What would you buy for an extra $20 a week?
A nice meal? A car mount for your phone? An extra four gallons of gasoline?
That’s the choice that will face Arizonans at or near the bottom of the pay scale in January when the state’s minimum wage rises another 50 cents, to $14.35 an hour.
But the question of how many people actually are working below that minimum is less than clear, as inflation and a tight labor market have forced many employers to offer higher wages just to get applicants in the door.
New figures reported Wednesday by the U.S. Bureau of Labor Statistics show that costs as measured by the Consumer Price Index rose 3.7% between August 2022 and last month.
That’s important because laws approved by Arizona voters in 2006 and again in 2016 require annual inflation adjustments in the state minimum wage based on the August annual figures.
Rounded to the nearest nickel, as required by law, the change in January will add 50 cents an hour to the current $13.85 figure.
A formal announcement won’t come until later this month. That’s when the state Industrial Commission, which has purview over the annual adjustment, has its regular meeting.
How Tucson’s minimum compares
The latest state minimum wage increase comes after Tucsonans voted two years ago to impose a $15-an-hour minimum wage in the city by 2025.
That started at $13 in 2022, with the ordinance putting it at $13.50 in 2023. But because the state increase was higher, Tucsonans got the benefit of $13.85.
Tucson’s is set to go to $14.25 in 2024 before hitting the $15 target. After that, as with the state minimum, adjustments would be made based on inflation.
The Tucson ordinance, though, is designed so that the more generous figure trumps. And with the state figure set to be a dime higher in January, workers in Tucson will be earning that $14.35 minimum.
In Flagstaff, the only other city with a local wage ordinance, the minimum already is $16.80 an hour. With guaranteed inflation adjustments, workers there will receive at least $17.40 an hour starting in January.
Flagstaff’s ordinance says the minimum wage there has to be at least $2 an hour higher than the state mandate.
May have little practical effect
Even with the big increase and the new $14.35 wage floor, the automatic boost being precipitated by Wednesday’s federal data may have little practical effect on what many companies pay their Arizona workers.
That’s because staff-starved businesses are finding they can no longer offer the bare minimum allowed by law to attract and retain employees.
That specifically includes the restaurant and fast food industry, which fought unsuccessfully to convince voters not to adopt a state minimum wage.
Had those businesses been successful, Arizonans would be entitled to no more than $7.25 an hour — the federal minimum wage that has not changed since 2009.
Steve Chucri, president of the Arizona Restaurant Association, said the way the new minimum wage will affect what his members have to pay is in the ripple effect.
“I can’t tell you anyone right now (is) making $14 an hour in the restaurant industry,’’ he said, since employers have had to offer more. “If there are, it’s a single-digit percentage.’’
That is borne out by a report from the Arizona Office of Economic Opportunity.
For 2022, the most recent data available, fast food cooks already were making an average of $14.63 an hour. The figure for cooks at more traditional restaurants was $17.07.
Dishwashers were being paid an average of $14.63 an hour.
Restaurants adding automation
But what happens, Chucri said, is that raising the floor by 50 cents an hour will drive up the wages of those making more than that. He said that will have a definite effect on an industry that is paying out $18 million a day to about 250,000 workers.
Many establishments are automating to reduce the number of employees needed, he said.
At the front end, that means some restaurants beyond fast-food places are having patrons order from kiosks or similar devices.
And for savings in the back of the house, it’s not unusual, he said, to find the French fries being made and turned by equipment. He specifically cited “Chippy,’’ a robotic tortilla chip maker being tested by Chipotle.
But total automation just can’t happen in a hospitality industry, Chucri said.
“We still have to have that person-to-person contact,’’ he said. “Technology can only replace certain functions of a restaurant. It can’t replace the rapport we have with our guests each and every day.’’
Other low-wage jobs
Aside from many restaurant workers, the Office of Economic Opportunity has identified other occupations that are at the bottom of the pay scale in Arizona.
Attendants at amusement and recreation areas were receiving an average of $13.70 in 2022. Cashiers of all types had an average wage of $14.14. The figure for desk clerks at hotels, motels and resorts was $14.35.
Arizona voters mandated in 2006 that the state have its own minimum wage not tied to the federal figure. That set the bottom of the pay scale here at $6.75 an hour, $1.60 higher than what federal law mandated at the time. Plus, there were inflation adjustments.
A decade later, voters decided to turbocharge the raises, imposing a $10 minimum with automatic increases up to $12 as of 2020. After that, inflation has driven the annual increases to the current $13.85, and the new $14.35.
The latest inflation rates
This year’s inflation figures are driven by a variety of issues.
The Bureau of Labor Statistics reports rents are up by 7.8% over a year ago. Even what the agency calls an “owner’s equivalent rent’’ is 7.3% higher.
Then there’s the cost of foods for home purchase. Leading the pack on inflation are cereals and baking products, costing 6.0% more than a year earlier. Fruits and vegetables are up 2.1%.
But the bureau said the costs of proteins — meats, poultry, fish and eggs — are unchanged from a year ago.
The cost of dining out is up 6.5%.
What is not the main driver of inflation, for a change, is the price of filling up the tank.
Last year, the bureau reported that gasoline prices were up 25.6% from the same period a year earlier.
That’s not to say fuel is cheap. But its price has dropped by 3.3% in the past year.
The cost of new cars is 2.9% more than last year, while used car prices actually wentt down 6.6%.
Along with these national figures, the bureau also released some state-specific data for the Phoenix metro area, which includes Maricopa and Pinal counties. The most notable difference from the national data is that rents there are up year-over-year by 9.5%.
It was a year and a half ago that prices for many goods and services first started to spike following the pandemic. It was a hardship for lots of Americans, so the Fed raised interest rates at a historic pace to slow spending and, hopefully, lower prices. Glenn Furton, professor of economics at Metropolitan State University of Denver, says the latest inflation numbers from the Fed are encouraging."I think people overall, economists overall, are more confident maybe more confused but in a positive way about the fact that this has been a rather successful effort by the Fed to maintain slow, incremental increases in the interest rate to bring down the money supply and bring down the inflation rate," said Furton. A report issued last week shows the Personal Consumption Expenditures Price Index rose 3% in June. This index is like the Consumer Price Index which tracks the changing prices of goods, but it accounts for how people spend when prices are high, which is why the Fed typically prefers it.SEE MORE: Yellow Corp. trucking company files for Chapter 11 bankruptcyBack to that 3% number, though. It means prices in June of this year were 3% higher than they were in that month last year. It's an improvement from the 3.8% in May and the 4.3% in April. With a solid job market and unemployment near a 50-year low, Furton says it's promising data that shows the Fed has been able to temper prices without throwing the economy into the recession many had feared."Any way you look at it, this has been successful, or certainly more successful, compared to historical efforts to deal with these sort of shocks," said Furton. A separate report from the Labor Department showed that wages and salaries grew more slowly from April to June, suggesting that employers were feeling less pressure to boost pay. It's another strong indicator that inflation should slow over time, because companies are less likely to need to raise prices to cover their higher labor costs.Like any assessment from economists, Furton says this is an interpretation and not a prediction. He said the Fed is worried about seeing these improvements and easing interest rates too soon, so there's no saying when those might start to get rolled back.
New research has found that states that raised the minimum wage have lower divorce rates following the change.
