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State labor expert says wage hike hasn’t dampened economic activity

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Wondering why the voter-mandated increase in the minimum wage hasn’t culled jobs?

It’s because the overall state economy is doing so well, said Doug Walls, director of labor market information for the Office of Economic Opportunity.

Walls acknowledged that the cost to employers – the wage has gone from $8.05 an hour in 2016 to $11 now – has to be borne by someone. But, he said, it appears that affected employers are simply passing along the additional expense.

More to the point, it does not appear to be affecting the willingness of people to go out and eat, drink and stay in hotels, the industries with the traditionally lowest wage rates.

But Walls said he’s not prepared to say the same would hold true if Congress hikes the federal minimum wage to $15 by 2025, as the U.S. House of Representatives voted to do earlier today.

“It’s a little bit more speculative, he said. “But what we’ve seen with Arizona’s minimum wage increases has been continued economic growth in a multitude of industries around the state.’’

Walls also reported that Arizona continues to create new jobs almost as fast as the number of people who are moving here, no small feat given the state’s population growth is the fourth fastest in the nation.

But the other side of all that is that the state’s seasonally adjusted jobless rate for June remained at 4.9 percent, which is the same as in May and two tenths of a point higher than a year ago. It also is more than a point higher than the national average of 3.7 percent.

Still, he said, that’s not bad news.

“We tend to think that when labor force levels increase, people are more optimistic about their opportunities to get jobs,’’ Walls said. “And they’ve been able to find those jobs within Arizona.’’

Conversely, he said, the unemployment rate may be lower in other states due to “shifting demographics.’’

What’s happening, said Walls, is that the workforce elsewhere is aging with people retiring.

“While work is needed and there are jobs out there, overall they’re not seeing the participation into the labor force that Arizona is actually seeing,’’ he said.

Of course, the other side to that supply-and-demand issue relates to wages: When the number of workers available is less than the number companies need, they have to offer more money.

The result is that the average hourly wage in Arizona for last month was $26.13 versus $27.87 nationally. And that appears to be widening, with a 4.2 percent year-over-increase nationwide versus 2.6 percent in Arizona.

One area where wages in Arizona are more than keeping pace is in the category of “leisure and hospitality,’’ generally defined as bars, restaurants and lodging places. There, wages are up 9.4 percent year-over-year.

“When you do increase wages, the costs have to go someplace,’’ Walls said.

That can take three forms: Higher costs to consumers, employers “eating’’ the costs or companies reducing employment. It’s that first scenario, he said, that appears to be happening in Arizona.

“What we’re seeing is that employment growth continues to increase or growth has held steady in some of those lower-paying industries overall,’’ said Walls.

“The strong economic growth is definitely spurring it on,’’ he said.

And there’s another angle: As this sector of the economy grows, there are more opportunities for workers to look for other employment.

“Employers might have been forced to increase wages as it was anyway,’’ Walls said, even if the 2016 ballot measure did not impose a mandate. “But the economic activity that we’re seeing in Arizona does not appear to have been dampened by the increase in the minimum wage.’’

One comment

  1. Just returned from a 6-week trip through Australia. Their minimum wage is $19.49/hour. Their service system: no tipping, still good service. Why? Hold people to job standards, provide good training, so they can be right at their job & good for your business. The country is clean, modern, excellent public transportation systems, many wonderful businesses provide services. Good health care provisions over-all.

    So as is noted in this article, raising minimum wage, so working people can have a livable income does not destroy business. Why doesn’t our country take the example of success elsewhere & see if it can happen here? Certainly AZ’s minimum wage raise just proved all the naysayers wrong.

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