Some Arizona businesses support Proposition 206, which would raise the minimum wage to $12 per hour by 2020, but others say it would devastate them.
Arizona’s Proposition 206, which proposes to raise the minimum wage and guarantee employees paid sick time, has split the state’s business community.
The unions and nearly 200 local small businesses have come out in support of the measure, saying it would be better for their employees and the community as a whole. They believe more money in employees’ pockets would equate to more money spent in their businesses, boosting the state’s economy.
The state’s most influential business organizations, representing large corporations, small businesses and restaurants, oppose it. They argue the increased wages would be disastrous for the local economy, forcing local businesses to close, eliminate entry-level jobs and raise the prices of goods and services.
A yes vote on Proposition 206, also called the Healthy Working Families Initiative, would gradually increase the minimum wage from Arizona’s current $8.05 per hour to $12 per hour by 2020. It also would require employers to offer paid sick time. A no vote would maintain the current regulations. Currently, the state adjusts the minimum wage annually based on inflation. Employers set their own paid-sick-leave policy.
The current minimum wage equates to about $17,000 a year.
By the book
About a year and a half ago, Changing Hands Bookstore, which has locations in Tempe and Phoenix, began paying employees at least $10 an hour.
“We moved forward with doing what is right for our community and our employees,” co-owner Cindy Dach said.
She said it meant less of a raise for employees already earning higher wages. But the owners thought it was the right thing to do. Dach said they hoped raising salaries would mean employees would no longer need to come to them for a loan to fix a tire or handle an emergency, that it would mean better applicants, and that happy employees would stay longer.
“And a year later, it has worked,” she said. “I think we made more people able to live. I feel like we are surrounded by people who feel like we are invested in them.”
Dach supports Prop. 206. If it passes, she said, they will use the same process to move to $12 an hour by 2020, focusing on raising the salaries of those at the bottom first.
“There is no way we can walk into the future raising everybody’s wages the same,” she said. “But raising the minimum wage further will help people care for and support their families. A living wage and earned sick time equal happy, healthy, productive employees.”
And Dach believes there will be an economic payoff. She hopes when workers have more money in their pockets, they will spend it with local businesses.
“We worry. So much of what we do is online for less money,” she said. “But if people have more money in their pockets, they will take those dollars and support local businesses. We hope they will choose to buy here.”
Dach said they are confident they can make up the additional cost by recapturing some of the revenue now going to online retailers. She’s challenged their marketing and buying teams to be more innovative.
A cascading effect
Carlos Ruiz, owner of HT Metals in Tucson, already pays his five employees above minimum wage. His lowest-paid worker earns $12 an hour. But Ruiz said Prop. 206 would still hurt his business.
“An employer has a certain value of labor that they’re paying for,” he said. “I fear once this hits $12 an hour, my minimum is now going to have to be something like $14 or $15 an hour for me to acquire the right skill set. And that still might not be enough. And then I’ve got a person now making $16 an hour, and he might have to go to $20. It’s a cascading effect.”
If Prop. 206 passes, Ruiz expects he would have to raise salaries, and find savings in other ways. That could mean raising the prices of the metal he sells, or it could mean cutting back other employee benefits such as paying for employees’ uniforms or providing two weeks of paid vacation.
But Ruiz said his business isn’t his only worry. He also serves on the Tanque Verde Unified School District governing board. He said they have many employees, such as student aides and crossing guards, who currently make less than $10 an hour.
“If this (Prop. 206) happens, we’re going to be laying people off in our school district,” he said. “We can’t absorb the increase in wages. It could be close to a $100,000 hit on our district.”
Ruiz said he fears supporters of the ballot measure don’t understand the broader implications.
“Yeah, so it’s for the guy at the Taco Bell,” he said. “But it’s everybody. Everything’s got to go up.”
He said it would make more sense to develop more programs to help individuals making lower wages improve their skills so they can move into higher-wage jobs.
Making a fair trade
Fair Trade Cafe has two locations in downtown Phoenix. Owner Stephanie Vasquez said she already pays her 16 employees above minimum wage, and already exceeds the proposal’s 2020 goal of $12 an hour.
“I’m Fair Trade Cafe. I believe in fair everything,” Vasquez said.
She believed the decision was a “smart move” for her business, her employees, their families and the economy.
“To me, it’s a crucial investment in your business. Your employees come first,” she said.
And Vasquez said as a result, that money comes back to the business in other ways. She said higher-paid employees play an active role in responsibly running the business, from not overpouring drinks or wasting paper products to not giving away items for free. They also stay longer.
“That investment is returned,” she said. “It’s supported and reciprocated in the employees’ ethics and support for the business.”
She said her business model also attracts more customers who want to spend money with businesses that respect their employees. And when more of those customers are making higher wages, she said, they will spend even more.
She called comments from other business owners that the higher wage would put small companies out of business “a scare tactic.”
“We have accepted in Arizona that it’s OK for schoolchildren to go to work because the jobs their parents hold don’t meet their basic needs,” she said.
Double wage whammy
As CEO of the Hozhoni Foundation, Monica Attridge oversees about 200 employees in Flagstaff and Prescott who care for about 140 individuals with intellectual disabilities. Most of her employees are paid less than $12 an hour, and many less than $10 an hour.
Attridge said she has about 40 unfilled positions. Turnover is high in this industry.
“If you raise your salaries, those positions still don’t get filled,” she said. “You just have to pay overtime at a higher rate.”
Attridge faces a possible double whammy on Election Day. In addition to Prop. 206 statewide, Flagstaff voters are considering Prop. 414, an initiative that would raise the minimum wage within city limits to $15 by 2021. She said her company, and many others in her industry, may not survive.
Many of the company’s services are funded through a combination of state and federal money. They have little control over revenue or expenses. The state Legislature decides how much money they get each year, and their staffing levels are set by mandatory ratios. Attridge said they are currently funded at 79 percent of what the state has determined their actual costs to be.
“We are looking at about another 10 percent increase in costs, maybe a little bit more for some providers. And we’re already underfunded,” she said. “I have figured it would probably cost us about $300,000 a year. We can’t sustain that for long.”
She said Hozhoni Foundation is trying to mitigate the impact by attempting to diversify its revenue sources, seeking contracts to provide other types of services to individuals with disabilities and boosting fundraising efforts. They are also hoping the Legislature will increase the amount it pays.
If the Flagstaff measure passes, Attridge said, many services providers will leave the city.
“And if we were to close — and I’m not saying that we are closing — I don’t think there would be any choice except for clients to have to move to other areas,” she said. “That’s very sad.”