Mayor and Council,
My name is Josh Collier I have a finance degree from NAU and have a firm handle on economics. I am quite often listening to and reading articles and books from economists just because this is something I am very interested in. I wanted to speak today about Prop 414 that passed last week and the issues that my family and others are already seeing, and it hasn’t even gone into effect yet.
We received a notice from our son’s daycare last week which stated: “With the new minimum wage law that just passed, please be prepared for tuition to go up in January 2017. I will do my best to keep the increase as minimal as possible, however, with the minimum wage increasing to $12 per hour by July, it may go up a substantial amount. Also, please remember the ARK has only raised tuition $10 in the last four years and our current tuition is one of the lowest in town.” My guess would be at the low end this will be a 20% increase and a 35-40% increase at the high end as this is a very heavily labor oriented industry that normally pays very close to minimum wage.
The childcare issue was one of the biggest points my wife made when we discussed this minimum wage increase initiative(my wife actually brought it up before I did). She even posted a question about childcare on the Flagstaff Needs a Raise Facebook Page, which I believe to be run by council member Putzova and her husband Joe Bader. The concern was never even addressed or commented on.
I was also wondering about some numbers they had published and how many would be affected. Their calculations were being questioned for legitimacy and I had done my calculations and actually gotten a number close to theirs (though it seems this number is for all of Coconino County rather than just Flagstaff as they stated, though the Bureau of labor statistics does say Flagstaff metropolitan area even though it seems to be Coconino county). So I just wanted to see where their number came from. So I asked them this question on the Facebook page. They said “use the data tools from the bureau of labor statistics”. To which I replied “ In which way did you do that can you guide me to the exact numbers and math you used?” I was then given a condescending response of “Contact NAU or CCC for assistance. They are really great at teaching statistics and research methods and professors are very helpful. Even librarians will be able to help you to research appropriate data sources.” I have had plenty of experience with statistics and was only trying to verify(as I had my own number and way I found it, which like I said was pretty close to their number) as I believe transparency is important and ran on that as a key platform issue when I ran for county supervisor.
With all this being said I believe many of the people did not even understand what the prop said and what they were voting on and I don’t believe many thought it would pass. I have now seen business owners extremely worried(even ones that seemed to have been at least silent and maybe even for it) but most thought they could vote with their feels instead of their brains because it was never going to pass.
Even the person who wrote this legislation is quite incompetent as I have read the full text(http://www.flagstaff.az.gov/DocumentCenter/View/49946, page 32 maybe a typo by the city but I believe this is what was voted on) and the part about the tipped employees reads as follows: “E. For any tipped employee, the employer may pay a cash wage up to:
- $3 per hour less than the minimum wage rate set forth in this section on or after July 1, 2017;”. This to me says that the employer is allowed to only pay below $3 per hour less than the wage on july 1st which would be $9. This should say “may pay a cash wage no less than”. So I could see restaurants exploiting this and having a case.
It really is sad to see so many voters as well as council members and incoming council members that have so little understanding of economics and unintended consequences, but are willing to vote based on their feelings. I would bet those that wrote this have very little understanding of price controls in this case a price floor, supply and demand, the disastrous effects of the minimum wage hike in the American Samoa (that I believe is a closer situation to Flagstaff than some of the other big cities like Seattle that the raise really has not fully gone into force and because of our very constrained area of land rather than Seattle or other cities in which the businesses have other options like moving out of the higher minimum wage area), the welfare cliff, or even exemptions for young people, disabled and other things that are thought of in essentially every other of these minimum wage laws. Also did you think of the way it affects the elderly on Social security or those that live on savings that now will have their purchasing power diminished? There are probably many other unintended consequences that I have not added or even thought of, but probably apply. Minimum wage does not magically raise productivity or increase a worker’s value it only puts a roadblock in the way of that individual getting that first job to increase their skills.
From Henry Hazlitt’s book economics in one lesson he states: “The first thing that happens, for example, when a law is passed that no one shall be paid less than $106 for a forty-hour week is that no one who is not worth $106 a week to an employer will be employed at all. You cannot make a man worth a given amount by making it illegal for anyone to offer him anything less. You merely deprive him of the right to earn the amount that his abilities and situation would permit him to earn, while you deprive the community even of the moderate services that he is capable of rendering. In brief, for a low wage you substitute unemployment. You do harm all around, with no comparable compensation.”
I have not been able to find any person that can tell me the mathematical or economic way that an exactly $15 wage was actually what we needed. I would have more respect if they had matched it with the living wage calculator for this area that says 1 adult needs 11.24 or 16.08 for 2 parents working and 2 kids even though I would still have been in opposition. This as presented(and as presented in most of the other parts of the country) is nothing more than a gimmick or a battle cry of fight for 15 to be used by those who wrote this to pander to the economically illiterate. Those who wrote this are extremely narcissistic to think they know where the tipping point is where this starts harming people. Most of even the most ardent supporters of a $15 minimum wage do think there is a point where it becomes problematic as they think you are crazy if you ask them why not $25, $50 or $100(so common sense tells them these are problems). What kind of wisdom do you have that you can know exactly what every industry needs for a wage and what every employee needs to have? I have a pretty good understanding of economics and believe the minimum wage is always detrimental, but just by magnitude, so how bad depends on the amount of people it affects, the going wage rate at the time, the amount of the raise, the phase in and many more things. I can not even guess where the extremely negative effects come in as many times the minimum wage follows the wage that is already being paid rather than leads as I believe this does.
I have also been told that prices wouldn’t increase, that unemployment will not increase, that businesses won’t shut down and that this is only good, but I am already seeing businesses extremely worried and even those who voted for it and big supporters worried about the effect. Like I said I don’t believe people(including myself) actually thought it would pass, but it was rather the “noble” statement they could make by voting for it. Just because you think it would be a great thing to have higher wages(as do I) does not mean standard basic economic principles do not exist and that government can magically make it happen. Higher wages(purchasing power) requires increasing skills, increasing productivity as well as an increase in technology which will increase purchasing power due to more efficiency. We do not live in the land of unicorns and harry potter magic.
So when you, that were in favor of these raises or pushed the minimum wage props(both 206 and 414), see the increase in cost of living that you say you want to combat, just remember you were the one that made it worse while making empty election promises to combat it. So thank you very much for my raise in prices it has really helped our family who lives on a very tight budget already(especially after my son’s health insurance was increased by 40% this year, but that is a totally separate problem).
Warrior for liberty and sound economics