Minimum Wage Increase Divides Flagstaff

By Laurel Morales
March 02, 2017
Laurel Morales
Jo Jaeger says Firecreek has raised some of their prices but customers have not complained. A cup of coffee went from $2.77 to $3.33 in January to help offset labor costs.
Laurel Morales
Jamie Thousand, owner of Satchmo's BBQ and Roux 66, says the state needed a raise. But he says not everyone understood what a hit two overlapping increases would have for businesses and Flagstaff's economy as a whole.
Laurel Morales
"I certainly would never argue our workers don’t deserve at least that much," says Monica Attridge, CEO of the Hozhoni Foundation. "We just don’t have the funding."

Jo Jaeger keeps coming back to Flagstaff.

“I tried a bigger city and I tried even a smaller town,” said Jaeger, an assistant manager and barista at Firecreek Coffee Company. “And we just got a mountain right there and a lake over there and a creek over there. It’s just got everything that you could want if you are a fan of the environment.”

But she said the cost of living has always been really difficult.

“The wage gap between what we’re paying downtown rent or around Flagstaff rent and what we’re getting paid has always been a lot bigger than other cities,” Jaeger said.

In fact it’s one of the largest gaps in the country. Workers in Flagstaff earn, on average, $19 an hour (14 percent below the national average), while paying more than $1,200 a month in rent. Many work two or three jobs and have roommates to stay in Flagstaff. 

In November, Arizona voted to increase the state minimum wage from $8.05 an hour to $10. It will gradually go up to $12 by 2020.

Flagstaff voters hiked it to $15 by 2021. It also made it so the minimum wage in Flagstaff is always $2 higher than the state minimum.

“We have rich tourists that come for our mountain and they come for the Grand Canyon,” Jaeger said. “The money’s coming; we just need to roll with it.”

But many business owners, especially smaller businesses with lower profit margins, are having a tough time rolling with it.

Jamie Thousand owns Satchmo’s BBQ and Roux 66 restaurants. He was already paying above minimum wage before the legislation passed. But he said he’s still trying to figure out how to raise his wages this high without hurting the customer.

“We’re all a little nervous,” Thousand said. “And looking at a 50 percent increase on base pay is a pretty daunting piece. As we say in the restaurant world there’s an old rule of thumb that’s a 30-30-30 rule and 30 percent of that is labor. When you increase that base so dramatically, it does change the way you do business.”

Thousand has had to cut two of his part timers. A couple restaurants have shut down saying the minimum wage increase put them over the edge.

“I’m afraid that the community doesn’t understand the number of price increases,” Thousand said. “It’s not just going to be when you go to restaurants. We’re seeing it across the board. We’re already seeing it ourselves our wholesalers as well.”

Thousand said it’s groceries and retail too. He said those retailers are competing with online stores. They can’t raise their prices.

Thousand and others tried to ask voters to reconsider the wage hike in a special election.

Ronald Gunderson is an economics professor at Northern Arizona University. He said this isn’t a self-fulfilling prophecy for employees.

“The workers may be made worse off,” Gunderson said. “They’ll find themselves working fewer hours. And even though they have a higher pay the money won’t go as far if it’s going to cost them more to eat out, to buy food, to buy clothing.”

Gunderson said it’s unfair to make business owners take on this burden. Instead he suggested redistributing income through unemployment, welfare, veteran and student benefits.

“Some businesses and some nonprofits may simply just disappear all together and then the services that they provide just won’t be here,” Gunderson said.

Nonprofits, like the Hozhoni Foundation, provide care for people with intellectual and developmental disabilities. Hozhoni runs 21 group homes in Flagstaff and Prescott and several day programs.

“We’re just playing a waiting game right now,” said Monica Attridge, the CEO of Hozhoni.

Attridge has asked the state legislature to help them with their budget. They’re waiting to hear how much the state is willing to provide. She employs 150 people in Flagstaff and Prescott. It will cost more than $1 million to increase staff wages.

“Worse case scenario if we were to get no funding for next year, we would be out of business shortly after July 1, as would the other eight providers of these services in Flagstaff,” Attridge said. “These clients cannot live on their own so this could be truly devastating if the legislature doesn’t come through with funding.”

The Flagstaff City Council could vote as early as next week on whether to extend the timeline. That would give employers more time to come up with the increased wages. But they need a super majority vote.

As the legislation reads currently Flagstaff’s minimum wage will go up to $12 an hour July 1.