Arizona voters favor minimum wage boost, but some economists have doubts

PHOENIX – A recent poll shows that a strong majority of Arizona voters support Proposition 206, a ballot measure to raise the minimum wage to $12 an hour by 2020. However, some local economists have expressed doubts about whether the measure would actually help low-wage workers climb out of poverty and some fear it may actually hurt the economy.

About 58 percent of the 779 voters polled said they favor the measure, about 32 percent oppose it and 10 percent were undecided, according to the Arizona Republic/Morrison/Cronkite News poll released Wednesday.

The measure, which will appear on the Nov. 8 ballot, is known as the Fair Wages and Healthy Families initiative, and it is intended to raise the income of families trying to survive on low wages, said Tempe City Councilwoman Lauren Kuby, a proponent of the measure.

“It’s ridiculous that people will come work full time and live in poverty,” said Julia Sayre, a bookkeeper at a law firm who plans to vote to raise the minimum wage. “I’m actually a little bit disappointed with the one that’s on the ballot because I don’t think it’s going far enough.”

However, one Arizona economist said raising the minimum wage is not the best way to help low-wage workers and impoverished families earn a living wage.

“I don’t think the minimum wage is the best tool for lifting a person throughout their life into higher-income brackets,” said economist Jim Rounds, president of Rounds Consulting Group Inc. “It’s not that I’m opposed to it, I just think there’s a better way to help the families.”

Rounds said the state should instead do a better job on its local workforce training programs – that way, the minimum wage won’t need to increase for workers to make more money.

The measure’s opponents said making low-skilled labor more expensive will make it more difficult for unskilled workers to get a job and will force businesses to get rid of employees.

“It hurts the very individuals the proponents claim to want to help,” said Garrick Taylor, a spokesman for the Arizona Chamber of Commerce.

“The mandates under Prop. 206 leave employers with only bad options,” Taylor said. “You can cut hours, institute layoffs, accelerate automation that would make employees unnecessary, raise prices or you could even close up shop. None of those things are good news for people looking for a job, or who have a job and want to keep it.”

However, other experts disagree.

“There is some sense to the argument that making low-skill labor more expensive could reduce employment of low- skill labor,” said Gary Solon, an economics professor at the University of Arizona. “But the empirical research on the subject finds that, in the range of minimum wage variation that occurs in the United States, those effects don’t seem to be terribly large.”

It’s unclear exactly how the measure would shake out if passed in Arizona. But on a national scale, the Congressional Budget Office released a report estimating the potential impacts if the federal government raised the minimum wage to $10 an hour. It suggested about 16.9 people would see an increase in their earnings, but only 19 percent of that added income would go to families living under the poverty line. It also indicated that about half a million to a million people would lose their jobs.

“For small changes in the minimum wage, you probably don’t do that much good, and you probably don’t do much harm,” Solon said. “Raising the minimum wage much, much higher could really distort outcomes in the labor market quite a bit, but I doubt that a change in that range is going to have huge impacts, really in any way. For either better or worse.”

“As with most policy changes, there would be both winners and losers,” he said.

Lee McPheters, an economist at the JPMorgan Chase Economic Outlook Center at the W. P. Carey School of Business at Arizona State University, said Arizona’s measure is not all “doom and gloom.”

“Most economists would say that the Legislature should not set wages,” he said. “Well, we have it, and it’s a fact of life.”

Arizona’s current minimum wage is $8.05 per hour, higher than the federal minimum wage of $7.25 per hour. About 44,000 workers in the state earned minimum wage or less in 2015, according to the Bureau of Labor Statistics.

Prop. 206 doesn’t just raise the minimum wage, it will allow cities to set their own minimum wage. Flagstaff could see an increase in minimum wage to $15 an hour if a ballot measure passes there.

“If you don’t have the skills and the education to make a living in Flagstaff, you should go somewhere where you can,” said Nancy Baca, a professor of economics at Northern Arizona University. She said a $15 minimum wage doesn’t make sense for the Flagstaff economy.

“It’s a really dangerous thing for Flagstaff to raise the minimum wage that high because we still do have a lot of small businesses that make our community unique … and it would really create a situation for them where perhaps they couldn’t survive,” Baca said.

Flagstaff has a high cost of living compared to other Arizona cities, and housing is the most expensive part of living there, she said. “Instead of artificially increasing minimum wage, why don’t we train and educate people so that they’re actually worth more, and so they get those raises naturally?”

In 2014, there were 5.1 million families living below the poverty level in the U.S., with 7,700 classified as working poor, according to a report from the Bureau of Labor Statistics. Those with higher levels of education were much less likely to be classified as working poor.

The ballot measure also would require some businesses to provide earned sick time for employees. For every 30 hours worked, employees would earn one hour of paid sick leave.

“Paid sick time is good for workers in general, from our perspective,” said Richard Merritt, president of Elliott D. Pollack & Co. “Most businesses already provide paid sick time.”

Companies use benefits, like paid sick time, to attract quality workers to a job, he said. If companies must provide the same benefits to everyone, a business loses some of its ability to stand apart from other businesses when recruiting.

“(Prop. 206) says that the annual paid leave time to employees would be 40 hours for the year in large businesses and 24 for the year in small businesses,” Solon said. “Talking about the latter, three sick days in the entire year, that’s not that many days. In both cases, my reaction is, I think they are symbolic issues. So, people get very worked up about it, but I don’t think the impacts are going to be terribly large, because they aren’t really such big changes.”

The poll, conducted Oct. 10-15, asked voters whether they would likely vote for or against Prop. 206, which would raise the minimum wage from $8.05 per hour to $10 per hour in 2017, then gradually to $12 by 2020. The margin of error for this question was plus or minus 4.1 percentage points.