Many Colorado employers are getting hit in the pocketbook by a new minimum wage law that went into effect Jan. 1, but the ultimate impact is being passed along to consumers of goods and services.
The state’s minimum wage remained unchanged for nine years at $5.15 per hour, matching the federal level, until November, when voters narrowly approved an amendment to the constitution to raise the hourly rate to $6.85, one of the highest in the nation.
With the federal minimum wage likely to soon be raised from $5.15 to $7.25 over the next two years, Colorado’s jump would not be a matter of much concern – if that was as far as it went. But Amendment 42 also raised the base pay of tipped employees from $2.13 to $3.83 per hour, and the minimum wage will now be adjusted annually for inflation as measured by the Denver-Boulder-Greeley Consumer Price Index.
That means every tipped employee and every worker paid minimum wage got a $1.70-per-hour raise, and that will likely increase every year.
That has business owners like Scott Smith of CooperSmith’s Pub and Brewery in downtown Fort Collins, a little steamed.
“It’s water under the bridge, but there wasn’t a single person in our establishment that was being paid $5.15 an hour,” he said. “Nobody had a problem with it to go up to $6.85. The flaw for us was raising the tip credit.”
Smith said he now has to pay each of his tipped employees $1.70 more to meet the new required base pay, which he estimates will cost him about $5,000 more each month or about $60,000 per year.
Smith said he’ll deal with the additional costs by raising prices 5 percent across the board and by being more watchful over the number of hours his employees work. “We passed it on to the consumers,” he said. “I’m just hoping people can accept the 5 percent going up every year.”
Raising the floor
The new law was aimed at helping those on the bottom of the income ladder, including workers in retail, hotel and motel housekeeping, janitorial, agriculture and other traditionally low-paying occupations.
But over the last several years most Coloradans’ hourly wage has climbed above $5.15.
“No one I know of was paying minimum wage,´ said Ilene Kamsler, director of the Colorado Hotel and Lodging Association. “They can’t get (workers) at the minimum wage.”
But it won’t be long before things tighten up, she predicts. “We did not mind raising the minimum wage – it’s tying it to the CPI that’s damaging,” she said. “It’s not a problem right now but as that CPI starts to compound it sure will hurt.”
It’s already hitting some of the state’s biggest resorts pretty hard. The Broadmoor Hotel and Resort in Colorado Springs, a sprawling 3,000-acre resort with 700 rooms and 15 restaurants, will be paying about $500,000 more a year to its tipped employees, said Steve Bartolin, president and CEO.
Bartolin said those employees were already earning between $20 and $30 per hour. “All the people who got raises were the ones who were already our highest-paid employees,” he said. “That’s the irony.”
Bill Vandenberg, part of the coalition Coloradans for a Fair Minimum Wage that helped pass the new law, defends tying it to the CPI. “For nearly 10 years, low-income workers had to wait for an increase in the minimum wage while the cost of living went up every year,” he said. “We believe an annual cost-of-living increase is good for everyone because that money keeps circulating in the local economy.”
Vandenberg also defends including both non-tipped and tipped employees. “As a former waiter for five years I know there are good nights and slow nights for tips,” he said.
Few complaints locally
Sarah MacQuiddy, president of the Greeley Chamber of Commerce, said she’s not heard anything from the local business community about the new minimum wage. “There’s really been no talk about it,” she said. “The majority (of businesses) are already paying above minimum wage.”
But that may change. “We haven’t seen the worst of it yet,” she said. “It could be a few years down the road. The CPI – that’s what people aren’t thinking about right now.”
Gaye Stockman, president and CEO of the Loveland Chamber, agrees that tying the minimum wage to the CPI “just isn’t fair.”
“If the rest of us could tie our increases to the CPI, that would be different,” she said. “Nobody’s going out of business over this, to my knowledge, but it could become a real burden.”
Pub owner Smith predicts the new law may cause friction between tipped and non-tipped employees as time goes by. “There’s going to come a point where cooks may be earning less than the servers,” he said. “It’s going to be real hard to find kitchen labor, and that gap is going to narrow every year.”