2017-04-06
Story

Jonathan Kenworthy of Grand Junction, Colo. says Colorado's new minimum wage increase is already making life easier for him financially.

Photo by David Cornwell

By Michael Booth

A minimum wage increase for Jonathan Kenworthy is not about splurging for concert tickets, or suddenly springing for a vacation. As a Grand Junction pizza delivery guy, the 33-year-old Kenworthy appreciates January’s $0.99 per hour wage boost in Colorado for much more prosaic reasons.

“At the end of the day, everything goes back to bills,” Kenworthy said. “In my current economic situation, I’m pretty much living paycheck to paycheck. It basically makes it easier for me to afford my life’s necessities a little better than before.”

The view on wages from the Western Slope changes, though, when it’s an employer talking.

Michelle Gillilan, who owns D&M Meats in Fruita with her husband, said the Jan. 1 wage boost and three more to follow by 2020 have forced their packing business to cut overtime hours for skilled employees, raise prices and pay higher invoices from suppliers who are also raising their prices because of expanded labor costs.

When many Coloradans vote, Gillilan said, “they just don’t realize the true costs. They just don’t get it” when it comes to small businesses, employees and basic economics.

The two perspectives on the early results from Colorado’s Amendment 70—passed with 55 percent support on last November’s state ballot—span the equity and employment issues that have defined the minimum wage debate for decades. Economists and academic researchers will now watch carefully for wider statistical evidence to back the majority’s view that raising wages will lift workers out of poverty and improve the overall economy, even if costs rise for some employers and consumer goods and services see a rise in prices.

“We’ve always felt this is just a first step,” said Michelle Webster, manager of policy and budget analysis for the Colorado Center on Law & Poverty (CCLP), a Colorado Trust grantee. CCLP was part of a coalition of progressive groups backing Amendment 70 during last year’s campaign.

One group of statistics that researchers will watch ties physical health directly to wages.

Groundbreaking research is showing that past lower wages created inequities in obesity rates and mental health among minimum wage workers, writes J. Paul Leigh, PhD, a professor of health economics at University of California, Davis. Gradual erosion in the buying power of the minimum wage in previous decades of stagnation can account for up to 10 percent of the increase in average body mass in the U.S. since 1970, according to a paper Leigh cited for the Economic Policy Institute. Though the researchers want to dig deeper, one theory to explore is whether those working for the minimum buy more high-calorie, poor-nutrition fast foods because they are the most affordable.

Leigh also cited a British study showing mental health improvements in workers who received a 1999 wage increase, when compared to control groups whose wages stayed the same.

“The weight of research evidence indicates that an increase in the minimum wage would improve the health and well-being of the U.S. population and, as a consequence, likely help restrain soaring medical costs,” Leigh wrote.

Colorado’s latest minimum wage campaign took hold at a time when employment levels in the state are high, but lower-wage workers and social-justice supporters see compensation as relatively stagnant. Colorado’s state-set minimum wage was adjusted for inflation and set at $8.31 in 2016, above the federal minimum of $7.25, but scheduled for only incremental increases in the near future with inflation largely tamed.

Progressive groups, citing one study of productivity, argue the minimum wage should have been $21.72 by 2012 if hikes had kept pace with workers’ more efficient contributions to the economy. Charts by the White House Council of Economic Advisors (during the Obama Administration, in 2014) show the inflation-adjusted buying power of the minimum wage reached a peak in 1968 and is a third lower now.

The November 2016 victory for Amendment 70 increased the Colorado minimum wage to $9.30 on Jan. 1. Pending increases in the amendment will move the base to $10.20 in 2018; $11.10 in 2019; and $12 in 2020. After that, the minimum will once again be adjusted upward with inflation but, unlike the previous law, will not be adjusted downward if the Consumer Price Index falls.

Minimum wage for tip-friendly jobs such as restaurants moved from $5.29 to $6.28, and will also move up each year.

Now that the law is set for years to come, Colorado will watch for statistical conclusions in the age-old interplay between employers, employees, progressive politics and economic analysis. A 2016 paper from the Colorado Women’s College (CWC) at University of Denver and The Women’s Foundation of Colorado cited studies showing tens of thousands of Colorado workers would be lifted out of poverty, and that history shows employers cut few jobs or hours even when the minimum is raised.

These proponents and the economists they cite are also optimistic the Colorado wage increases will have a positive effect on many social determinants of health, as well as a direct impact on wage inequality by race and gender. About 16 percent of white workers in Colorado will see raises due to the new law, while 30 percent of black workers and 28 percent of Latino workers will see boosts, according to the CWC study. (A 2016 Pew Research Center poll found national support for increasing the federal minimum wage was significantly higher among Democrats or people of color than among Republicans or whites.)

