Arizona voters passed a proposition imposing minimum wage increase. The increase has a unique impact on the Arizona agriculture industry. Many agriculture commodity prices have been stagnant for years as costs increased. The minimum wage law simply imposed another cost increase.
Prior to January 2017, the Arizona minimum wage was $8.05 per hour. The proposition required an increase to $10.00 per hour in January 2017, and another increase occurred in January 2018 to $10.50 per hour. There are two more required increases in January 2019 to $11.00 per hour and January 2020 to $12.00 per hour with subsequent increases based on a cost of living index. The increased minimum wage has impacted agriculture businesses as the focus continues to be on more efficient production in light of stagnant sales prices. Some neighboring agriculture states are also facing minimum wage increases such as Washington, Oregon, Colorado, and most notably California, which will increase to $15.00 per hour by 2022. Meanwhile states such as New Mexico and Utah maintain minimum wages under $8.00 with no scheduled increases, which creates an unbalanced playing field.
The costs are further increased as the unemployment rate closes on what is traditionally determined to be full employment at 4.5%. This creates further pressure as even those employers who have traditionally paid more than minimum wage (like those in the agriculture industry[1]) will notice the increased effect on minimum wage as the wage floor increases. As a result, many businesses will have to reevaluate their business models – whether that is a further investment in technology or a change in sales process that is not as closely related to traditional commodity prices. When a business requires a new substantial investment opportunities exist that allow for a restructuring or a reduction of debt. The Business Reorganization attorneys at Mesch Clark Rothschild are experienced in debt restructuring and debt reduction and are available for a consult to ensure businesses maximize changes in their business structure.
[1] Source MIT Living Wage Calculator, 2012 Census of Agriculture.
For questions, contact me at irothschild@mcrazlaw.com.
