Minimum wage increase
New wage boost puts squeeze on teenage workers across Arizona
Employers are cutting back hours, laying off young staffers
The Arizona Republic
Feb. 10, 2007 12:00 AM
Oh, for the days when Arizona's high school students could roll pizza dough, sweep up sticky floors in theaters or scoop ice cream without worrying about ballot initiatives affecting their earning power.
That's certainly not the case under the state's new minimum-wage law that went into effect last month.
Some Valley employers, especially those in the food industry, say payroll budgets have risen so much that they're cutting hours, instituting hiring freezes and laying off employees.
And teens are among the first workers to go.
Companies maintain the new wage was raised to $6.75 per hour from $5.15 per hour to help the breadwinners in working-poor families. Teens typically have other means of support.
Mark Messner, owner of Pepi's Pizza in south Phoenix, estimates he has employed more than 2,000 high school students since 1990. But he plans to lay off three teenage workers and decrease hours worked by others. Of his 25-person workforce, roughly 75 percent are in high school.
"I've had to go to some of my kids and say, 'Look, my payroll just increased 13 percent,' " he said. " 'Sorry, I don't have any hours for you.' "
Messner's monthly cost to train an employee has jumped from $440 to $580 as the turnover rate remains high.
"We go to great lengths to hang on to our high school workers, but there are a lot of kids who come in and get one check in their pocket and feel like they're living large and out the door they go," he said. "We never get our return on investment when that happens."
For years, economists have debated how minimum-wage increases impact the teenage workforce.
The Employment Policies Institute in Washington, which opposed the recent increases, cited 2003 data by Federal Reserve economists showing a 10 percent increase caused a 2 percent to 3 percent decrease in employment.
It also cited comments by notedeconomist Milton Friedman, who maintained that high teen unemployment rates were largely the result of minimum-wage laws.
"After a wage hike, employers seek to take fewer chances on individuals with little education or experience," one institute researcher told lawmakers in 2004.
Tom Kelly, owner of Mary Coyle Ol' Fashion Ice Cream Parlor in Phoenix, voted for the minimum-wage increase. But he said, "The new law has impacted us quite a bit."
It added about $2,000 per month in expenses. The store, which employs mostly teen workers, has cut back on hours and has not replaced a couple of workers who quit.
Kelly raised the wages of workers who already made above minimum wage to ensure pay scales stayed even. As a result, "we have to be a lot more efficient" and must increase menu prices, he said.
While most of the state's 124,067 workers between the ages of 16 and 19 made well above $5.15 per hour before the change, the new law has created real-life economic opportunities.
Liliana Hernandez brings home noticeably more under the new law. The 18-year-old, who attends Metro Tech High School in Phoenix and works part time at Central High School, is saving the extra money, maybe to put towards buying a used car.
Hernandez said she deserves the raise just like any other Arizona worker even if she still lives with her parents.
"I'm doing the best I can and working hard like everyone else," she said.
In the months leading up to last November's vote, advocates of the new law maintained that it would help Arizona create a "living wage" for some of the poorest workers.
The Economic Policy Institute estimated that 145,000 Arizonans would receive a pay raise. That was how many made $5.15 to $6.74 per hour.
At one press conference, a mother described how she was unable to afford basic school supplies for her son.
Opponents, however, said there was little talk about teenage workers. "Everyone wanted to focus on the other aspects of the minimum-wage campaign," said Michelle Bolton, Arizona state director of the National Federation of Independent Business.
An Employment Policies Institute study determined that 30.1 percent of affected workers in Arizona fell between the ages of 16 and 19.
"Workers affected by the minimum-wage increase are less likely to be supporting a family than the typical Arizona worker," it stated. "For example, 30.4 percent of the workers are living with their parent or parents, while only 7.6 percent of all Arizona workers are in this category."
John Weischedel, a senior at the East Valley Institute of Technology in Mesa, knows he is lucky to be making $8 per hour at an auto dealership and learning technical skills. So are most of his friends who make $9 or more per hour while still attending high school.
After the minimum-wage law went into effect, "a couple of my friends got laid off - they worked in fast food," he said. "They're going to wait until they're out of high school to find other jobs."