Economist: Incomes up in Arizona because of strong economic policy, not because of minimum wage law

Arizona’s economy is booming, with more residents and businesses flocking to the Grand Canyon state. The latest economic numbers represent a complete reversal from where the state found itself a decade ago during the economic downturn when Arizona was hemorrhaging money and jobs.

Although the economic forecasts are promising, there are certain policies, including mandatory minimum wage and paid leave policies, that could lead the state in the opposite direction.

State and local-level minimum wage laws have been trending across the nation. Proponents claim to want to increase the standard of living for low wage workers, but the long term economic effects have been relatively uncertain, until now.

In a new study conducted by the Employment Policies Institute (EPI), economists from the University of California Irvine have measured the long-term effects of minimum wage laws across the country.

They conclude that there is no evidence that higher mandated minimum wages reduce poverty or reliance on public assistance, and that “the net effect of a rising minimum wage could be to further reduce workplace opportunities for those workers who need them most.”

But what does this mean in Arizona?

In 2016, voters approved Proposition 206 to raise the minimum wage for workers initially to $10 per hour in 2016 and increasing every year to eventually reach $12 per hour in 2020.

Arizona now has the fifth highest minimum wage in the United States. But the City of Flagstaff did not stop there. Voters in the northern Arizona city voted to raise the minimum wage to $11 per hour in 2018 and it will eventually reach $15 per hour in 2020.

Many are quick to credit the state’s low unemployment rate and overall income growth to the minimum wage increase, but the reality is actually the opposite.

According to economist Jim Rounds, “Incomes are going up because of the state’s aggressive efforts to not just add jobs, but to add higher wage jobs, and to become a hub for innovation and entrepreneurship.”

Rounds says other pro-growth policies are also furthering the state’s healthy economy.

“In a very short period of time the state went from being reactive to proactive when it comes to building the economy. Lots of things matter, including regulatory reform, competitive tax policy, and marketing of the state’s assets. Good public policy is what’s driving these numbers up. But, there’s still work to be done.”

Rounds notes that the tight labor market is also pushing up wages, and he warns of the economic harm that will result when the minimum wage increases beyond the current levels.

“We should instead be asking why some individuals are still working minimum wage jobs to raise a family, and what we can do to help them move up the ladder,” said Rounds. “That’s good policy.”