By Philip Haldiman, Independent Newsmedia

Minimum wage has gone up for the second year in a row, and the debate is returning over whether such increases help or hurt the economy.

The voter approved hike includes a $3.95 increase over four years. This year, it increased from $8.05 to $10. Now in the second year of increases, it went up to $10.50 on Jan. 1.

Additionally, minimum wages will increase $11 in 2019, and $12 in 2020.

Proponents of an increased minimum wage contend it is not only necessary to improve the lives of workers, but that it also improves the economy by increasing purchasing power and creating more stability for the middle class. However, opponents believe an increase disproportionately affects small businesses and that such a move would be counterproductive by decreasing opportunity for the young and lower-skilled looking to enter the workforce. Opponents also say it causes business owners to raise prices.

Feeling the effect

Raoul Sada, president and CEO of Surprise Regional Chamber of Commerce, which also serves the business communities of El Mirage, Sun City, Sun City West and Youngtown, said area businesses were affected by the initial increase and will be affected again by this year’s increase.

He said based on some conversations with small business owners the minimum wage increase has resulted in an increase in overall prices for many area merchants.

“Some of the small retailers, in-homecare businesses and landscape businesses that pay minimum wage, are typically in highly-competitive industries with low profit margins, and this has resulted in additional labor costs being passed on to the consumer, or simply resorting to hiring more part-time employees to avoid paying for additional fringe benefits,” Mr. Sada said.

A study released earlier this year suggested that a one dollar increase in the minimum wage leads to a 14 percent increase in the likelihood of forcing a 3.5-star restaurant out of business. The study, conducted by the Harvard Business School, considered 3.5 the median rating.

However, lower quality restaurants, which are already closer to the margin of exit, are disproportionately impacted by increases to the minimum wage, the study said.

Guy L. Erickson, president/CEO of the Peoria Chamber of Commerce, said retail, restaurants and other sectors of the service industry will hurt the most from the increase. He said there will be another wave of cutting back on employees and rolling out automation.

For example, employers might eliminate bussers, forcing food servers to take over their duties, or install order kiosks at restaurants to eliminate labor costs, he said.

“Think about it, if you set a kiosk on a table, you can look at the menu, order your food, push a few buttons and pay your bill. You don’t have to wait to order your food or get your check. This may have been cost prohibitive before, but now you might see more of that,” Mr. Erickson said.

A number of McDonald’s throughout the West Valley have already installed kiosks in their lobbies giving patrons the option to order electronically.

Mr. Sada said a fast food member of the Surprise chamber announced earlier this year that all their restaurants will install self-serve kiosks, as a way to provide faster service that will also reduce the needs to cashiers.

“We saw a similar shift in the car wash industry,” Mr. Sada said. “A few years ago, the typical car wash employed 20-50 employees. Today, with automatic washers, a business can wash more cars per hour with much fewer people on the payroll. This is one of the unintended negative consequences increasing the cost of low-skilled, minimum wage labor.”

New demands

But, Mr. Sada said it is not all bad news. As low-skilled positions get replaced with automation, there will be new demands for skilled labor, which typically demand higher wages. He said this is why the Surprise Regional Chamber of Commerce wants to ensure the future workforce is trained and qualified, particularly by sponsoring the Career and Technical Education programs in the Dysart Unified School District.

He said CTE programs are the backbone of a strong, well-educated workforce, which fosters productivity in business and industry and contributes to the Northwest Valley’s leadership in the marketplace. Having skilled workers is one way to offset the impact of a low-skilled workforce that is dependent earning a minimum wage, Mr. Sada said.

“It is critical for our community to build a strong skilled workforce, which is key to building a strong and local community,” he said. “Studies, as well anecdotal comments from local business owners, have shown that these minimum wage policies often lead to reduced employee hours, job loss and a higher cost for goods and services.”

CTE courses typically include hands-on, career focused learning, giving students the skills necessary to graduate into post-secondary, career and life opportunities.

Dysart spokesman Zachery Fountain said  CTE programs are the backbone of a strong, well-educated workforce, which fosters productivity in business and industry and contributes to America’s leadership in the international marketplace.

He cited former Dysart student Jordan Chamberlain, who used engineering opportunities in the district to obtain a job right out of high school, a time when most of his peers are working minimum wage jobs.

Mr. Fountian said all those engineering-related educational programs provided Mr. Chamberlain the opportunity to get a job as a machinist at Phoenix-based Rugo Machine Shop Services.

The district’s Career and Technical Education programs are aimed at preparing students to enter the workforce with the academic and vocational skills needed to compete successfully in the job market, he said.

“Being career and college ready, our CTE programs include everything from architecture and engineering to medical and culinary arts so that students can compete for higher wage careers,” Mr. Fountain said. “Jordan Chamberlain is an example of someone who took advantage of the engineering program at Shadow Ridge High School,” he said. “He was able to take his experience at Shadow Ridge and West-MEC to attain a machinist position that will assist him in achieving his engineering goals as he works through college.”

Cities planning ahead

When the minimum wage law passed in 2016, the city of Peoria did an evaluation of positions and wages that would be impacted by the increase, which primarily impacted part-timers, employees without benefits in both wages and sick time accruals.

Spokeswoman Jennifer Stein said adjustments were made to make sure the city met the requirements for 2017, and planned for the financial impacts for 2018, 2019 and 2020.

She explained the city estimated the long term impact would be about $265,000 per year — $167,000 in adjustments for fiscal years 2017 and  2018, and another estimated $100,000 for fiscal years 2019 and 2020.

The city maintains a five-year operating forecast for all major funds.

There could be some question as to how the 2020 increase will affect city contracts because of the expectation there will be some increased contract costs from businesses that employ minimum wage workers, she said.

“We made sure to adjust our forecasts accordingly,” she said. “We did not need to make cuts to the budget, however, increased costs across the board, including personnel costs, utility costs, commodities, etc., will continue to outpace revenue growth and put pressure on maintaining service levels and meeting the demands of growth.”

In Surprise, Human Resources Director Mark Schott said there were no positions within the city’s various pay plans that were impacted by the first increase to $10 per hour. However, the January 2018 increase to $10.50 impacted a few positions within the city’s Seasonal Pay Plan, which is used primarily by the Community and Recreation Services Department for temporary and part-time employment.

The minimum for certain seasonal positions will be adjusted from $10.35 per hour to $10.50, which will affect positions such as Groundskeeper, Lifeguard and Service Worker.

Looking forward, positions within the Seasonal Pay Plan will be the only positions affected by the minimum wage law.

“Likely, the Seasonal Pay Plan will continue to be addressed in years to come, similar to the 2018 adjustment,” Mr. Schott said. “No positions currently exist in the General Pay Plan, which are less than $12 per hour.”