Prop. 202: The devil is in the details, says business lobby director
Measure could raise prices, reduce company operations

ARIZONA – The director of an Arizona small‑business advocacy group wonders why the proposition to raise the state’s minimum wage to $6.75 requires more than 1,700 words.

Because there’s a lot more to Proposition 202 than meets the eye, said Michelle Bolton, state director of The National Federation of Independent Business /Arizona. “The devil is in the details,” she added.

If OK’d by voters this fall, Prop. 202, also known as the Arizona Minimum Wage Act, would take effect Jan. 1, 2007, and the minimum wage would climb from $5.15 to $6.75 per hour. In addition, the hourly rate would increase in each subsequent year by the cost of living, as measured by the consumer price index.

Prop. 202 is backed by the Arizona Minimum Wage Coalition.  On its Web site, the group states that “Raising the minimum wage will give thousands of Arizona workers a fair shot at taking care of themselves and their families.”

The coalition also states that raising the minimum wage is supported by most Arizonans “because it sends a clear message that, in Arizona, we still value hard work.”

Bolton called the measure “disingenuous, through and through.” She emphasized that although proponents are touting the measure as just a wage increase, the proposition is much more than that.

The proposition states that Arizona government and small businesses–those with less than $500,000 in gross annual revenue–would be exempt from the law.

“The small‑business exemption is a ruse,” said Bolton. “As currently written, a business that meets the revenue minimum would also have to be exempt from the very limited Federal Labor Standards Act minimum‑wage requirements to qualify.”

The federation routinely counsels its members that, practically speaking, all businesses are subject to the federal minimum‑wage provisions, said Bolton. This means if Prop. 202 passes, it will affect all businesses, regardless of revenue.

And, Bolton asks, if the proposition is good for the private sector, why doesn’t it apply to state workers?

She also said that if the measure passes, it will grant enhanced rights to illegal immigrants. The reason, Bolton continued, is because a state commission would be created by the proposition to enforce the minimum wage, and all employees –including undocumented  workers–could lodge complaints against their employer with the commission.

She said undocumented employees already have the right to file minimum‑wage complaints with the U.S. Department of Labor,  adding that the state commission would give them the opportunity to pursue action on two fronts.

Jim Thompson, owner of the Dairy Queen in Cave Creek, said he would gladly pay $2 or $3 above the current hourly minimum – if he could find people to work. But he opposes the proposition for another reason.

“I’m never in support of the government telling businesses what they have to pay people,” Thompson said. “The law of supply and demand should dictate what people earn.”

Arizona currently uses the federally mandated rate of $5.15 as the minimum hourly wage. Congress last raised the minimum rate in 1997, from $4.75 to $5.15. The U.S. Senate last month rejected a bill that included a cut in estate taxes and a $2.10 minimum‑wage increase over three years.

Sarah Trone, general manager of the Hampton Inn in Anthem, said she supports the initiative because people can’t live on the current minimum wage, citing the rising cost of gasoline as a factor.

Trone said there’s a good reason that none of the hotel’s employees makes less than $8 an hour.  “You need to offer a competitive wage to get good people, ” she explained.

Arizona had an estimated 43,000 employed wage and salary workers with earnings at or below $5.15 per hour in 2004, according to an April 2005 report by the U.S. Bureau of Labor Statistics. The report also stated that minimum‑wage workers tend to be young, female and employed part time.

An increase in the minimum wage may result in higher labor costs for Arizona businesses, according to a fiscal analysis prepared by the state’s Joint Legislative Budget Committee. The analysis states that businesses may attempt to raise prices, reduce other labor costs and/or substitute capital for labor through automation.

“If they are unable to pass on the higher labor costs to consumers or raise their productivity, businesses may experience reduced profits and possible reduced operations in the state,” according to the analysis.

The budget committee wasestablished in 1966 to ascertain facts and make recommendations to the Arizona Legislature regarding all facets of the state budget, state revenues and expenditures, future fiscal needs, and the organization and functions of state government.

Noah Clarke, an economist at the Phoenix‑based Goldwater Institute, said raising the minimum wage will actually hurt the people it’s aiming to help.

“The proposition, if it passes, will raise the minimum wage by 30 percent,” noted Clarke. “When the price for people goes up, employers hire fewer people.”

The Goldwater Institute is a conservative research and educational organization studying public policy.

Clarke said those people earning minimum wage in Arizona are often providing supplemental income to their families. “The average family income for minimum‑wage workers in Arizona is almost $39,000 a year, according to the Employment Policies Institute,” he stated.

The executive committee of the Arizona Minimum Wage Coalition is made up of representatives from the United Food and Commercial Workers Local 99; Service Employees International Union Local 5 AZ; Arizona Association of Community Organizations for Action Now; Arizona Education Association; Arizona American Federation of State, County and Municipal Employees; Arizona American Federation of Labor‑Congress of Industrial Organizations (AFL‑CIO); Communications Workers of America Local 7019; and Phoenix Fire Fighters Local 493.

Reach the reporter at barry@thedesertadvocate.com