Although the Federal Minimum Wage is currently set at $7.05 per hour, our Arizona State Legislature has recently mandated increases to the state’s minimum wage, which is currently set at $11 per hour.
When given the fact that a wage increase for an individual employee that is based on their job performance will then increase their purchasing power and ultimately improve their quality of life, one might assume that an across-the-board increase in minimum wage earners would elevate the quality of life of all minimum wage earners. But, could it really be that simple?
The free market approach provides for increasing a person’s wage based on that worker’s individual merit. This merit would include growth in job related skills and knowledge, certification, specialized training, increased job performance, experience, dependability and ability to work with other employees. This allows the employer the ability to take the risk of hiring an un-skilled or entry-level candidate, then investing in that new hire by sponsoring an on-the-job training period.
The free marker approach allows the employee the ability to negotiate a rate of pay that is commensurate to their individual worth to that employer. When negotiations for pay increases fail, the employee is free to take their newly-acquired training, skills, experience and knowledge and shop them elsewhere to other employers.
My observations are based on ten years of operating a food service business in Quartzsite, Ariz. where I currently employ up to 30 people annually, with nearly half of those employees starting at the minimum wage. These jobs include custodial, dish washer, busser, cashier, host, server, prep cook and line cook.
So, what have I concluded to be the results of the mandated Minimum Wage Increases after observing and implementing them for several years?
- Increasing minimum wages with the across-the-board method negatively affects everyone, those working and those not. The “Law of Unintended Consequences” states that there is a “gap between our ability to innovate and our ability to forsee the conseuqences.
- This will trigger a survival response by small business employers, manufacturers, ranchers, farmers and other industries structured around the use of minimum wage workers. This will cause an increase to their costs of goods sold, forcing them to increase their prices, while passing that increase on to all consumers.
- Increasing minimum wage requires all employers to restructure all employees’ pay, as an employer cannot elevate a minimum wage employee above an employee with seniority and experience. This impacts all structured merit and step pay increase programs like those that are currently used by most small businesses, hospitals, manufacturers, educational and municipal government organizations.
- The people most negatively affected by this minimum wage increase are the very same employees intended to benefit from that increase. Their purchasing power will have been eroded by increased costs. Others who will also be seriously affected are people who depend on Social Security, retirement systems, or who are on fixed incomes based on Cost of Living Adjustments.
- Cost of Living Adjustments (COLA) are based on national costs, rather than the regional increases resulting from the statewide mandated minimum wage increase.
- Every person and business in this state will pay for these increases, resulting in Arizona’s manufactured goods becoming less competitive nationwide, and also in the global marketplace.
- As of Jan. 1, 2020, Arizona’s minimum wage will have risen by 70 percent, to $12 per hour. However, it will not end there. The plan is to continue increasing to a targeted $15 per hour.
- As a business owner, I must continue raising my prices as necessary in my struggle to survive. At the same time, I must search for better and faster machinery, along with a new business strategy that requires fewer employees. What a shame!
(Editor’s note: Simpson is the Mayor of Quartzsite and a business owner. He said he was writing this as a business owner and it does not necessarily reflect the policy of the Town of Quartzsite.)