I’m a 40-year old(ish) guy living the suburbs in the middle of the United States. My whole life I’ve heard the debate. Raising the minimum wage is the right thing to do. A living wage helps eliminate poverty, and so on.
On the other side a single argument. Raising the minimum wage will cause business to go bankrupt and increase inflation.
With several states choosing to significantly raise their minimum wage we are about to find out who is right.
The Colorado Minimum Wage History
The Colorado minimum wage was something like $3.15 when I started working at a fast food restaurant at 16. I remember making something like $3.40 an hour when they raised the (federal) minimum wage to $3.35. I got a raise to $3.50 as a way of keeping me from getting upset that new hires were getting about what I got.
One thing I noticed then. We didn’t go out of business. No one did.
We did raise our prices, but it was imperceptible to most customers except those regulars who had been coming and ordering the same thing for so long they had the price memorized. They adjusted.
Later on I delivered pizzas. Minimum wage plus 50 cents per delivery from the company, plus whatever tips I got. I never got rich, but I made way more than minimum wage.
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By the time I graduated from college I was an exempt, salary employee. I think my first real job after college paid me $30,000 per year. I didn’t even know what minimum wage was after that. It just didn’t apply to me.
What Is Minimum Wage In Colorado?
The minimum wage in Colorado is $12.32 for 2021. Last year, in 2020, the Colorado minimum wage was $12.00. Both numbers are way over the federal minimum wage of $7-something that people in hard-core Republican states get.
Here is where things get interesting. Colorado voters passed Amendment 70 (later we passed something that made it harder to add so many amendments) in 2016. It made the minimum wage $9.30.
No big deal there. But, what it also did was raise the minimum wage by $0.90 every year until 2020 when the minimum wage became $12.00.
So where did $12.32 come from?
The amendment also set the minimum wage to adjust every year based on the Consumer Price Index for Colorado.
In other words, for the first time in Colorado minimum wage will keep up with inflation.
Did a Higher Minimum Wage Hurt Colorado Business?
While Colorado’s higher minimum wage may have hurt some businesses, and required others to make due with fewer employees, state law and policy isn’t about individual outliers here and there. The purpose of state policy is to advance the overall state. The Colorado minimum wage did do that, for some workers, and some businesses.
It is true that certain businesses, like restaurants and fast food chains raised prices as the minimum wage rose. The catch is that such increases often happened in conjunction with other drivers. For example, McDonald’s tweaked its menu and pricing when the price of cheese increased.
As far as businesses fleeing the state because of higher minimum wage? Very few.
You have to remember that if a business can be done in another state, then it can really be done anywhere. And if a business needs the cheapest possible labor, and can be done anywhere, chances are those jobs have already been outsourced overseas. That means most minimum wage jobs left in Colorado must be done in Colorado.
Fast food restaurants are again a good example of places that pay minimum wage. You can serve chicken nuggets in Ft. Collins using minimum wage workers in Nebraska where the minimum wage is lower. They have to be there in Ft. Collins, so the only way for that business to “flee” is for it to no longer operate at all in Ft. Collins.
Has the Minimum Wage Helped People in Colorado?
Answering how the higher minimum wage helped people in Colorado has been clouded by three things. Of course, the Covid outbreak changed up everything making comparisons to previous years difficult. Secondly, the housing market has raced higher making housing costs much higher in a way that is not attributable to higher wages.
The other thing is that coming out of the pandemic, there are fewer workers to fill job openings. That’s what happens when 600,000 people all die in a year. The result is that most businesses are offering higher than minimum wage to attract workers.
Here in the Denver area I’ve seen signs for fast food workers ranging from $14 to $15 to start. Other jobs pay even more.
Have Prices Gone Up Because of Higher Minimum Wage in Colorado?
The big boogie man for higher minimum wages is inflation, the concept that prices will go higher because of higher wages. Here is the catch.
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Like never before, consumers have easy access to a wide variety of marketplaces worldwide. In other words, the local Kohl’s can’t raise prices too much due to wages because everyone in Colorado can access Amazon and other online marketplaces. This access to other markets not only keeps prices in check, it makes minimum wage-earning Coloradoans richer by comparison.
A person in Mississippi making the federal minimum wage of just $7.25 per hour pays the same for a new popcorn maker on Amazon as a Coloradoan making $12.32 per hour for minimum wage. If the popcorn makers costs $30, that’s over 4 hours of labor for the Mississippian, but less than 2.5 hours of labor for the Coloradoan. Even better, the low-ish wage jobs that pay a bit over minimum wage earn even more.
Theoretically, this makes life better (easier?) for those who live in Colorado than those who live in Mississippi. This benefit is maximized when there are different wages for different states. When the national headquarters of Wendy’s decides to offer a $4 meal deal nationwide, that deal is cheaper for those in states with a higher minimum wage.
When it comes to earnings, the difference is apparent in the gig economy. Things like Amazon Flex pay a minimum rate of $18 per hour in the Denver area, significantly higher than minimum wage. However, $10 per hour is significantly higher than minimum wage in other areas, so rates vary.
Colorado’s Higher Minimum Wage Is a Good Thing
As time passes we will get better data, but the initial look is that the higher minimum wage for Colorado is a good thing, and that any problems have been solved by businesses who can now deal with a minimum wage that rises a few cents each year rather than lurching rates caused by laws that don’t change very often and then suddenly try to “catch up” by making big minimum wage increases.
We will see if other states follow the higher minimum wage trend, or if the federal government gets around to raising theirs.
What Does It Pay?
Colorado has one more law affecting wages in the state. The new law requires businesses to post what a job pays along with the ad. This allows workers to compare wages between companies and decide where to apply. Sought after workers will apply to jobs that pay what they are worth, while more entry-level workers will apply to lower paying job opportunities.
It may be that workers in Colorado will be the best paid in the nation. Then we’ll see if high wage really hurt the states that have them.