This Is What Happens When Minimum Wage Rises in Arizona

A few weeks ago, I had a conversation with a young woman in her 20s. We discussed the economy, the cost of doing business, business expenses, and wages.

"I just want everyone to make a livable wage," she said.

"Interesting," I replied. "And how much is that? What, exactly, is a 'livable wage'?

She considered the question and said, "Well, it's being able to pay all your bills and buy food and also pay for housing and stuff."

"And how much should that be?" I asked. "Fourteen dollars an hour? Twenty-four dollars? A hundred and four? And what expenses? Should you make just enough to pay for basics like rent and food, or should you have enough to pay for extras, like eating out and buying new shoes?"

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I could see the concern cross her face as she considered my question. In the end, she signed and said, "I don't know...but right now, people aren't making enough to live."

I completely agree.

What is 'A Livable Wage' in Arizona

This is the question: what exactly constitutes a livable wage?

A hundred years ago, the average wage in Arizona was around .75¢ an hour. At that time, a dozen eggs cost around .45¢, a loaf of bread was roughly .09¢, and for fresh milk delivered to your home, the price tag came in at about .28¢ for a half gallon.

READ: Arizona is Bracing for Surging Prices and Drastic Shortages

So, about a hundred years ago, .75¢ an hour might have been considered a livable wage. Obviously, the definition of "a livable wage" increases as prices rise, so how much should it be now?

Wage-Push Inflation versus Cost-Push Inflation

According to economists, this question is something of a chicken or egg dilemma. Do prices go up because wages rise, or do wages need to rise to keep up with inflated prices?

The debate falls into two categories: Wage-push inflation and cost-push inflation.

Wage-push inflation theorizes that higher wages increase production costs, causing businesses to raise prices to maintain profits.

On the other hand, cost-push inflation suggests that rising prices due to factors like raw material costs force employers to push wages up so workers can keep up with living expenses.

READ: Arizona Target Stores Respond to Price Gouging

Arizona's Minimum Wage Hike

Whatever the cause of inflation, Arizona's minimum wage just went up again. Beginning on the first of the year, the minimum wage rose from $14.35 to $14.70 per hour.

This 35-cent hike is a 2.4% cost of living adjustment. In 2016, voters passed Proposition 206, which implemented a yearly increase. Arizona's minimum wage has climbed over 80% since it was first enacted.

It's tough to say if this increase will help or hurt Arizona's economy. Small business owners face challenges when labor costs suddenly rise —one of the biggest expenses in running a business.

Businesses, especially those already struggling in this economy, will feel an immediate impact on their bottom lines as wages go up.

As the cost of labor rises once again, you may see prices going up, workers' hours being cut, and prices rising to offset higher wages.

We all want workers to earn a livable wage, but it will be a tough sell if there's nowhere to earn a living.

Sources: Investopedia | Food Price Inflation | AZ Central | ABC15 |