Food-service jobs saw record first-quarter jump, despite wage increase

Arizona gained a record number of new food-service jobs in the first quarter of 2017, despite a new, higher $10 minimum wage that some feared would lead to a drop in such jobs. (Photo by Lennart Tange/Creative Commons)

WASHINGTON – Arizona added a record 15,100 food-service jobs in the first quarter of 2017, despite a voter-mandated Jan. 1 increase in the minimum wage that some analysts believed would cause a reduction in service industry jobs.

Opponents of Proposition 206, which raised the minimum wage from $8.05 to $10 an hour, said one quarter’s worth of job gains is not enough to prove the full impact of the law, which phases in more wage increases through 2020.

But the growth in the first quarter was surprisingly strong, said Lee McPheters, a research professor at Arizona State University’s W.P. Carey School of Business, who said normal growth would be less than half the posted rate.

“This was a shock to all Arizona analysts, because common-sense economics tells you, well the cost of food service workers has suddenly gone up to $10 an hour, there’s going to be fewer of them,” said McPheters, who calculated the increased based on Bureau of Labor Statistics numbers. “In fact this was an all-time record quarterly increase for food service workers.”

McPheters said Arizona gained a total of 56,200 jobs in the first quarter of 2017, with food service and health care – which added 11,800 jobs – accounting for the largest increases. The 6.8 percent growth in food service jobs was the highest growth rate in the nation, according to McPheters’ report in May to the Economic Club of Phoenix’s annual economic outlook luncheon.

Despite the gains, opponents of Proposition said it is still too early to say anything conclusive based on the quarterly report, and that results will become more concrete once the law is “fully implemented.”

Under the law, which voters approved by a comfortable 58-42 percent margin, the minimum wage will continue to rise, to $10.50 an hour next year, $11 in 2019 and $12 by 2020.

Garrick Taylor, a spokesman for the Arizona Chamber of Commerce, pointed out that Arizona is currently in the “early stages of implementation for this law.”

“As you know, we were opposed,” to Proposition 206, said Taylor.

While the chamber would never be disappointed with job growth, Taylor said that the experience of other states that have faced a mandated increase in the minimum wages “gives us cause for concern.”

“We hope that we will be proven wrong,” he said.

But some businesses said they have already been stung by the “trickle-down” effect of the wage increase.

MaryBeth Scanlon said there were other factors behind her decision to close Pizza People Pub, including restaurant saturation in downtown Phoenix, but that the wage increase played a role. Scanlon said the law not only increased the amount she had to pay her workers, but also the amount she had to pay suppliers, who had to raise prices as well.

Scot Mussi, president of the Arizona Free Enterprise Club, said that long-term trends show that increases in minimum wage tend to bring about lower growth in jobs for “people who need them most.”

Mussi said that it’s too early to “draw definitive conclusions based on one quarter.”

But McPheters predicted that the growth in restaurant employment could continue through this year, driven by the “cultural trend” in which people are spending less time and money on food preparation and more time eating out.

Still, he said he sees a “movement to technology” in the future to replace workers in the food service industry. While there will probably be steady food service job growth this year, McPheters said, don’t be surprised in two to three years if “you’re clicking on a tablet to order.”