A new minimum wage increase will take effect in Colorado on New Year’s Day, bringing wages to $12.32 an hour, or $9.30 for tipped workers.
The 2.7% statewide increase is based on language in the Colorado Constitution, which mandates annual inflation adjustments based on the consumer price index. Colorado voters approved a constitutional amendment in 2016 enshrining the annual wage increase in the state’s governing document.
The increase comes as 31 counties are still under Level Red coronavirus shutdown restrictions, although Gov. Jared Polis said Wednesday that he is asking health officials to downgrade those counties to Level Orange.
Industries that rely on low-wage workers, such as restaurants and hospitality, have seen some of the highest rates of new unemployment claims filed with the state.
After months of closures and limited operations, the Colorado Restaurant Association said the mandated increase would be difficult for restaurants, especially in Denver where the increase will be by $1.92 per hour.
The city of Denver passed a bill in 2019 to increase the minimum wage beyond the state baseline, which sets the new hourly rate for 2021 at $14.77.
“What may seem like a small amount will actually take a significant toll on restaurants who are already struggling to make rent, keep their employees on their payroll, and keep their doors open even in the short term,” said Restaurant Association CEO Sonia Riggs.
Pete Turner, who owns the restaurant chain Illegal Pete’s and advocated for the constitutional amendment in 2016, said while the increase comes at a bad and uncertain time for businesses, the pandemic has only underscored its necessity.
“It’s not an ideal time to take on more costs,” Turner said. “But I think the pandemic has really highlighted the disparity between working-class people and people who have money and means, and it’s really just widening that gap. Folks just don’t have the money to live.”
The Colorado Fiscal Institute, a left-leaning policy research group that has supported minimum wage increases, pointed to its own research showing the cost of paying workers more is usually passed on to consumers through increased prices.
“We found that the minimum wage component of a price increase of a $20 meal usually ended up making that same meal cost about 50 cents more, so really imperceptible to most consumers,” spokesman Elliot Goldbaum said.
Illegal Pete’s locations closed for the early months of the pandemic, reopening in July, and like many restaurants have seen less business, especially at locations that previously got a lot of traffic from college students and visitors to sporting events, Turner said.
The chain has paid its workers above minimum wage since 2015 – and currently, including tips, workers average about $21 an hour, Turner said. With the uncertainties of the pandemic, he acknowledged the increase will hit other businesses differently, and urged consumers to examine their own spending habits.
“People [during the pandemic] have been willing to pay more for delivery, so … they need to realize the value around what restaurants provide, and that should translate into folks being able to get a living wage,” Turner said.
The restaurant association surveyed Denver restaurants at the beginning of September about the city’s planned increase. Twenty percent of restaurants that responded to the survey said the hourly wage hike would force them to consider closing, while 59% reported they’d have to further reduce staffing levels.
The restaurant association was also among groups calling for the Denver City Council to postpone the wage increase.
“Restaurants are grappling with a 100-year pandemic – the most challenging crisis they’ve faced in living memory,” Riggs said. “Council should be doing everything it can do to relieve this burden and keep people employed.”
Denver is still moving forward with the minimum wage increase as scheduled.
“This was not an easy decision, but as our economy recovers – and we know it will – we don’t want to leave behind our minimum wage workers, who are often frontline workers in the pandemic and disproportionately women and people of color,” Denver Mayor Michael Hancock said in a statement in November. “Putting additional dollars into the hands of workers also provides an economic stimulus by increasing their ability to spend.”
Denver’s minimum wage will go up to $15.87 in 2022. After that, annual increases will be linked to the consumer price index.
The federal minimum wage of $7.25 hasn’t changed since 2009. Twenty states, including Colorado, are raising their minimums by Friday, according to CNN.