Minimum wage will rise in January, costs increasing

minimum wage, fast food, Consumer Price Index

In January, Arizona's minimum wage will rise another 50 cents, to $14.35 an hour. But the question of how many people actually are working below that minimum right now is less than clear, as inflation and a tight labor market has forced many employers to offer more than that just to get applicants in the door. (Deposit Photos)

Minimum wage will rise in January, costs increasing

What would you buy for an extra $20 a week?

A nice meal? A car mount for your phone? An extra four gallons of gasoline?

That’s the choice that will be facing Arizonans at or near the bottom of the pay scale in January when the state’s minimum wage rises another 50 cents, to $14.35 an hour.

But the question of how many people actually are working below that minimum right now is less than clear, as inflation and a tight labor market has forced many employers to offer more than that just to get applicants in the door.

New figures reported Wednesday by the Bureau of Labor Statistics show that costs as measured by the Consumer Price Index rose 3.7% from between August 2022 and last month.

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

Rounded to the nearest nickel, as required by statute, that translates out to 50 cents an hour on top of the current $13.85 figure.

A formal announcement, however, won’t come until later this month. That’s when the state Industrial Commission, which has purview over the annual adjustment, has its regular meeting.

The latest state minimum wage hike comes after Tucsonans voted two years ago to impose their own $15-an-hour minimum wage by 2025.

That started at $13 in 2022, with the ordinance putting it at $13.50 in 2023. But with the state increase higher, Tucsonans got the benefit of $13.85.

It is set to go to $14.25 in 2024 before hitting that $15 target. After that, as with the state minimum, adjustments would be made based on inflation.

The Tucson ordinance, though, is designed so that the more generous figure trumps. And with the state figure set to be a dime higher in January, workers there will be earning that $14.35 minimum.

In Flagstaff, the only other city with a local wage ordinance, the minimum already is $16.80 an hour. And with guaranteed inflation adjustments, workers there will be earning at least $17.40 in January.

It always will be higher, with the Flagstaff ordinance saying the minimum wage there has to be at least $2 an hour higher than the state mandate.

Even with the big increase and the new $14.35 wage floor, the automatic boost being precipitated by Wednesday’s BLM data may have little practical effect on what many companies pay their Arizona workers.

That’s because staff-starved businesses are finding they can no longer offer the bare minimum allowed by law to attract and retain employees. And that specifically includes the restaurant and fast-food industry which fought hard — and unsuccessfully — to convince voters not to adopt a state minimum wage.

Had those businesses been successful, Arizonans would be entitled to no more than $7.25 an hour — the federal minimum wage that has been not changed since 2009.

Steve Chucri, president of the Arizona Restaurant Association, said the way the new minimum wage will affect what his members have to pay is in the ripple effect.

“I can’t tell you anyone right now making $14 an hour in the restaurant industry,” he said, with employers forced to offer more. “If there are, it’s a single-digit percentage.”

That is borne out by a report from the state Office of Economic Opportunity.

For 2022, the most recent data available, fast-food cooks already were earning an average $14.63 an hour. The figure for cooks at more traditional restaurants was $17.07.

And dishwashers were being paid an average of $14.63 an hour.

But what happens, Chucri said, is that raising the floor by 50 cents an hour will drive up the wages of those making more than that. And that, he said, will have a definite effect on an industry which is paying out $18 million a day to about 250,000 workers.

What many establishments are doing, he said, is automating to reduce the number of employees needed.

It starts, Chucri said, at the front end, with not just fast-food restaurants having patrons order from a kiosk but similar devices even in casual establishments.

And there are savings in the back of the house.

It’s not unusual, he said, to find the French fries being made and turned by equipment. And he specifically cited “Chippy,” a robotic tortilla chip maker being tested by Chipotle.

But total automation, he said, just can’t happen in a hospitality industry.

“We still have to have that person-to-person contact,” Chucri said.

“Technology can only replace certain functions of a restaurant,” he continued. “It can’t replace the rapport we have with our guests each and every day.”

Aside from many restaurant workers, the Office of Economic Opportunity has identified other occupations that are at the bottom of the pay scale in Arizona.

Attendants at amusement and recreation areas were earning an average of $13.70 in 2022. Cashiers of all types had an average wage of $14.14. And the figure for desk clerks at hotels, motels and resorts was $14.35.

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. After that, inflation has driven the annual increases to the current $13.85 — and the new $14.35.

What’s driving this year’s inflation figures are a variety of issues.

The Bureau of Labor Statistics reports rents are up by 7.8% over a year ago. And even what the agency calls an “owner’s equivalent rent” is 7.3% higher.

And then there’s the cost of foods for home purchase.

Leading the pack has been cereals and baking products, which are costing 6.0% more than a year earlier. Fruits and vegetables are up 2.1%.

But the BLS said the cost of protein — meats, poultry, fish and eggs — is unchanged from a year ago.

And the cost of eating out is up 6.5%.

What is not the main driver of inflation, for a change, is the price of filling up the tank.

Last year, BLS reported that gasoline prices were up 25.6% from the same period a year earlier.

That’s not to say fuel is cheap. But it has dropped by 3.3% in the past year.

Perhaps unrelated, the cost of new cars is 2.9% more than last year, with used car prices actually down 6.6%.

The BLS, aside from publishing national figures — the ones used to adjust the Arizona minimum wage — also released some more state-specific data for the Phoenix metro area, which includes Maricopa and Pinal counties. The most notable difference is that rents here are up year-over-year by 9.5%.