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Feeling the impact: Businesses in Peoria adjust to minimum wage hike

Posted 3/3/17

By Philip Halidman, Independent Newsmedia

Low-wage workers are now reaping the benefits of a nearly $2-an-hour minimum wage hike approved by voters in November.

But for some West Valley …

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Feeling the impact: Businesses in Peoria adjust to minimum wage hike

By Philip Halidman, Independent Newsmedia

Low-wage workers are now reaping the benefits of a nearly $2-an-hour minimum wage hike approved by voters in November.

But for some West Valley businesses, the increase has created challenges.

Guy Erickson, CEO and president of the Peoria Chamber of Commerce, said it is the small guys who have really been hurt by the increase.

The Peoria Chamber’s membership is about 400 merchants, the majority being local small businesses.

“Mostly I’ve heard of businesses cutting back on some employees or not being able to hire more as they usually would going into the spring training season,” he said. “It’s sort of a damned if you do and damned if you don’t situation. We are a very small microcosm in the grand scheme – multiply that by how many other businesses are dealing with the same thing and this new law is having a huge impact on small business.”

Raoul Sada, CEO of the Surprise Regional Chamber of Commerce, which also has about 400 members, concurred that the wage hike is affecting area small businesses, which employ nearly half of private sector workforce.

In a recent Surprise Chamber survey, 75 percent of respondents stated they were considering raising prices or automating services to drive down labor costs.

It is safe to assume retailers and the hospitality sector, including restaurants, will raise prices on goods and services to compensate for the increase, he said.

“The question is: will higher prices also raise the cost of living for employees, chipping away at the benefit of the higher wages? Time will tell,” Mr. Sada said. “The jobs that make up the local economy — and the businesses that create those jobs — help workers provide for their families and lead healthy, comfortable, and fulfilling lives. To keep the economy vibrant and to continue to create opportunity for workers, we must ensure that new businesses can be launched and current ones can be expanded.”

Maids of Honor has been providing professional cleaning services to the Northwest Valley and much of the metropolitan area north of Interstate 10 since 1991.

The company deploys six company cars throughout the Valley and employs a staff of about 15, and nearly all were affected by the wage increase.

Owner Cathy Sandberg said  she had to raise rates 4 percent.

“We’re feeling the impact. This has an  effect everywhere,” she said. “We’re trying to figure out ways to lessen the blow.”

On Jan. 1, the minimum wage went up from $8.05 to $10 per hour. It will increase to $10.50 in 2018, $11 in 2019, and $12 in 2020.

The new law also states that employers must begin providing paid sick leave, July 1.

A lawsuit filed by the Arizona Chamber of Commerce and Industry could stop the law, but that decision will be made by the Arizona Supreme Court.

The group argues that the voter initiative violates the law because it creates new costs to the state without providing a new revenue source.

The Supreme Court will make the final decision, and hold a hearing March 9.

Before the minimum wage law, Ms. Sandberg paid her cleaners a starting wage of $8.50 an hour. Workers receive 35-40 hours of training and then average about 1.5 hours of drive time a day.

Because of this she eliminated employee  incentives and considered charging a credit card fee.

“Driving from house to house takes time. That is significant,” she said. “And when sick pay goes into affect, that will affect me a lot.”

Another issue involves workers employed before the pay raise who are getting paid less than a new hire who has the benefit of the $10 increase. Because of this, Mr. Erickson said the Peoria Chamber decided not  to hire another intern or part-time person.

“We had budgeted $8.50 an hour, but did not account for having to pay all the interns $10,” he said. “With the new law in place they start at the same rate now that someone who started at $8.50 and earned their way to $10. That automatically makes the current employee feel they should be entitled to a raise. If I can’t afford to give them a raise, rather than lose the good employee, it’s easier to not hire a new employee and upset the apple cart.”

Thomas Nacinovich, owner of Spa 810, which opened late last year and provides non-surgical, non-invasive anti-aging treatments, said the minimum wage increase is affecting his business indirectly.

Spa 810’s sheets and linen supplier, which employs low-wage earners, raised their prices, causing Mr. Nacinovich’s expenses to jump.

“We are staying with the vendor, but also considering other suppliers,” he said.
More than 700,000 workers earned a wage of $12 or less during 2015, according to the Arizona Department of Administration.

Nearly 80,000 workers, or 30 percent of Arizona’s workforce, benefited from the increase, with about two-thirds older than 24 years old, most being women, according to Grand Canyon Institute.

Mr. Erickson said lower-end jobs were never meant to support a family.

“These are jobs to allow young people an opportunity to see what the working world is all about – and hopefully realize the smartest thing they can do is get a good education to eventually get a higher paying position,” he said.