Proposition 206 Impact in Tempe

Proposition 206 Impact in Tempe

53 percent of Tempe businesses last year didn’t plan to make adjustments, such as reduction of employees or raised prices, to comply with the new minimum wage raise and paid time off initiative according to a Tempe Chamber of Commerce survey.

Communication Director of the Tempe Chamber of Commerce Chris Samuels said there is the possibility these businesses were simply able to afford the raise and paid time off. However, there could be a variety of reasons businesses did not need to make adjustments in preparation Samuels said. “Most importantly they have the financial ability to increase payroll,” Samuels said.

However, Nancy Roberts, professor emeritus at Arizona State University’s Department of Economics, said that ultimately the minimum wage raise will negatively affect businesses in Tempe. “Increasing the price of the first rung on the employment ladder will hurt the very people that minimum wage supporters purport to help,” Roberts said.

More than half of the businesses surveyed in 2016 expected the minimum wage raise to have negative effects Samuels said. Roberts added, “the biggest misconception is that raising the minimum wage will help solve the problem of poverty.”

Roberts said that restaurants and hotels will be most affected by the wage raise, noting “restaurants and hotels are big users of unskilled labor. Restaurants at all levels spend about 33 percent of each dollar on salaries and wages… Increase the costs of running a business and decreasing the already slim profit margins will lead to businesses shutting down.” 

Still, Roberts said raising the minimum wage affects the consumer and employees because business owners will economize, noting “some people will lose their jobs; others will find their hours cut. Customers can expect to see prices increase.”  

Since Proposition 206 has been in effect, Samuels said, “I haven’t heard anything terribly negative… I think people are just trying to get on with running their business.” Although, business owners did not report to the chamber as many problems with adjustments as they anticipated in the survey, that does not mean that they are not an issue, Samuels said adding, “We had a couple of chamber members have to drop their membership because of 206.”

Samuels has also had the chance to observe some of the adjustments businesses had to make on a first hand basis. “We’ve seen restaurants that have one store are getting hit the most,” Samuels said. “Smaller restaurants have dropped the membership.”

Maricopa County Communications Director Fields Mosely said the county is preparing to pay workers by allocating funds into a savings and using that money in the future for their payroll.

Proposition 206 went to the state ballot in November 2016. The proposition proposed to raise the state’s minimum wage and give workers paid time off. It was approved and put into effect on January 2017. The state’s minimum wage is now $10 an hour and will increase to $12 by 2020.

The survey was conducted in December 2016 by the Tempe Chamber of Commerce to it’s members. Members include small and large business owners located in Tempe and the surrounding cities

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