The same study also references a 2016 report by the National Bureau of Economic Research claiming that infant birth weights rise along with a higher minimum wage, and “improve these infants’ future educational and financial prospects.”

During a recent California campaign for a higher minimum wage, Human Impact Partners published a report citing a litany of public health benefits linked to better wages. “Higher income means better nutrition, more leisure time physical activity, and less smoking and other risky behaviors. Higher income also means more choice and stability for health insurance,” the report summary states.

Opponents pointed to studies friendlier to their point of view—that businesses using high percentages of lower-wage labor do inevitably cut positions or hours when their wage costs rise. They also say cost hikes are already getting passed on to consumers, and that low-wage workers are precisely the ones who will be hurt most by wage-related jumps in prices for food, gas, child care and other basic items.

A group of three Mexican restaurants in Broomfield added a 10 percent “Amendment 70 Service Fee” to each table bill in February, citing an estimated $185,000 increase in labor costs that had to be passed on at least partially to consumers.

Fruita’s D&M Meats immediately saw key suppliers raising their prices, and had to follow suit to its customers, Gillilan said. The business employs seven people overall, and after cuts to hours combine with price increases for gas, tires and other necessities, Gillilan thinks their employees will be “worse off than they were before.”

Some employers who support higher wages are also struggling to factor in the new minimums without hurting employees. Heather Griffith owns Young People’s Learning Center, the oldest privately owned child care center in Larimer County, serving 150 families in the school year and 250 in the summer.

Griffith said she pays everyone above minimum wage, but that when the minimum moves up, she has to compete harder for entry-level employees with a wider range of retail or fast-food businesses. Staff salaries will be 48 percent of her costs next year; she had committed to a 5 percent boost in wages over the next three years, but also told parents their fees would rise 5 percent.

Griffith has convened meetings of child care center operators in northern Colorado to talk about costs and other challenges, and said “I think many agreed this [minimum wage hike] is long overdue. I think there is also deep concern about parents not being able to make this work, and turning to unlicensed care.”

The 2016 CWC study and others, though, conclude that working women still gain from minimum wage hikes even if their child care costs go up modestly.

“Their wages will go up more than the cost of their child care,” said the University of Denver’s Miller Chair of Applied Economics, Jack Strauss, PhD, who co-authored the study. “There will be more winners than losers here.”

Other reviews of child care costs, including definitive geographic surveys by the University of Colorado, show areas such as Denver, Boulder and mountain resorts already have high day-care costs and wages, Strauss noted. The more immediate impacts of low-wage hikes would be felt at day care centers in other regions that pay the minimum wage or closer to it.

Meta-reviews of economic studies show that gradual increases to the $12 level, as Colorado is doing, do not disrupt employment, Strauss said. With gradual increases, 30 times more people benefit from the hike than are affected by job losses or hour reductions, he said.

Still, employers and their advocates say employment losses are inevitable in Colorado and are already underway.

Eric Fruits’ Economics International Corp. conducted research for the Common Sense Policy Roundtable on the Colorado wage proposal, assessing that the state would have as many as 90,000 fewer jobs by 2022 than if the minimum wage had stayed the same. Fruits calls Colorado’s schedule of wage increases “steep-ish,” while Oregon, on a path to $14.75, and Seattle, heading to $15, are “steep.”

Seattle employment has continued to grow while its minimum wage increases, Fruit acknowledged—but there is an impossible economic question here, he noted: “What would have happened with employment if you hadn’t raised the wage?”

“Economists argue over this a lot,” said Rich Jones, director of policy and research at the Bell Policy Center, which helped lead the main coalition advocating for Amendment 70. “But our conclusion is that it’s pretty close to zero effect” on employment growth, he said. For example, he said, studies of contiguous metro areas, where one raised wages and the other didn’t, showed no negative impact on employment in the higher wage area.

By 2020, Jones said, about 500,000 Coloradans will be benefitting from the amendment’s wage hikes and, contrary to assumptions that low-wage jobs are for teenagers in fast-food businesses, 142,000 of those people are parents. “That’s a large number of kids affected by their parents’ income,” Jones said.

The coalition that backed Colorado’s minimum wage boost is still together after the election, noted Michelle Webster, manager of research and policy analysis at CCLP. While the wage boosts are set for years to come, other targets remain.

Parts of Colorado have such high costs for housing and other services—including Denver, Boulder and some mountain communities—that even the pending $12 minimum wage is not enough to live on in those areas, Webster said. Yet the legislature in 1999 blocked local communities’ ability to set a minimum higher than the state.

The coalition will work through the legislature to strike that provision in favor of local control, likely in 2018, Webster said.

“There’s still a tremendous amount of work to be done for low-wage workers,” she said.

Michael Booth
Writer
Denver, Colorado