During the 2016 election this past November, Arizonans were given the opportunity to vote for an increase of the state’s minimum wage. Proposition 206 allowed voters to raise the current minimum wage to $10 an hour starting in January, with a gradual annual increase to $12 per hour by the year 2020.
On the surface, the wage increase gives workers in the state the chance to earn more money per year, which opens the door for a better lifestyle and greater quality of life. Everything will become more affordable since we are all capable of making additional money. Right? Maybe not.
Mike Sullivan is the general manager for a medium sized business in Phoenix and oversees around 60 employees. Prop. 206 changed very little for them as a business, as they provide a wage above the current minimum expectations. He does, however, believe businesses will be forced to become competitive or risk closing down.
“The prop actually from an employer perspective has two parts that can be viewed as a positive and a negative. Passing it creates additional costs for the owner; sick time and an increase of minimum wage. We offered both as we feel they are basic necessities for your company. If you provide better benefits and create a positive work environment you’ll attract better candidates and have a stronger sense of devotion.” Sullivan said.
Local business owners attempted to sue to block passage of Prop. 206, a move which was seen as greedy by voters simply wanting a better life, but the business owners felt it was their last chance to stop the potential end of their businesses through the increased cost of operation. Those who own and operate a small business in Arizona are the ones who face the biggest challenge when it comes to Prop. 206, as rising costs for workers means increased insurance costs, an abundance of extra yearly expense for lost time, and higher expectations from applicants.
Opponents of Prop. 206 pointed out the inherent danger involved with a minimum wage hike: businesses would have to pay more for their labor. Seems like an obvious thing to point out, but it is a fact that can carry serious and negative implications.
Rocket Burger & Subs is a local small business that serves burgers, fries, and a large variety of soft drinks. As a small business that hires many younger individuals, paying an increased minimum wage could have a negative impact. Owner Dennis Gray was faced with the challenge of meeting the demand for a higher wage while keeping costs down.
“It’s hurting everyone, and were are in the process of changing prices, mostly on food. We will have to see how the customers feel about it.”
With business owners (especially small businesses) needing to shell out more money to staff, and profits not changing drastically enough to compensate for the shift in cost, owners of local businesses that were already experiencing razor thin profit margins find themselves in quite the quandary.
One of the biggest fears associated with the passing of Prop. 206 was a concern that with higher wages, businesses would be forced to raise prices to cushion the additional expense of a higher wage for their employees. With higher costs for goods and services to alleviate the strain of the minimum wage increase, the local economy could very well find itself regressing. Local small businesses that cannot afford the higher wages will be forced to close, creating the possibility of greater unemployment and a greater dependency on government services, which will raise taxes, which could make things cost more. At that point, we may find ourselves back at square one.
Of course we all want (and deserve) a better life, and this issue seems to be one that may be one step back to take two forward in the long run. Only time will tell what effect this will have on our local economy in the end, but for now businesses are doing their best to juggle the difficult circumstances.