Arizona raises minimum wage by $1.05, but will it help? An economic expert weighs in

PHOENIX - A new year and a new minimum wage in Arizona.

It's now $13.85 per hour, but can the wage growth keep up with inflation? The owner of Cocina Adamex in Phoenix is talking about how they’ve handled labor costs after the new ownership took over last summer.

Fortunately, the staff stayed and wages didn’t change. In fact, employees are already making a little more than the new minimum wage.

Adriana Zapata is a true small business owner.

"We have all of our pastries, fresh every day, traditional items like marranitos," she said.

She considers the employees at Cocina Adamex her family. Literally. Many of them are her relatives.

"Keeping their wages above minimum wage is a big goal for us," Zapata said.

Arizona’s minimum wage is now up a $1.05 compared to 2022 – we're one of 26 states boosting minimum wages in 2023.

Zapata has always kept starting pay at Cocina Adamex around $14 an hour and says labor is the largest expense.

"Depending what day of the week it is, how much business we expect, so we’re constantly monitoring our labor cost," Zapata explained.

She's happy to say she hasn’t had any staff turnover.

'It’s really almost not a livable wage’

"Really it’s a matter of keeping people, stopping them from moving on to the next best job," said Rick Merrit, President of Rick Merritt, Elliot D. & Pollack Company, a real estate and economic consulting firm, focused on Arizona.

He says employers have already had to increase wages to keep talent and that the new minimum wage won't have a huge impact on those living alone.

"It’s really almost not a livable wage at this point unless you have a spouse who is working as well. You have two minimum wage jobs then you’re probably able to get by, but as an individual, it’s very, very tough," Merrit said.

According to RentCafe, the cost of living in Arizona is 7% higher than the national average. Housing is 18% higher than that average.

Zapata knows the minimum wage rate won't stop here.

"For my business to thrive, I need my employees to come, be happy, feel comfortable, share in our success," Zapata said.

Inflation has really caused businesses to adjust, especially restaurants like this one. Lettuce prices had shot up last month, reports show, and so that was an ingredient they cut back on.

For Zapata, she says raising menu prices is a last resort.

Northern Arizona city Flagstaff just raised its minimum wage to $16.80 an hour.