Low wage earners are likely already seeing the effects of the Jan. 1 minimum wage increase that raised the rate from last year’s $6.90 an hour to $7.25 an hour and $4.25 an hour for tipped employees.The five percent increase in wages is a result of the U.S. Department of Labor’s Consumer Price Index, which adjusts minimum wage based on current cost of living. Subsequent raises in the minimum wage rate are set to take place annually each Jan. 1.
Mike Wells, owner of Xtreme Bean, a coffee house on the corner of Southern and McClintock in Tempe, has been in business in the valley for almost 18 years. He said the bump in minimum wage has had little effect on his business.
“Personally, I’m not really affected because I start my people off at $7 an hour anyways, so bumping them up 25 cents doesn’t make a huge difference,” Wells said.
Wells went on to say that if the government mandated an increase in hourly wages to something like $10 an hour, it would have a larger effect on business owners everywhere.
“I would have to cut a couple of people to keep overhead costs down, and that would be bad for business because it would impact the quality of service,” Wells said.
Two Mesa Community College students, Amy Armstrong and Deb Ihrke, received raises as of Jan 1.
Both work for U.S. Airways and said they have noticed a decrease in business in the airline industry, “less people are flying” according to Armstong.
Both said they support the annual increases in minimum wage and Ihrke noted that at U.S. Airways the raise was a “big morale booster” for employees.
Although raising the minimum wage does increase income for some, it may result in a decrease in hours or even job loss for others. According to some economic theories, for every 10 percent that wages are increased, jobs among low-wage earners are decreased by 1-2 percent.
“Establishing minimum wage is helpful to people with limited skill sets who may not otherwise have an opportunity to advance,” MCC economics professor Doug Conway said.
Conway went on to explain that the minimum wage system allows workers who may not otherwise be able to enter the workforce, because of illness, disability, lack of education, criminal background, etc., a chance to have earning potential and purchasing power in the market.
According to Conway, the minimum wage line acts as a sort of safety net against poverty for these individuals.
Although some economists will argue against raising the minimum wage, Harold Cranswick, also an economics professor at MCC, disagrees with their arguments.
“Maybe it has value in ways we haven’t looked at before; ways in terms outside the supply and demand graph,” Cranswick said.
“The arguments for minimum wage are based on social reasons, not economic ones. It goes beyond economic reasons to caring about people,” he added.