will place Arizona at a competitive disadvantage against other states in attracting new businesses. As a state that derives much of our economic growth from tourism, we were hit harder than most by the Great Recession as visitors from around the country opted to skip vacations and trips while struggling to keep their houses out of foreclosure.
Arizona has not fully recovered from the Great Recession and attracting new businesses is the only way to build a more stable economy that won’t be as affected by turbulence in the market.
Additionally, most businesses that aren’t dependent on location could opt to move to states with lower minimum wage, even our neighboring states like Utah and Texas at $7.25, New Mexico at $7.50 and Nevada at $8.25 or Colorado at $8.31.
At $10 an hour, Arizona would have the top minimum wage in the country, tied with California and Massachusetts, higher than Connecticut at $9.60, Washington at $9.47 and New York at $9, and we certainly do not have the robust economy that those states do. Massachusetts and New York are the economic powerhouses of the East Coast while California would be the sixth-largest economy in the world if it was suddenly its own country.
Some big companies with the capital to do so may simply pick up stakes and move to states with lower wages.
The proposition also doesn’t take into account cost-of-living difference around the state. A worker earning minimum wage in Sedona, Scottsdale or Fountain Hills still won’t be able to afford rent in most neighborhoods while a worker in Camp Verde, Ajo or Ash Fork will see an increased wage far beyond what they need for rent. Arizona is not a one-size-fits-all state and Proposition 206 doesn’t take into account the differences between urban and rural areas.
The paid sick leave portion of the bill is a noble and forward-thinking idea, but should have been separated into its own proposition and not tied to the wage increase.