Inflation drives minimum wage raise

Workers at the bottom of the Arizona wage scale appear to be in line for a pay hike of $26 a week.

And you can credit — or blame — inflation.

New figures reported Tuesday by the Bureau of Labor Statistics show that prices as measured by the Consumer Price Index for urban consumers, have risen 5.3% between August 2020 and last month.

What makes that important is that laws approved by voters in 2006 and again in 2016 require annual inflation adjustments based on the August figures.

The official calculations won’t come until later this week when the Arizona Industrial Commission, which is in charge of such things, makes the pronouncement.

But tacking that 5.3% figure onto the current $12.15 an hour minimum translates out to 64.4 cents. Rounded to the nearest nickel, as the law requires, puts it at 65 cents and pushes the minimum up to $12.80.

By contrast, the federal minimum wage, which can be adjusted only with congressional action, has been stagnant at $7.25 an hour since 2009.

How many workers might be affected is unclear.

The most recent data compiled by the state Office of Economic Opportunity, from last year, shows a series of occupations where at least 10% of workers earn less than $12.15. That was at a time when the minimum wage was just $12.

The biggest category is in food preparation and service. And those workers make up about 8.5% of the state economy.

But Steve Chucri, president of the Arizona Restaurant Association which opposed both voter initiatives, said the latest scheduled increase won’t have as big an effect as might be anticipated, at least not immediately. The issue, he said, is supply and demand.

It starts with what Chucri said has been a bounce in customers.

“I think this is probably going to be the busiest June on record for Arizona restaurants,” he said. “A lot of people stayed here.”

At the same time, however, there are more eating places looking for help than people willing to do the job.

“We had a lot of people leave our industry,” he said, some going back to school and others pursuing a different line of work.

What that did is drive up wages, to the point where Chucri said some restaurants were paying $24 an hour to hire someone to wash dishes.

But he said this 65-cent-an-hour wage boost — and others that will follow annually — will make a difference.

“Now there’s a new floor,” he said, which will set the minimum that eating establishments can pay even when there are more people looking for work.

Other industries also are likely to be affected.

Another group with starting wages that are less than the new minimum are those in what are called health care support occupations, everything from pharmacy aides to physical therapy aides.

Then there are all the folks who now are earning more than $12.15 but less than the new minimum. They, too, are in line for a raise.

And, on top of that, you add in the people who currently are being paid $12.80 who may argue that they are entitled to be paid more than the minimum.

Arizona voters mandated in 2006 that the state have its own minimum wage not tied to the federal figure. That set the bottom of the pay scale here at $6.75 an hour, $1.60 higher than what federal law mandated at the time.

Plus there were inflation adjustments.

A decade later, voters decided to turbocharge the raises, imposing a $10 minimum with automatic increases up to $12 as of 2020.

Last year, with inflation at just 1.3%, that gave workers at the bottom an extra 15 cents an hour.

What’s driving this year’s inflation figure is the cost of fuel.

BLS reports that gasoline prices are up 41.9% over a year earlier.

There also has been a 21.1% increase in the cost of piped gas, versus a 5.2% hike in electricity.

Grocery prices, while rising, are up just 3.0% year over year. But the cost of eating out has risen by 4.7%.

The other big hike has been the price of used cars and trucks, up 31.9%.

At least part of that might be attributed to the fact that there are fewer new vehicles available, with supply chain issues holding up computer components and other parts that manufacturers need. New car prices are up 7.6% year over year.

Shelter prices, including rent and what the BLS calls the owners’ equivalent rent of residences, are up 2.8% nationally.

Of note, that figure is significantly less than for the Phoenix metro area, for which the agency does a separate computation. There, shelter costs are up 6.4% in the past year, a reflection of the tight housing market in Arizona and rising rents and home prices.

The latest state minimum wage hike comes as voters in Tucson are set to decide in November whether to impose their own $15-an-hour minimum wage by 2025.

That would start with setting the floor at $13 on April 1, going to $13.50 in 2023 and $14.25 in 2024 before hitting the target. After that, as with the state minimum, adjustments would be made based on inflation.