Arizona's minimum wage going up soon due to inflation

What would you buy if you had an extra $14 a week?

A couple of meals at a fast food restaurant? Four gallons of gas? A prescription co-pay?

Those are among the choices that will be facing Arizonans at or near the bottom of the pay scale when the state’s minimum wage rises another 35 cents, to $14.70 an hour, on Jan. 1.

The reason for the increase is that Arizona voters twice approved creating a state minimum wage separate from the federal figure of $7.25, a number that hasn’t been raised since 1991. Those two initiatives require annual increases each year pegged to the annual inflation figures in the Consumer Price Index.

The new numbers, released Wednesday by the Bureau of Labor Statistics, peg year-over-year inflation at 2.5%. That computes to nearly 35.9 cents added to the current $14.35.

But the law also requires the Industrial Commission of Arizona, which makes the adjustment, to round to the nearest nickel, resulting in the final figure of $14.70 an hour. A formal announcement is expected later this month. For a full-time worker paid the minimum, the increase will amount to $14 a week.

Tucson, Flagstaff higher

Workers in some communities will do better.

Tucsonans voted three years ago to enact their own minimum wage in multiple steps.

That is set to go to $15 an hour in 2025, with annual inflation adjustments after that.

In Flagstaff, the only other city with a local wage ordinance, the minimum already is $17.40 an hour. And with guaranteed inflation adjustments, workers there will be earning at least $17.85 in January.

The Flagstaff ordinance also says the minimum wage there has to be at least $2 an hour higher than the state mandate.

Who is paid at the bottom?

The question of how many people actually are working below the minimum right now is less than clear, as inflation and a tight labor market have forced many employers to offer more just to get applicants in the door.

The most recent figures from the state Office of Economic Security, from 2023, show starting wages for fast food and counter workers at $13.94 an hour, and dishwashers at $14.10. Ushers, lobby attendants and ticket takers were starting in the $13.86 range, as were amusement and recreation attendants.

And pay for hazardous materials removal workers starts at $13.85.

But an increase at the bottom usually forces up wages all along the pay scale. So if a hamburger chain has to pay 35 cents more an hour for new workers, all the other, more experienced employees will also want a pay bump.

Gov. Katie Hobbs, making an unrelated economic development announcement Wednesday, declined to say what she believes is an appropriate minimum wage.

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“Arizonans have been struggling with rising costs,’’ she said. “An appropriate wage is a wage that allows families to have a quality of life without working two and three jobs to keep food on the table. I don’t know what that is.’’

But Hobbs did have some thoughts when asked whether her family could survive on minimum wage.

“I think most families living on minimum wage would tell you the answer to that is ‘no,’ ‘’ she said.

Ballot measure on tipped workers’ pay

The new numbers come against the backdrop of the Arizona Restaurant Association financing a ballot measure to decrease what it has to pay its own tipped workers.

Current law gives the restaurants a $3-an-hour credit assuming the employees make the minimum once tips are counted in. Using the new minimum wage figures, that will make restaurants responsible for $11.70 starting in January.

But if Proposition 138 is approved, it would increase that credit to 25% of the minimum wage, meaning the employers would have to pay $11.02 an hour.

The restaurants argue that no worker would lose money. That’s because the new credit would be available to employers only if the worker’s earnings, with tips, totaled at least $2 over the minimum — or $16.70 as of Jan. 1.

Restaurants say that lowering their own out-of-pocket costs helps tipped workers by allowing restaurants to keep more of them employed.

Foes argue, however, there’s no reason to make the employees even more dependent on tips.

Smallest inflation increase since 2021

The reason wages are going up only 35 cents an hour is because the 2.5% inflation figure is the smallest 12-month increase since February 2021. Last year the annual increase was 3.7%, which drove up the minimum by 50 cents.

Breaking down that 2.5% figure finds a mixed bag.

On one side, the numbers for the cost of housing are up 5.2%. Motor vehicle insurance is up 16.5%.

But the cost of food at home rose only 0.9% — though not uniformly. The cost of meat, poultry fish and eggs is up 3.2% in the past year, with just a 0.4% increase in other groceries including dairy and related products and a 0.2% drop in the cost of fruit and vegetables.

BLS reports that energy costs are down 4% year-over-year, including a 10.3% drop in gasoline prices. That compares with just 3.3% decrease from the same period a year earlier — and a big swing from the 25.6% increase two years earlier.