Denver Leaders Unveil New Plan for $15 Minimum Wage
Community leaders, however, are concerned about how the hike will disproportionately affect small businesses and restaurants.
On Sept. 19, Mayor Michael B. Hancock and Councilwoman Robin Kniech (at-large) proposed to raise the citywide minimum wage starting on Jan. 1. It is estimated that more than 100,000 Denver residents would see higher wages under this proposal.
“Wage stagnation is a national challenge and has meant pain and a lack of opportunity for too many people for too long,” Mayor Hancock said in a statement.
This is part of the Mayor’s agenda to lift the city’s residents and families to 60% area median income (AMI), which is the national metric of affordability. With Colorado’s minimum wage set at $11.10, Denver’s low-income workers do not meet the goal of 60%. According to the Mayor’s office, increasing the minimum wage to $15 per hour would place a family of four (with two people working full-time) at just above the 60 percent AMI rate.
Earlier this year, the city proposed a $15 per hour minimum wage for city employees and contractors. The proposal would increase hourly wages for city employees and covered city contract and subcontract workers to $13 on July 1, 2019, $14 on July 1, 2020 and $15 on July 1, 2021. Following this proposal, the Colorado General Assembly passed HB19-1210, which enables local governments to set a citywide minimum wage greater than the state constitutional wage.
With new authority under this legislation, Mayor Hancock and Councilwoman Kniech’s proposal would elevate Denver’s minimum wage to $13.80 an hour on Jan. 1, 2020 and $15.87 on Jan. 1, 2021, and then rise according to the Consumer Price Index each year after that.
According to Councilwoman Kniech’s office and an Economic Policy Institute Minimum Wage simulation model, 20% of Denver residents (73,978) would receive a raise on Jan. 1, 2020, 95% of whom are adults. By Jan. 1 2021 the cumulative number of Denver workers who would receive a raise would exceed 100,000.
The Councilwoman and Mayor hold that this increase will have little to no effect on employment, give a boost to workers, will stimulate the local economy, improve public health outcomes and reduce turnover and recruitment costs for businesses. However, many in the business community are concerned with how this hike could disproportionately affect small businesses and the restaurant industry.
“My primary concern – consistent with that expressed by a number of local industry and trade associations – is the heavy burden this will place on any number of small businesses,” says Todd Fredrickson, a partner in the Denver office of Fisher Phillips practicing employment law. “This is a pretty rapid increase in just over a year for most small businesses to implement, especially those that already operate on fairly slender profit margins.”
Fredrickson adds that something will have to give for these employers, including things like employer-covered health insurance premiums and paid-time-off benefits. “I suspect that small employers will have to get creative in meeting the new minimum wage requirements, while also setting themselves up to attract employees with other perks or benefits,” he says. “I could also see many small businesses deferring hiring decisions or relying more on part-time workers to avoid the added overtime costs that could be generated by increases in the minimum wage.”
These concerns are echoed by the Colorado Restaurant Association, which has concerns that the speed of the hike is too fast and that it will further increase the earnings disparity between servers and kitchen staff.
“In the case of the restaurant industry, this proposal actually hurts the people it's trying to help,” says Sonia Riggs, CEO of the Colorado Restaurant Association. “Restaurants in Colorado want to provide livable wages to their staffs — this is how they compete for talent. But this proposal actually makes it harder for them to do so, not easier, because it gives the highest paid employees in the restaurant a raise and diverts resources away from the lowest paid employees.”
In response to these concerns regarding the restaurant industry, Denver leaders cited a report, "The New Wave of Local Minimum Wage Policies: Evidence from Six Cities," which studying the effects of high local minimum wages on the restaurant industry in Chicago, District of Columbia, Oakland, San Francisco, San Jose and Seattle. The report did not detect significant negative employment effects and found positive effects on earnings.