Business Owners Grapple with Flagstaff’s Impending Minimum Wage Increase

Dec 19, 2016

Seattle, San Francisco, Santa Fe, and now Flagstaff are all cities that have recently implemented raises in their minimum wages. Last month, Flagstaff voters approved an increase to $15 an hour — nearly double the current minimum wage in Arizona. Even though it passed decisively, many business owners are now wondering how they’ll pull it off. Arizona Public Radio’s Ryan Heinsius reports.

Mike Funk, owner of Firecreek Coffee Co. in Flagstaff, stands behind the coffee bar at his café. He supports the city's $15 minimum-wage increase but is concerned for some local restaurants.
Credit Ryan Heinsius


About 100 people are packed into a hangar at the Flagstaff Airport. They’re here for a forum on the new minimum wage, and a lot of them are voicing concerns, and even fears.

“Well, it’s pretty scary, ‘cause we have to raise prices. Otherwise I’ll go out of business,” says Winnie Hanseth, owner of Lumberyard and Beaver Street breweries in Flagstaff. “We would definitely have to change the way we do business, and that would effectively mean probably cutting out the way we do service, as far as servers coming to your table. It’s just too much too fast. It’s just too hard to grasp.”

More than 100 Flagstaff business owners and employers gathered in the hanger at Wiseman Aviation in Flagstaff in early December. They discussed the city's $15 phased-in minimum-wage increase, which starts to take effect in July 2017. Many attendees fear the initiative will hurt their businesses and raise the cost of living in Flagstaff.
Credit Ryan Heinsius

It is pretty scary, because we have to raise prices. Otherwise I will go out of business, says Winnie Hanseth, owner of Lumberyard and Beaver Street breweries in Flagstaff.

People are worried about the ripple effect of the wage increase through the local economy. It’s not just bars and restaurants. It could also impact things like childcare costs, nonprofits, and even gym memberships. Julie Pastrick is the CEO of the Flagstaff Chamber of Commerce.

“Business owners, and consumers, residents who are all living here are really concerned about raising prices; the cost of living will rise in a town that’s already very high — high cost to living,” says Pastrick.

Jacob Thompson, Firecreek's manager, pulls an espresso shot at the café's coffee bar. Many employees who work for tips in town fear raising the minimum wage could cause customers to tip less and actually bring their pay down in the long run.
Credit Ryan Heinsius
We passed this higher minimum wage to address the issue of poverty and low wages in Flagstaff, says Joe Bader with the Flagstaff Living Wage Coalition.

That high cost of living is exactly why Joe Bader thinks the increase is necessary. He’s part of the Flagstaff Living Wage Coalition, a group that was instrumental in pushing the pay raise initiative.

“We passed this higher minimum wage to address the issue of poverty and low wages in Flagstaff,” Bader says. “Instead of some people having to work three or four jobs, maybe they could work just two jobs in order to try to survive here.”

One of Bader’s favorite coffee shops is Firecreek, a local café that will be affected by the increase. Bader says higher wages enhance public health and reduce social issues associated with poverty, like child abuse and domestic violence. He thinks the business community’s panic is simply unfounded.

“It’s a challenge when rent goes up, it’s a challenge when the price of coffee goes up, it’s a challenge when the price of restaurant supplies in general go up. I mean, it’s tough being a businessperson, you have to anticipate a lot of things. Wages is one of them,” says Bader.

Firecreek owner Mike Funk (right) chats with café manager Jacob Thompson (left) and barista Cyam Casteen.
Credit Ryan Heinsius

Mike Funk sits at the next table and wants in on the conversation. He owns the café and, even though he supports the idea of a wage increase, he’s worried about its real-world effects.

“The fear among the local, independent restauranteurs is that maybe not all of the people who voted for this will go support them and pay 15, 20, 25 percent more,” Funk says. “The fear from the hourly workers who receive tips, is that people will think they’re making enough money and not tip them so much.”

Marty King gets some of those tips. He’s an assistant manager at Firecreek. He supports the increase and is equally concerned it might affect local businesses, but he’s hopeful it won’t be as catastrophic as a lot of people think.

“Hopefully, increased wages translates to increased sales in the service industries. I think it’ll be a drastic adjustment period though — this next year. And if we can weather that, then I’m sure by 2021 everything will be fine,” King says.

That’s the year the $15-an-hour wage will be completely phased in. The state’s wage increase from the current $8.05 to $12 an hour will fully go into effect the year before, so no matter what, employers will have to adjust to higher labor costs. The question remains, though, whether the gap between those numbers will be a breaking point for some local businesses.