Youth employment bill to revive student starter jobs

A bill to boost part-time employment for students in Arizona is headed to the Senate this week, and the sponsor is hoping it will garner enough votes to go into effect by summer.   

Under the legislation, employers would be allowed to pay student workers less than the state’s minimum wage under certain conditions. They must be full-time students, younger than 22 and work no more than 20 hours a week.

The bill, H.B. 2523, is needed to alleviate high youth unemployment that is creeping up to 12 percent, said the sponsor of the bill, Rep. Travis Grantham of Gilbert.

“We need to stop the unintended consequences of the high minimum wage, which has effectively blocked young inexperienced part-time workers out of the workforce,” Grantham said. “I want those individuals to be given an opportunity to get a first job and build a resume. Not only is it important to the worker but it’s important to businesses that would like to hire them.”

Arizona voters approved multi-year wage hikes when they passed Proposition 206 in 2016. The initiative required that wages be increased incrementally every year for four years, from $8.05 an hour to $12 an hour by 2020. The law increased sick pay provisions, too.

Higher wages forcing out youth workers

Prop. 206 was intended to help raise incomes for working families. But it has ended up reducing much-needed starter jobs for youth, Rep. Grantham said.

Since the multiyear increases started in 2017, restaurants, university food courts, hotels, group homes and other businesses have reported cutting back on hiring unskilled and low skilled young workers.  

“We’ve targeted trying to eliminate those jobs,” said Bill Riddle, who owns the successful Valle Luna Mexican restaurant chain in the Phoenix area with his wife, Janie. “They make great future employees but to bring them in and train them and put a lot of money and effort into educating them on their first job is crazy because the money that it takes to underwrite them then is being taken away from the middle-class worker, the person who should be paid on performance.”

With more than 270 employees, Bill Riddle said their labor costs increased $401,678 the first year even though their employees earned more than minimum wage. When the final increase kicks in next year, it will have cost them $2.3 million in additional labor costs, he said.  

Businesses failing under multi-year wage hikes

Many businesses that rely on minimum wage workers cannot afford a 50 percent increase in labor costs under Prop. 206.

Restaurants that rely heavily on unskilled youth, have been among those hardest hit.

Even established businesses like the longstanding Las Margaritas in Tucson are suffering. Owner Terry Morse announced in November she was closing the location because of the wage hikes, rising sick pay and other reasons. Another Tucson mainstay, Zivaz Mexican Bistro, cited the wage hikes when it announced it was closing in July.

In Flagstaff, jobs for youth are “fading away” because of the wage hikes, Chamber President Julie Pastrick said in a letter supporting H.B. 2523.

Kelly Hibbs, the owner of Cultured Yogurt in Flagstaff, closed her small shop last year after a potential buyer backed out after learning of Arizona’s minimum wage hikes, she told the Arizona Daily Sun newspaper.

“This is heartbreaking for us to have it end this way. We loved the people who worked for us and our customers,” Hibbs said. “It’s not that we didn’t want to pay our employees more. We just couldn’t afford to do it.”

Industry supports H.B. 2523

Industry leaders, chambers and trade associations support Grantham’s bill to help students and industry including the Arizona Restaurant Association, the Arizona Chamber of Commerce and Industry and the Greater Phoenix Chamber.

The bill would allow employers to hire students part-time for as low as the federal minimum wage, $7.25. Currently, minimum wage in Arizona is $11.

On Thursday, it is set to go before the Senate Commerce Committee. It’s passage, however, is not certain.

Grantham said he pulled the bill from being heard by the committee on March 14 when the vice chair, Sen. Tyler Pace, expressed concerns including the law might cause the loss of jobs for higher paid employees.

Grantham said he has been working with Pace to find a resolution. Whatever Pace decides, his vote is needed for it to move ahead.