As the final fixed increase to minimum wage hits, local businesses are adjusting.
Jan. 1, the state of Arizona increased minimum wage from $11 to $12, after several increases from previous years. In 2021 and beyond, Arizona’s minimum wage will change based on the cost of living in the state.
Local business owners shared the struggles of running a home-grown business under rising minimum wage, costing the employers more money from limited resources.
Headquarters Restaurant and Bar owner Alma Farrell discussed tough choices the eatery has to make. Since the minimum-wage increases started in 2016, she has had to raise prices.
“You have to keep your customers happy because they don’t want you to raise the prices, but how can you not raise them? How do you keep your vendors happy?” Farrell said. “That’s the biggest issue, is trying to find the balance to raise the wages for your employees, keep the vendors that you have, and keeping the customers happy.”
Arizona voters passed Proposition 206, the Fair Wages and Healthy Families Act, in November 2016, when minimum wage was $8.05. The initiative implemented two measures into law: minimum wage increases until 2020 and paid sick-time requirements.
Brooklyn Boys has been a locally owned restaurant in Maricopa since 2007. The owner of the New York-style Italian restaurant, Vincent “Vinny” Fiordilino adjusts the budget with each minimum-wage increase.
“Looking at a different point of view as an owner, especially when business is kind of slow, it hurts. It hurts a lot because you’re always on a tight budget,” Fiordilino said. “It’s a rough business, no matter what kind of store you have, but you adapt and you go with the flow. You try to make the best out of it.”
The Industrial Commission of Arizona implements and enforces Prop 206’s requirements.
The current state minimum wage far exceeds the federal minimum wage of $7.25, which Arizona has been above since 2010, when the state last matched the nation’s hourly wage. According to the U.S Department of Labor, in 2011, Arizona raised its minimum wage 10 cents above the federal wage and has been increasing it ever since.
Maricopa’s Native Grill and Wings is part of a chain of locations across Arizona, Texas and Illinois. The raises since 2016 have caused layoffs and cut hours while the restaurant figured out ways to reduce supply costs. Native Grill also had to recover from a months’ long closure in 2019 after a fire.
“Some places end up closing and stuff like that when minimum wage continues go up. It’s too early to tell how it’s going to affect us,” owner Pat Kieny said of the latest increase. “Hopefully it’s not too damaging. So, all we can do is wait and see and keep moving forward.”
Another demographic affected by the minimum wage increase is the employees. Maricopa High School graduate Harrison Edmondson, a full-time Arizona State University student studying supply-chain management, said his major gave him a lot more insight into how minimum wage can affect people within the same community very differently.
“Small business-wise, they rely so much on community support and community engagement, that when they have their operating costs increase, they’re going to have to lay people off or cut hours, benefits,” said Edmondson, who works as a community assistant for ASU and previously worked at Fry’s. “But, unfortunately, if they can’t afford to pay these workers and decrease the profit margin a little bit to cut the labor cost, I just feel like they may need to reevaluate the business model.”
Edmondson said he has struggled to keep up with expenses despite the increases in pay.
“Budgeting was always something that I tried to do, but considering the amount of money I made, I still wasn’t able to cover my basic expenses. I had to get a credit card to help cover the expenses, so I have a little bit of credit card debt right now,” Edmondson said. “Personally, whatever medical expenses come up for me, I am basically not able to pay those at all.”
According to the U.S Department of Education, the average cost of in-state college tuition in Arizona was $9,337 from the 2018–19 academic year. This does not include housing or other costs. This is $1,114 less than the previous year (10.7% decrease). This also is representative of one academic year; students will typically pay four to six years of university tuition.
Arizona now has the fifth highest minimum wage in the country, tying with Maine and Colorado, which share the $12 hourly wage, according to the Economic Policy Institute. Only Washington, California and Massachusetts are higher.
Maricopan Antonio Gonzales is a full-time ASU student who also has to make ends meet working entry-level jobs while attending school. He is currently employed at a Chipotle.
“I think it’s a good thing, but I don’t think it’s going to solve all of the problems that everybody thinks it will,” Gonzales said. “Minimum wage jobs aren’t for people that are trying to support a family and pay off the house and all that stuff. It’s an entry-level job, and then people use that and build into a career where they can afford that stuff.”
Local government is also affected by minimum-wage jumps, as many minimum-wage employees provide various services for the City of Maricopa. Spokesman Adam Wolfe said the City has 71 employees impacted.
The 2018 median household income for Maricopa sits at $68,908, 16% higher than the state’s $59,246, according to the U.S. Census Bureau’s American Community Survey.
Over the past decade, the average annual cost-of-living adjustment has been about 1.5%. The cost of living in Maricopa has risen 2.2% during the past year, with the biggest increases in transportation and food, though housing is edging up, too.
Minimum wage will continue to increase to accommodate any rising cost of living, which means some years may see no increase, large increases or small increases depending on what is deemed necessary by the Industrial Commission.
“Hopefully, it’ll get easier from this point on,” Fiordilino said. “I’m all for this for the employees, because I used to be an employee once before being an owner, and I understand what kind of hardship they go through, making a living. However, being an owner has its perks and disadvantages. Owning a business is not easy.”
This story appears in the February issue of InMaricopa.