This is a guest OpEd from member Julio Espinoza. Please provide your comments below.
Some regional advocates will argue that better wages and free trade are bad for the private sector putting American companies and workers out of business. Some others will argue that raising wages and outsourcing operations will make the U.S. economy stronger. Regardless of your opinion, what the business leaders and the general public can do to help our local economy grow is to continue with the educated debate on increasing the income of our households and helping our businesses to be locally sustainable and globally competitive. Note from Global Chamber Tucson: Exports and foreign direct investment brings money to Southern Arizona!
A minimum wage increase along with ease of doing business, as controversial as they can be, have a positive impact in local economies; both workers and business owners will be thankful in the long term for the improvement of the economic foundations of small communities. However any macroeconomic adjustments only translate into development if policy makers find a way to match wage increases with tax credits, income redistribution measures and more market deregulation. This is not a political or social justice aspiration by itself, but a legitimate business demand that needs to be addressed. But is the City of Tucson doing a good job in this regard? What can the general public and business leaders do to advance their best interest? It seems Tucson is moving in the right direction and we all need to work together to keep the momentum going.
Last year the Mayor and Council of Tucson started conversations with local constituencies about raising the minimum wage in Tucson. What are the assumptions behind this controversial proposal? It boils down to basic macroeconomics theory: if we expand the demand side of the economy (income), we will also see an increment in the supply side (goods and services), which translates into economic growth for everyone, the blue collar and the white collar workers. Along with a minimum wage increase comes more productivity and consumer satisfaction as well as higher inflation rates, which are inevitable with any economic growth cycle.
Early this year, Mayor Rothschild with other community leaders such as the Small Business Development Center (which provides affordable business consultancy services and loans to the local entrepreneurs) and Visit Tucson (whose mandate is to promote the hospitality and retail industries of Tucson) put together the Borderlands Trade Conference (BTC). The event raised the international stature of Tucson and deepened ties with Mexico, a democracy in transition and an emerging economy (12th largest economy in the world) with an expanding middle class eager to spend their discretionary income in the United States. This was the second edition of the BTC and they are planning to host another BTC next year because our city economy needs foreign investment and consumers as much as our companies need to outsource operations to be competitive. This is a win-win situation for everyone and the City of Tucson seems to be leading our local economy in the right direction: embracing globalization.
If the increase in the minimum compensation translates into economic growth, why are some interest groups opposing it? The answer is simple: the belief that higher compensation will put companies and jobs out of the market. But can ideology be wrong in the face of economic theory and statistical data? Increasing minimum wages does not necessarily translate into poverty alleviation itself as much as it does not necessarily represent imminent bankruptcies and unemployment; the readers can refer to extensive literature on the subject. Let’s just say that the more income households have, the more they are prone to spend per quarter because families gain consumer confidence along with discretionary income. Raising the wages of the labor force leads into economic stimulus, lower employee turnover and training costs, larger talent pool, increased productivity and customer satisfaction, which translates into a more competitive business environment. Working families, mostly the minorities, are not the only ones that will certainly benefit from a minimum wage increase (economic stimulus) and that is why many cities around the country have been raising minimum wages besides bringing investment in high wage industries.
In a highly competitive economy, cities want to stay strong communities and competitive economies because they are battling against other cities for local and foreign investments that diversify their economic sectors. For example, we can see transition into advanced industrial sectors in the Phoenix Metro area where cities such as Mesa have been able to position themselves as the hub of operations for big companies such as Apple and have achieved a significant expansion of the households’ income over the last decade. This brings up the question of the kind of city we want in the future: a small college economy with poor infrastructure and lack of human resources or a vibrant diversified economy where people can study, work, prosper and stay. If Mesa’s favorite fruit is Apple, what is Tucson’s?
If free market measures along with the economic stimulus of better wages makes sense for our city economy to grow and stay competitive what is holding us back from taking leadership? The dilemma for the Tucson private sector is to decide between keeping low operation costs (with a high human resources turnover and brain drain) or support a minimum wage increase that eventually translates into a vibrant and diversified city economy that can host high wage job industries: Health, Education, Aerospace/Aerial, Technology and Tourism (HEAT). The dilemma for the general public is how to decide on the kind of information to trust and the leadership to follow.
It looks like the Mayor and Council of Tucson have been very proactive trying to diversify the economy of Tucson understanding that the main industries of the City need other industrial clusters and supply chains around them. We all need to support these efforts regardless of our political ideology and short term business interests if we want our city to prosper and be sustainable for generations to come. On March 15th, at the National Law Center for Inter-American Trade, the City of Tucson will be collaborating with the Global Chamber to conduct “Grow Globally Fair Tucson”, an all-in-one annual business fair for companies in Southern Arizona and Mexico to connect them to the resources to grow and raise the international stature of our interdependent border region.
The fair seems to be the continuation of the efforts of the Mayor and Council of Tucson to make our city a global player with high living standards by creating international trade and investment opportunities. Mayor Rothschild will share his views on international business progress and opportunities in and from Southern Arizona. The event will also include business matching to grow across the U.S.-Mexico border and around the world. Attendees will have access to regional business specialists like the international law experts of Polsinelli and the National Law Center, as well as the economic developers of the Small Business Development Center of Pima and Santa Cruz, and more.
As we need more voices to join the debate and more companies to prosper, our duty as economic and political agents of one of the most resilient cities in the Southwest is to make sure that we foster an inclusive dialog based on macroeconomic theory and facts, not political ideologies that damage our best business interests. If you want to be part of the debate, try to reach out to your local councilmember: be informed, ask for facts and do your own research. If you are a business owner and want to know more about how to make your business grow, make an appointment with the business experts that can help you with a business expansion plan, affordable loan and international trade and investment opportunities. Together we can make Tucson (Arizona as a whole) an oasis of HEAT in the desert.
Julio Espinoza of Espinoza Consulting is a member of Global Chamber