In accordance with Proposition 206, known as the Fair Wages and Healthy Families Act, Arizona's minimum wage in 2023 increased to $13.85. The updated 2023 Arizona minimum wage took effect on January 1, 2023 and will remain so through December 31, 2023.
Arizona's minimum wage is somewhat unique in that it is based on inflation, as published in the U.S. Bureau of Labor Statistics' Consumer Price Index (CPI). For 2023, the $13.85 minimum wage is based on inflation numbers from August, 2021 to August 2022.
Arizona's $13.85 minimum wage in 2023 is up $1.05, or 8.2% from the 2022 minimum wage of $12.80. This represents the largest percent increase since 2016 - 2017, when the minimum wage went from $8.05 to $10.00.
Arizona Minimum Wage - Historical Rates Table
| Year | Arizona Minimum Wage |
| 2023 | $13.85 |
| 2022 | $12.80 |
| 2021 | $12.15 |
| 2020 | $12.00 |
| 2019 | $11.00 |
| 2018 | $10.50 |
What is the Consumer Price Index (CPI) and Why is it Relevant to the Arizona Minimum Wage
According to the US Bureau of Labor and 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. In order to account for inflation, Arizona has tied the minimum wage to the Consumer Price Index. For consumers, this means that the purchasing power of your dollar remains strong. For Arizona employers, this means that they need to account for an annually-updated minimum wage, which can drastically change labor practices and employment numbers.
How Business Owners Can Prepare for the AZ Minimum Wage Change
As labor laws change, it's important that business owners prepare themselves and their employees for the changes. Here are some ways to get ahead of the curve.
Clearly Document Policies - It is important to review the employee handbook to ensure policies and procedures are up-to-date and consistent. Whether it's employee scheduling, employee disciplinary policies, or employee performance reviews, reviewing the organization's policies and procedures and keeping them up to date and consistent is important anytime there's a key labor law change, such as minimum wage or AZ sick leave.
Keep Your Technology Up To Date - Technology plays a critical role in managing payroll. It's important to choose a payroll service and solution that is flexible, customizable and well-integrated into the rest of the organization's HCM suite. From automatic tax withholding calculations to calculating commissions and tips, to easy-to-implement direct deposit, the payroll solution should work for the company, not the other way around.
Implement Best Practices for Compensation Management - With a major change to minimum wage, it's important to review the organization's compensation management practices, from base pay all the way through benefits and paid time off. Compensation management plays a critical role in attracting, retaining and motivating employees, and there's never a better time to review employee compensation than a major change to minimum wage in the new year.
Review Budgets - This goes hand-in-hand with reviewing compensation management practices. For instance, maybe it's a better time to hire more seasonal workers to supplement staff during busy times or to adjust schedules with existing staff to reduce overtime costs. It's important to review the upcoming year's budget, cash flow and hiring plans, and ensure that it fits with the change in the Arizona minimum wage.
It's always important to make sure your organization is prepared and remains in compliance with labor and wage laws. Contact us if you would like to discuss Arizona's minimum wage laws or any other labor laws for the upcoming 2023 calendar year.
