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Study: Predicted job losses from AZ minimum wage hike never happened

By: - July 17, 2019 2:28 pm

A protest in April 2015 for increasing the minimum wage to $15 ah hour. Photo by OFL Communications Department | Flickr/CC BY-SA 2.0

A national trade group representing small businesses is warning of negative consequences if Congress approves a proposed hike in the federal minimum wage, while an Arizona think tank found that an increase in the state’s minimum wage enacted by voters in 2016 has brought significant benefits without demonstrable job losses here.

The U.S. House of Representatives will vote Thursday on the Raise the Wage Act, which would raise the federal minimum wage from its current level of $7.25 an hour to $15 by 2024. The proposal is expected to pass in the Democratic-controlled House, though it’s unlikely to get through the U.S. Senate, where Republicans have a majority.

On Wednesday, the Arizona chapter of the National Federation of Independent Business warned of “dire economic consequences” if the Raise the Wage Act passes.

NFIB cited a study from the Congressional Budget Office showing that the Raise the Wage Act would cost ultimately cost about 1.3 million workers their jobs. Conversely, CBO also found that it would increase the wages of about 17 million people who currently earn less than $15 an hour, while another 10 million people who earn slightly more than that could see their pay go up, as well.

“Arizona business owners are already bracing for the final assault from the out-of-state, big-labor-backed 2016 initiative that will mandate a $12 per hour wage in 2020,” Chad Heinrich, NFIB’s Arizona state director, said in a press release. 

But the Grand Canyon Institute, a nonpartisan think tank, said Arizona’s recent minimum wage increase hasn’t had the negative effects NFIB and other business groups predicted.

Arizona’s minimum wage is currently set at $11 and will rise to $12 next year under the terms of Proposition 206, which voters approved in 2016. 

In a study released on Tuesday, GCI said there is “no clear evidence” that Arizona’s food service sector, which employs the largest portion of minimum-wage workers, has suffered net job losses. GCI found that food service incomes have increased by 14 percent since January 2017, when the minimum wage began rising, while hourly pay in the industry has increased by 19 percent. 

The study compared Arizona’s food service sector with those of Nevada and Utah, neither of which raised their minimum wages. In those states, incomes rose only 6 percent and hourly pay increased by a mere 3 percent.

Dr. Dave Wells, GCI’s research director and the author of the study, wrote that there is evidence that total hours worked by food service employees may have decreased by one hour per week as a result of the minimum wage increase.

Heinrich argued that GCI’s findings on the lack of job losses attributable to Prop. 206 overlook the fact that businesses must figure out how to deal with the increased costs of labor, which is usually their biggest expense. When the minimum wage goes up, businesses must either absorb the costs, pass them on to customers or cut back on hiring and hours for employees. 

“That’s not really dealing at the individual business level and the choices that the business owner’s going to make when seeing these increased costs,” he told the Arizona Mirror

And while GCI found no evidence of job losses in the food service sector, Heinrich pointed to CBO’s estimate and questioned why Arizona would be immune from that effect. He said NFIB’s own study found that the Raise the Wage Act would cost 1.6 million jobs nationally, reduce the gross domestic product by $980 billion and reduce total economic output by more than $2 trillion by 2029. 

The GCI study noted that the wage increase occurred during a time of economic expansion, which has likely mitigated any negative effects. 

CBO did not break down its findings to the state level, so it’s unclear what how many workers could see wage increases or job losses in Arizona if the federal law were to pass. Wells said the Raise the Wage Act would have less of an effect in Arizona than in many other states because its minimum wage is already significantly higher than the federal level. 

“Most of the adjustments in Arizona already happened,” he said. 

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Jeremy Duda
Jeremy Duda

Jeremy Duda is a Phoenix native and began his career in journalism in 2003 after graduating from the University of Arizona. Jeremy Duda previously served as the Mirror's associate Editor. Prior to joining the Arizona Mirror, he worked at the Arizona Capitol Times, where he spent eight years covering the Governor's Office and two years as editor of the Yellow Sheet Report. Before that, he wrote for the Hobbs News-Sun of Hobbs, NM, and the Daily Herald of Provo, Utah. Jeremy is also the author of the history book “If This Be Treason: the American Rogues and Rebels Who Walked the Line Between Dissent and Betrayal.”