Arizona is one of the few states in the US which has drafted Fair Wages and Health Family Act (FWHFA) to help Arizonans keep up with rising cost of living and hike the minimum wage in January 2017. While the federal minimum wage is stagnant at $7.25 per hour, the data shows that a single adult should make over $11.00 per hour to provide for their own needs. Hence to tackle this situation, FWHFA act was passed in Arizona, which will increase the minimum wage continuously at the end of each year until 2021.
The current minimum wage in Arizona is $12.15 per hour which is $3.75 more than the federal minimum wage. Post 2020, the minimum wage will rise each annually on 1st January based on the annual increase in the cost of living which is measured by the percentage increase in the Consumer Price Index from August of the preceding year over the level from August of the previous year.
What is Consumer Price Index?
According to the US Bureau of Labor Statistics, the Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. The Consumer Price Index is managed by the Bureau of Labor Statistics, which is a division of the US Department of Labor.
Minimum Wage Increase Schedule
As of January 1st 2019, the minimum wage is Arizona rose to $11.00 per hour. On 1st January 2020, the minimum wage is scheduled to increase to $20.00 per hour. Post 2020, in the subsequent years, the minimum wage is set to increase based on the annual increase in the cost of living. Here, the increase in the cost of living is measured by the percentage increase in the CPI (Consumer Price Index) from August of the immediate preceding year over the level from August of the previous year.
For ex: if we are determining the minimum wage for the year 2021, we have to calculate the consumer price index from August 2019 to August 2020. If the CPI is calculated to increase to 2%, then considering that minimum wage will be $12.00 per hour in 2020, then the minimum wage in 2021 must increase to $0.24 as per the calculations. Hence the minimum wage for the year 2021 would be $12.24 per hour beginning January 1st 2021.
How is Arizona’s minimum wage changing in the future?
In accordance with the Fair Wages and Health Family Act (FWHFA) and in consideration with the Consumer Price Index (CPI), Arizona will hike the wage to $11.00 in 2019 and then $12.00 in 2020. Later, beyond 2021, Arizona will raise its wages based on the cost of living.
However, Flagstaff has passed its own legislature, that will see it reach a minimum wage of $15.50 by the year 2022. Beyond that, the wage increase will be based on the cost of living and inflation (consumer price index).
Under Arizona’s minimum wage law, an employer is allowed to reduce base wage of upto $3.00 less than that of the minimum wage to tipped employees. That means, as of 1st Jan 2019, the minimum wage of tipped employees cannot be less than $8.00 per hour. This will raise to $9.00 per hour in 1st Jan 2020, $11.00 per hour in 1st Jan 2021, $11.50 per hour in 1st Jan 2022, and will continue based on cost of living of subsequent years.
An employer is required to inform their employees at the time of hire, promotion or transfer to a position
that qualifies them for the tipped minimum wage. Also, the employer is required to inform the reduced base pay on each pay cheque along with a confirmation that your tipped pay bought you the total pay above the minimum wage.
Exceptions To The Arizona Minimum Wage
Under Arizona’s minimum wage law, certain employees and employers are exempt from the Arizona minimum wage. They are:
Tipped Employees: Employees who make a significant portion of their income in tips, ex: waiters, taxi-drivers, bartenders, etc.
Family Business: Employees who work for their parents or siblings
Babysitting: Babysitters in Arizona are also exempt from the minimum wage, although the Arizona Minimum wage law clearly differentiates between a casual babysitter and a regular nanny
Small Business: Businesses accounting to $500,000 or less in gross annual revenue are considered to be small business and employers of such business are not entitled for Arizona’s minimum wage
Government Employees: Both state and federal government employees are exempt from the Arizona minimum wage. They fall under federal employment law and not the Arizona state law