Phoenix had the highest small-business wage growth rate among the major metropolitan areas in the nation, according to a Paychex-IHS Markit report. The study analyzed the top twenty metropolitan areas in the nation and determined that Phoenix had the fastest wage growth by over half a percentage.
Phoenix small-businesses posted a 4.92 percent wage increase over last year’s wages. Moreover, small-business employees in Phoenix generated over $90 more in weekly earnings than the second-ranked city, Riverside, CA. Overall, small-businesses in the western region led all other regions in wage growth.
According to the US Small Business Administration, 99.4 percent of Arizona’s businesses are small. Additionally, 44.5 percent of Arizona employees work for a small business, so this rapid wage growth impacts a large fraction of state workers.
NFIB state director Chad Heinrich asserted, “Small businesses are the bulk of our state’s economy, which is indicative of the strength of these businesses.”
Heinrich explains that the growing demand for employees is a main reason for the rapid wage growth.
“We have a very inviting business climate, which is everything,” Heinrich stated. “So when we look at the creation of a business climate that’s conducive to small business growth, we have to give credit to our state leaders — Governor Ducey, state legislators, and others – on their business-friendly policies.”
The optimism of small business-owners leads to more investment in their companies. The addition of capital investments and the consequential need for additional staff drives this wage growth.
“There’s more capital spending, and when that happens, the investment in people has to follow,” Heinrich asserted. “When we see optimism through the business owners, that leads to more capital, and with more capital, that leads to more people.”
Plus, this wage growth will likely translate to larger corporations as well. Heinrich highlights that this rapid increase will create a ripple effect among all businesses in the state.
Heinrich explained, “You’re going to see wage growth across the entire business sector. All businesses are competing for the same talent, so it will not be isolated to just small businesses.”
The universities also play an important role in this equation. As the local universities generate more talent, employers have a wider selection of potential employees. This allows small-businesses to get off the ground and expand into larger businesses.
Arizona continues to prove itself as the optimal state for small-businesses to launch and flourish. As wage growth and small business optimism rise, so will the success of businesses in the state.