CSI Arizona Releases Report on the Fiscal Implications of Proposition 138: Protecting the Tipped Workers Minimum Wage Credit

PHOENIX, Ariz. – The Common Sense Institute Arizona (CSI) has released a new report analyzing the potential economic impact of Proposition 138, which will be on the ballot this November. Prop. 138 aims to solidify the minimum wage credit for tipped workers in the Arizona state Constitution, a move that would protect tipped workers and the industries that depend on them from future policy changes.

Key Findings:

  • Protecting Jobs and Income: CSI estimates that the current tipped worker credit protects between 6,200 and 13,500 jobs across Arizona and contributes $500 million to $1 billion annually to the state’s GDP.
  • Tipped Workers’ Earnings: Despite earning a base wage lower than the state minimum wage, tipped workers in Arizona earn an estimated average of $22.04 per hour—well above the minimum wage—when tips are included.
  • Economic Impacts: Without the tipped worker credit, the removal of the wage credit could lead to 6,200 immediate job losses, particularly in the restaurant and bar industry, as businesses adjust to increased labor costs. State GDP could decline by $500 million and personal income could drop by $700 million, signaling broader economic harm if the credit is repealed.
  • Future Wage Increases: If Prop. 138 passes, it would increase the tipped worker wage offset to 25% of the state minimum wage, allowing for more flexibility for employers while still ensuring workers earn at least $2 above the minimum wage. In 2025, this would raise the tipped worker wage to approximately $11.08 per hour.

“CSI’s research has repeatedly shown that even well-meaning wage and labor policies can have a detrimental impact on Arizona’s economy. This is particularly true in industries like restaurants and bars, where tips contribute significantly to workers’ overall earnings,” said Glenn Farley, Director of Policy and Research at CSI Arizona. “The findings of this report reflect that maintaining this credit helps protect jobs and stabilize income in key sectors.”

Read the full report here: https://www.commonsenseinstituteus.org/arizona/research/ballot-issues/the-fiscal-implications-of-prop-138

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