PHOENIX – Waiting for a city bus Monday, Marcella Alvarez said she has mixed emotions about starting a job this week as a telephone receptionist.
She’s happy to have a job after three years of searching but is worried about making ends meet on $7.65 per hour, which is minimum wage in Arizona.
“Life will be pretty difficult with the pay,” Alvarez said.
That’s why she was happy to learn that she and others making minimum wage in Arizona will get a modest raise Jan. 1 under a law voters approved in 2006.
The Industrial Commission of Arizona recently announced a 15-cent-per-hour increase in the state’s minimum wage to $7.80.
It’s the third straight year that Arizona’s minimum wage has been higher than the federal rate of $7.25 an hour, which has stayed unchanged since 2009.
“It’s going to make my life easier,” Alvarez said. “I hope it’s more than 15 cents. Why not 18 cents? Or 25 cents?”
Under Proposition 202, dubbed the Arizona Minimum Wage Act, the Industrial Commission adjusts the minimum wage based on the annual change in the national cost of living as measured by the Consumer Price Index for Urban Consumers.
According to the Bureau of Labor Statistics, the national CPI increased by 1.7 percent from last August to this August. The Industrial Commission made its minimum wage adjustments mostly based on this figure, said Karen Axsom, director of the commission’s labor department.
Under the law, employers may pay up to $3 an hour less than the minimum wage to tipped employees, which makes their minimum wage $4.80 an hour as of Jan. 1.
Out of the 1.5 million hourly workers in Arizona, 85,000 received minimum wage in 2011, the U.S. Bureau of Labor Statistics reported.
John Mathis, professor of Global Economics and Finance at Thunderbird School of Global Management, said he expects the increase to encourage minimum wage workers to buy more goods and services.
“It will help stimulate the economic recovery,” Mathis said. “Given the state of economy, particularly in Arizona, every penny helps. And 15 pennies will help.”
But Brad Flahiff, director of development at Barnett Management Co., which owns 23 Burger King restaurants across the Valley, said the increase might force the company to reduce employees’ hours, stop hiring or even cut back on staff. It amounts to an extra $100,000 in labor costs annually for the company’s Burger King restaurants, where 80 percent of employees receive minimum wage, he said.
“The automatic escalator has to go away,” Flahiff said. “It has been such a threat to our business over the last few years.”
Basing the change in Arizona’s minimum wage on the national CPI instead of a local one is inappropriate, said Rick Murray, CEO of Arizona Small Business Association, the state’s largest trade association.
“It doesn’t make a lot of sense because it has nothing to do with the local economy,” Murray said. “When we look at Arizona’s overall economy, it has a negative impact because it increases unemployment rate,”
However, Mathis said the uptick in unemployment caused by this increase will be small.
“It’s not that big enough of an incentive for small companies to go out and replace labor with machines,” he said.