NAU study finds mixed economic effects from Flagstaff's higher minimum wage

Northern Arizona University researchers told the Coconino County Workforce Development Board on Thursday that the city’s higher minimum wage has produced mixed results for employment, wages and local industry structure.

The Economic Policy Institute researchers — Nancy Baca, associate teaching professor of economics at the W. A. Franke College of Business and director of NAU’s Economic Policy Institute; Melissa Jerrinson, research associate; and Fei Fei Zhang, research associate — said they combined a quantitative difference-in-differences model with focus groups and interviews to evaluate Flagstaff’s minimum-wage policy, implemented in 2017.

The study compared Flagstaff’s outcomes to a constructed “synthetic” metropolitan statistical area (MSA) made from weighted parts of other MSAs to estimate what would have happened without the local wage floor. The researchers warned of limitations, including the pandemic’s disturbance of trends and a smaller qualitative sample than planned.

On the quantitative side, the team reported that, compared with the synthetic control, Flagstaff had about 1,800 fewer manufacturing jobs and about 1,600 fewer construction jobs over the study period. Aggregating across sectors, the model estimated roughly 4,000 fewer jobs than the synthetic scenario would have shown. At the same time, the model showed higher total wages in some sectors: hospitality total wages were about $38,000,000 higher than the synthetic counterfactual, and the researchers reported an average per-worker wage increase of about $12.50 per year across occupations compared with the synthetic control. The team noted and corrected a slide labeling error: several figures on the slides were presented with mistaken million-dollar units and actually reflected dollar amounts.

Nancy Baca said the research design "used a difference in difference economic model" and acknowledged caveats: "there's a big noise in the analysis" because of COVID and data limitations. Fei Fei Zhang, explaining the synthetic-control approach, noted the method creates a weighted composite of other MSAs so the pre-2017 trends match Flagstaff before comparing post‑2017 divergence.

The qualitative findings, drawn from three focus groups with 22 business owners or managers and 16 worker interviews, painted a more textured picture. Business respondents cited rising payroll costs, job consolidation, reluctance to hire less-experienced workers, higher turnover and difficulty retaining management-level staff. Workers described reliable annual raises and reduced hours for some, but also concerns that pay still does not keep pace with Flagstaff’s cost of living.

Melissa Jerrinson summarized the mixed results and the added value of qualitative work: the macro model shows aggregated gains and losses across industries, while the interviews revealed how effects vary by firm size, sector and worker experience. The presenters and board members discussed the study’s use for workforce programming rather than as a direct policy lever, with board staff noting that workforce development tools such as on‑the‑job training, apprenticeships and internships can help mitigate negative business impacts.

Board members and staff asked about study timing, the construction of the synthetic MSA and sample size for the qualitative work. Regina Salas of the Coconino County Workforce Development Board introduced the researchers and said the results would inform future board programming and priorities.

The researchers recommended the study as a foundation for targeted follow-up, including deeper industry-specific work and additional qualitative outreach, and flagged housing costs, a tight labor market and projected population slowdown as key structural constraints for local employers and workers.

The full report and presentation slides were posted to the board’s project materials; the presenters said they could revisit the analysis in one to three years to expand sample sizes and focus on tourism and hospitality specifically.