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Wage and Salary Laws: Arizona Minimum Wage Rate

In November of 2006, voters were given a chance to raise the Arizona minimum wage rate to $6.75 per hour, a more modest version of the living wage movement. This hike in wage and salary laws was sponsored by unions, along with the Arizona chapter of ACORN, a labor activist organization. As reported by tucsoncitizen.com, even 2008 Presidential Candidate John Edwards made a stop in Tucson to push for a change in Arizona's wage and salary laws. Technically speaking, there was no Arizona minimum wage rate. The federal minimum wage ($5.15 per hour) was the state’s default wage, meaning a full-time minimum wage earner brought home only $10,712/year.

When the votes were counted, 66% of the voters passed the Arizona minimum wage proposition (Prop 202) and established the state’s new minimum wage, which went into effect on January 1, 2007. Since the wage and salary laws have changed, maybe it's time to ask, were the doomsayers right and jobs were lost, or were the activists right and the poor benefited?

How is your salary so far in 2007? Find out with our salary survey.

Pro And Con Raising Minimum Wage

According to AZCentral.com, Arizona's 2007 minimum wage rate cost one group some jobs: teenagers. The food service biz has reportedly cut hours for teens, put hiring freezes in place and let go of teenage workers.

Which has to make one wonder: were these for profit companies running a charity, employing teens they didn't need? Or were the teen workers simply slackers, easily increased their productivity by 31% to match the pay increase? Makes one wonder if employers know the difference between the cost and the value of a worker.

That some companies looked for inefficiencies in their hiring practices is a clear effect of raising minimum wage. Whether significant additional unemployment will happen in Arizona is open to debate.

An article in AZCentral.com, stated, “The Employment Policies Institute in Washington, which opposed the recent increases, cited 2003 data by Federal Reserve economists showing a 10 percent increase caused a 2 percent to 3 percent decrease in employment."

Remember that nearly all minimum wage jobs are high turnover jobs. It is not that 97% of the people earn 10% more, and 3% are permanently unemployed. Even if these statistics are true, they mean the average worker will earn 7% to 8% more a year, while working 2% to 3% fewer hours. Sounds like a good deal :-)

With an axe to grind, people tend to focus on the statistics to support their case. I for one think decreased teen employment is a good thing. Teens should be in high school studying, increasing their future income potential, not working late at Burger King to pay for gas and insurance for a 10-year-old Honda Civic. I didn't get my first car until I was 23 and married :-)

For supporters of the wage rate increase, teens are only a secondary concern. They maintain that the higher pay rate would primarily help adults. Seven months before the ballot vote, Linda Brown, executive director of the Arizona Advocacy Network, stated in tucsoncitizen.com: “Of the 125,000 citizens in Arizona working at minimum wage, 74 percent are older than 25 and 25 percent are single mothers… most of these subsistence wages are not going to teenagers, but to the working poor, who make up 4.6 percent of Arizona's total civilian work force.”

Raising Minimum Wage in Arizona for the Disabled

Interestingly, no one on either side of the debate ever mentioned transitional job centers, which employ developmentally disabled women and men, who work to learn new skills. These job centers were exempt, under federal law, from paying the minimum wage rate because many of the workers cannot perform their jobs as quickly as person without a disability. These folks were paid a sub-minimum wage rate based on their productivity.

An unintended effect of raising the minimum wage, according to eastvalleytribune.com, is to place jobs for the disabled in peril. Minimum wage laws often have exceptions for different classes of workers, such as wait staff, agricultural workers, and sometimes even teens. The issue in Arizona is whether it was a legal oversight, or intention, to raise the pay for disabled workers.

According to the Arizona Attorney General, Arizona's 2007 minimum wage rate ($6.75) trumps the federal exemption of the job centers. This means transitional job centers must pay this new wage rate to disabled workers. The result is likely to be layoffs and center closings, unless a solution is found.

Legal solutions are easy, as long as people agree on the solution. Some advocates argue that disabled people are entitled to the same wage rate as those who are not disabled. The 2007 minimum wage rate is inadvertently righting another wrong.

Pros for Raising Minimum Wage?

Arizona's 2007 minimum wage law has only been on the books for a short time, so no one can tell what the long-term ramifications will be for Arizona. We can look at other states, such as Washington and Oregon, and see their results. Oregon and Washington have the highest minimum wage rate in the nation. According to the Bureau of Labor Statistics, these Northwest states have also experienced higher unemployment rates. Is there causality in this correlation?

In Washington, the minimum wage rate is $7.93 an hour, and in Oregon, the minimum wage rate is $7.80 an hour. Oregon and Washington experienced high unemployment rates even before minimum wage laws were changed by voters. As of January, Oregon had the 8th, and Washington the 11th highest unemployment rates of the states. Is this caused by the high minimum wage?

It is tough to compare apples with oranges - literally, if we compare Washington State with Florida, which has one of the lowest unemployment rates in the country at 3.3% :-) Let's look at the 4 states with the highest unemployment rates (over 6%): Michigan, Alaska, South Carolina, and Mississippi, and see if there is a pattern.

South Carolina and Mississippi have no minimum wage laws: businesses that are small enough, and avoid interstate commerce, can pay their workers as little as they like. The others have to meet the federal minimum of $5.15/hour. Alaska and Michigan have state minimum wage laws of $7.15/hour. Having minimum wages that are 28% lower clearly is not giving South Carolina and Mississippi any advantage in avoiding unemployment.

There may actually be hidden pros for raising minimum wage, according to Becky Pallack of the Arizona Daily Star: “Because the Northwest region is an attractive place to live, there is a plentiful supply of people looking for jobs and low job turnover." Maybe that is just a statement that the mountains around Seattle are more attractive than the mountains around Phoenix :-)

Is your salary enough to offset not living in Washington State? Find out with our salary survey.

Cheers,

Dr. Al Lee

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