Businesses adapting to minimum wage hike

Full effect of new law may not be felt for years

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The minimum wage increase that took effect in Colorado at the beginning of the year is having a minimal impact so far on the metro Denver business community, according to several proprietors and industry experts.

While some employers are evaluating how to best account for the added expense of paying workers nearly $1 more per hour, the bigger and more common quandary is how they will absorb the cost as the minimum wage rises an additional $2.70 per hour over the next few years.

On New Year’s Day, the first of four annual increases took effect in the state, raising the wage from $8.31 to $9.30. Under the new law, by 2020, Colorado’s minimum wage will reach $12 per hour, following 90 cent increases in 2018, 2019 and 2020.

For now at least, the wage increases have not affected Jefferson County Public Schools. District spokeswoman Diana Wilson said Jeffco already pays virtually all of its lower-compensated employees above the state’s minimum wage.

Jack Strauss, an economist at the University of Denver, said fast food restaurants in Highlands Ranch, where he lives, pay $10 to $12 per hour. He said that with the area’s low unemployment rate, most businesses are forced to pay higher wages.

“Denver is a booming city,” he said.

A dilemma for some

One area organization that does pay some of its employees minimum wage is Goodwill Industries of Denver.

Prices at the nonprofit group’s stores won’t increase, but Goodwill has delayed expanding employee service programs, such as rent and utility assistance packages, according to Leslie Peabody, vice president of human resources.

“On the flip side, we’re definitely on the side of the power of work,” Peabody said. “We’re happy about the (new law), it’s just taking a bit of change and flexibility about what we can provide.”

Carolyn Livingston, communications director for the Colorado Restaurant Association, said restaurateurs may be reluctant to speak publicly about it, but said she has heard from some that they are adjusting their businesses.

“Some people have already increased their prices,” she said.

Livingston said that other restaurateurs are looking at cutting back on employee hours.

CRA opposed the minimum wage increase during the campaign, but the law, Amendment 70, passed with 55 percent of the vote in November.

“The thing folks don’t understand with restaurants is they only make 3 to 6 percent profit margin,” Livingston said.

Amendment 70 also raises the minimum pay for tipped employees, such as wait staff, maintaining it at $3.02 per hour below the regular minimum wage, with a requirement that the hourly wage plus tips must total at least $9.30 per hour. Livingston pointed out that this will make the tipped minimum wage higher as a percentage of the regular minimum wage than before.

“The tipped minimum wage is going up 70 percent in four years,” she said. “That’s a lot.”

Sean Kaiser, the director of operations at The Egg & I restaurant in Arvada, said extra thought had to go into his 2017 budget.

“We had to put a lot of thought into our budget this year. We’re trying to maintain hours for our employees, but it’s getting pretty tough,” he said.

At Paciugo Gelato and Cafe in Lakewood’s Belmar area, manager Mark DiFrancia says his workers are still making enough in tips so that the change hasn’t affected their prices yet. He said that without tips making up the difference, his store would be forced to raise prices, which would likely hurt total sales.

“I get that it seems like a good idea, but in reality it doesn’t work that easily,” said DiFrancia. “I think a lot of the people who voted for it don’t understand the ramifications for businesses.”

Peabody said the “skyrocketing” cost of living in and around Denver led to higher turnover with Goodwill’s staff. She hopes larger paychecks will mitigate that.

“We definitely saw that $8.75 an hour was just not going to cut it for our employees in the Denver metro region,” she said. “We weren’t paying a livable wage.”

Littleton resident Michael Kessler, who owns Sanyork Fair Trade in Denver, agrees.

“We feel that $10 or under an hour is not a living wage, especially in this economy and in Colorado,” said Kessler, whose company imports goods from Latin America. He said that all of his employees already make more than $12 per hour.

Sheridan resident Jose Ortiz, 18, said he works for minimum wage at a company in Lakewood, which he declined to identify, and welcomes the wage hike.

“Every little bit helps,” he said.

What’s next?

Kessler was one of the business owners who signed on to the Business for a Fair Minimum Wage campaign in favor of Amendment 70.

Strauss, the DU economist, said that modest minimum wage hikes are unlikely to have large effects on food prices in Denver, but said effects could be felt in parts of the state where the economy is not as strong, such as Pueblo or rural parts of the state.

While activists around the country have been calling for a $15-per-hour minimum wage for several years, Amendment 70 was crafted as a compromise, with its supporters saying that they recognize that $12 per hour in Denver is different from $12 per hour in Pueblo.

Peabody said it will take time to fully understand the effect Amendment 70 will have on the bottom line. She said Goodwill is preparing to adapt.

“Every four years, there could be a change in policy just based on the presidential elections,” she said. “You’re always kind of changing based on what can happen in the marketplace or the political arena. We just have to make changes and adapt.”

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