Once it reaches $15.50 an hour, the minimum wage will be $2.50 too high.
That’s according to the preliminary findings from the study on local minimum wage conducted by Rounds Consulting Group and paid for by the city of Flagstaff. The study also states the city will need to implement a “hyper-aggressive economic development plan” to partially offset the effects of the economic losses.
Rounds Consulting canceled its contract with Flagstaff last month after the firm was accused of bias by members of the public. But Rounds Consulting still delivered preliminary findings of the study the last week of January.
However, despite the delivery of those findings, the Flagstaff City Council has no plans to discuss the report, according to city spokesperson Jessica Drum.
Although the study asserts the law passed in 2016 will increase the minimum wage beyond what is appropriate for Flagstaff, it does not conclude a wage higher than the state’s is unsuitable for the city.
“Preliminary findings show that the consideration of increasing the minimum wage was not an error in public policy. Instead the error was in the level that was implemented,” the report concludes.
“It’s not, 'we're opposed to a minimum wage' or 'we're in favor of it,'” President of Rounds Consulting Jim Rounds, who also worked on the study, told the Arizona Daily Sun. But Rounds said in his view, the current optimal wage level for Flagstaff is $13 an hour.
Based off the cost of living in Flagstaff, Rounds said a $13 an hour minimum wage would have accomplished the same goal as $15 minimum wage would in a more expensive city.
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Because of this, Rounds said they believe the $15.50 wage in Flagstaff is the equivalent of Seattle or Los Angeles passing a $22 minimum wage or San Francisco passing a $35 wage.
Seattle currently has a minimum wage of $12 an hour while Los Angeles has a minimum wage of $14 and San Francisco has a $15 minimum wage.
Rounds said it would have been best for such an economic analysis to have occurred prior to the passage of the law. That way, policy makers could have decided to raise the wage proportionally to other cities as opposed to simply matching the $15 wage laws of other communities, Rounds said.
The report adds the higher than optimal wage will likely make the effects of the next economic downturn more severe and only then will truly see all the ways the wage has impacted the economy.
As such, the report suggests the city take aggressive measures to support the local economy as to lessen any such impacts.
Before such an economic downturn, the report states it is difficult to develop a full understanding of how the wage increase is effecting the city.
That’s because there are so many factors in how an economy is doing, it can be difficult to identify what influence the minimum wage increase has on its own. But comparing how the Flagstaff economy reacts to a slight downturn to other cities in Arizona will likely highlight those effects, Rounds said.
“When we review minimum wage reports, and we have done this in the past, the problem is that you can’t control for every factor that’s impacting a community when you do a technical analysis,” Rounds said.
The report also includes depictions of the Flagstaff economy historically and some following when the wage increase occurred. For example, households in Flagstaff receiving benefits such as food stamps dropped slightly in the two years after the wage increased.
At the same time, the unemployment rate, which had been slowly decreasing since the end of the Great Recession, appeared to increase slightly in the two years following the wage increase. But the slight increase in the unemployment rate locally also corresponds with a similar leveling off of the unemployment rate statewide.
Adrian Skabelund can be reached at the office at email@example.com, by phone at (928) 556-2261 or on Twitter @AdrianSkabelund.