Unintended Consequences come with Arizona Proposition 206

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Posted by William Sleiman on Friday, November 4th, 2016, 4:29 PM PERMALINK

Arizona Proposition 206 would increase the minimum wage to $12 by 2020.

Raising the minimum wage sounds like a great idea but ends up harming many people and can lead to negatives effects that outweigh the benefits. When the minimum wage is increased, the cost of labor is higher and businesses can’t afford to pay as many employees.

If the minimum wage is increased, jobs are going to be harder to come across. Studies have shown that a $1 increase in the minimum wage leads to a 1.48% increase in unemployment Specific to Arizona, it has been estimated that 75,000 Arizonians won’t get hired if the minimum wage is raised too sharply.

Indeed, restaurants are replacing people by turning to cheaper alternatives like kiosks, computer screens, and other technological replacements. Wendy’s announced plans in May to install self-service ordering kiosks at its restaurants because of growing labor costs associate with rising minimum wages. Other fast food restaurants, like McDonalds, are testing self-service ordering kiosks.

Unfortunately, this primarily targets people who have little work experience. Usually, younger kids coming out of college fill minimum wage jobs to gain valuable work experience. If businesses have to cut labor cost, entry-level and minimum wage positions will be one of the first things impacted.

Minimum Wage increases could force businesses to provide goods and services at higher prices to offset increases in labor cost. Even employees who don’t earn substantially more than minimum wage don’t get the benefits from the increase in minimum wage but bear the cost when prices rise. Plus the minimum wage increase could be offset by the increases in prices and lifestyle.

Arizona would be better served under the current minimum wage law. Proposition 206 aims to raise the minimum wage to $10 in 2017, $10.50 in 2018, $11.00 in 2019, and $12 in 2020. Starting in 2021, the measure would increase the minimum wage with the cost of living. While Proposition 206 claims to artificially raise minimum wage, current minimum wage merely increase in accordance with the inflation rate and Consumer Price Index (CPI).

Making Proposition 206 worse for the economy, it guarantees 40 hours of annual paid sick time to employees of large businesses and 24 hours to those of small businesses. Reducing workplace and contract flexibility drives up costs for business operations, which could lead to a loss in jobs. This will be especially problematic for small businesses.

There are too many examples of the negative effects that raising the minimum wage can have on an economy, let’s not add Arizona to the list. Voters in Arizona should make the right decision on November 8th: oppose Prop 206.

Photo Credit: Bo Insogna

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