Roberts: Will Arizona's new minimum wage kill this 59-year-old business?

January 6, 2017
AZ Central
Laurie Roberts

This week, Matt Redmann’s employees are getting raises as Arizona’s minimum wage rises to $10 an hour.

It should be cause for celebration.

But there will be a cost and Redmann is hoping his employees won’t be the ones to pay it – with pink slips.

“I’m going to work my butt off to avoid that from happening,” he told me.

Redmann is executive director of Epi­Hab Phoenix Inc. I’m guessing you’ve never heard of it. I hadn’t.

Company moved here to be competitive

Epi­Hab has been around for 59 years. The non­profit was founded by a group of people, including Dr. John Green and Charles Barrow, who went on to start Barrow Neurological Institute.

The goal is simple: to provide jobs for people who suffer from epilepsy and other challenges that make finding work difficult – or, for a fair number of Redmann’s employees, impossible even.

Epi­Hab doesn’t do fundraisers and it doesn’t get government grants. It survives by providing affordable services – labor intensive work that businesses and government agencies contract with Redmann to provide.

Jobs like packaging and shipping metal frames that transform iPads into cash registers. Like assembling and fulfilling orders for devices that electrify acoustic guitars.

Jobs like cleaning and inspecting meters for Salt River Project. Like assembling tiny valves for a catheter sold by an Arizona manufacturer of medical equipment. That work was being done in Mexico, Redmann tells me, but came back to Arizona two years ago because Epi­ Hab could offer a competitive rate.

Redmann’s worried about what happens now that Arizona's minimum wage has rocketed from $8.05/hour to $10. Epi­Hab employs about 30 people and most of them earn less than $10 an hour.

Or they did, until this week.

Epi-Hab needs cash, has nothing to cut

Now Redmann has to figure out how to come up with $40,000 to $80,000 more to cover this year’s added payroll, provided the voter­approved law withstands a legal challenge from the business community.page1image33358976page1image33359552page1image33359744page1image33359936page1image33360128page1image33360320page1image33360512page1image33360704

If that sounds like peanuts, know that Redmann doesn’t have vast overhead that he can cut. He can’t reduce his profit margin because he doesn’t have one.

At Epi­Hab, the goal isn’t to make a profit but to provide meaningful work for people who have intellectual disabilities or medical issues that limit their ability to get jobs.

The key, Redmann says, is putting people into jobs in which they can be successful – whether it’s operating a forklift or assembling parts for products or packaging up products or even stuffing gift bags for special events.

Some of Redmann’s employees have been there for decades. Every employee I talked to seemed committed – proud, too, of the work they do.

“I actually love it here for a lot of the skills I’ve learned,” said one, a 21 year old who recently got the job – his first one ever.

“It’s going good so far,” said another, who has been at Epi­Hab for 30­ plus years. So far. But for how much longer?

How you can help

It’s a question that keeps Redmann up at night.

The logical answer would be to raise prices by 8 to 12 percent to cover added payroll costs. But he worries that his major customers – the ones that provide 80 percent of Epi­Hab’s work might automate the tasks or look elsewhere for cheaper labor.

Redmann says he plans to take the next several months to figure out what he can cut in order to avoid large price increases that could drive away business.

“I’m going to have to reduce benefits or eliminate them,” he said. “Or I’m going to have to slim and trim down and that is people.”

It’s likely that a small retirement savings plan set up for his employees will have to go. Possibly some employees as well, if he can’t find new work to offset any losses. (If your business could use Epi­Hab’s services, call him at 602­254­7027.)

As a last resort, a business that’s been here, helping people since 1958, could simply close its doors – a prospect that Redmann says is unthinkable.

For now.

“I’m sure we’re not the only ones who are scared.”

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