Arizona small businesses brace for another jump in minimum wage

The statewide minimum wage in Arizona will be $14.35 beginning January 1, a 50-cent increase from the 2023 rate of $13.85.

The state minimum wage rate resets every January to reflect the rate of inflation. The historically high inflation rate caused the minimum wage rate to jump more than $1 in the readjustment from 2022 to 2023.

How we got here

Prior to 2006, Arizona did not have a statewide minimum wage, aligning instead to the federal minimum wage.

But in 2005 Arizona voters passed Proposition 202, a measure that established a state-level minimum wage rate that included annual cost of living increases.

A decade later, Arizona voters passed Proposition 206, which increased the minimum wage, maintained the annual inflation adjustments, and mandated employers to provide employees paid leave. That measure easily passed 58-41.

While Arizona voters were increasing the mandated state-level wage rate, local voters in some jurisdictions were doing the same. Flagstaff and Tucson have set their own minimum wage rates, actions that courts have ruled are permissible despite state legislative attempts to prevent city-by-city rates.

Some cities go even higher

Flagstaff and Tucson’s local wage laws also include annual inflation adjustments.

As a result, the minimum wage in Flagstaff will be $17.40 per hour next year. Tucson’s local ordinance phased-in a $15 hourly rate to begin January 1, 2015. The city rate in 2024 will be the same as the state’s at $14.35.

Pressure on job creators

Employers are feeling the crunch.

Chad Heinrich, Arizona state director for the National Federation of Independent Business, said small businesses are already dealing with the upward pressure on costs attributed to inflation.

“Job creators are already grappling with increased costs thanks to an inflation rate that remains stubbornly high,” he said. “The low unemployment rate, though, means employers are fighting to attract talent, which leads to bigger paychecks for jobseekers. Market forces are leading to increased wages – mandates just make hiring more expensive.”

Where Arizona ranks

Arizona is in the top-10 of states with the highest minimum wages. The top-three are all in the West: Washington at $15.74, California at $15.50, and Oregon at $15.45. Three states are at $15, followed by Arizona.