At The Preservery, a neighborhood eatery in Denver’s RiNo neighborhood, the cost of food and other expenses has gone up at least 20% since the pandemic. Rent is higher. There are also additional costs to boost job openings online, which has “for sure” added 60% to recruitment expenses, said co-owner Whitney Ariss.
But faced with the city’s 9% minimum-wage increase set for Jan. 1 to $17.29, that’s not a problem.
“We are in full support … especially because of the current circumstances with the cost of living in Denver and inflation and all of that,” Ariss said. “But, of course, as a small independent owner and operator, it’s really, really hard right now. Any kind of increase in anything — which we have seen across the board in the restaurant world from food costs to operational costs to labor costs — everything has increased. And I wouldn’t say that traffic has. For us, we’ve never fully recuperated from the pandemic in terms of regaining our past revenue averages.”
Business owners are mixed about next year’s minimum wage hike in Denver, which for the first time is based on inflation. It was part of an ordinance passed by Denver City Council in 2019 to get the city’s lowest earners to a better wage and then link annual pay raises to the Consumer Price Index starting in 2023. Colorado’s minimum wage, also pegged to inflation, is going up, too, more than a dollar an hour to an estimated $13.68. Next year’s increase coincides with the highest inflation rate in 40 years, at 8.94%.
Ariss just hopes her customers understand.
“The huge challenge is adjusting consumer expectations and helping people realize all of the hidden costs that go into providing the service of food and beverage for our guests,” she said. “We are a casual, mid-priced restaurant and still on a regular basis, we get questions and inquiries about why our prices are what they are. … Most of us (restaurant owners) feel like it’s really difficult to actually charge what we should be charging to make our businesses profitable.”
Some business organizations have released statements pointing to the struggle small companies are still having during the pandemic recovery. A group of more than 50 restaurants in Denver sent a letter to Denver’s City Council asking for help. The Denver Metro Chamber of Commerce said this only fuels future inflation.
“Mandatory minimum wages tied to formulas like CPI will cause businesses to increase prices to meet new wage demands. Increased prices will simply continue to fuel inflation. At its worst, increased prices lead to a general increase in cost of living that might be so high as to negate any advantage gained by workers having slightly higher wages,” according to a statement from the chamber. “Competition, free from government interference, is still the best solution for both workers and for employers.”
Inflation has slowed from a few months ago. For June and July, consumer prices were up 8.2% in the Denver area from a year ago, compared to the 9.1% increase in March. Denver’s minimum wage increase is based on how much consumer prices in the Denver area increase in the first six months of the year compared to a year ago. The city isn’t allowed to change the wage mid-year, according to state statute.
But while Americans are finding some relief at the gas pump, an average gallon of gas still costs 10% more than it did a year ago, according to the AAA gas price tracker. The Denver area’s cost for groceries is up 13.6% while the cost of eating out is up 9.8%.
And while a 10% hike in apartment rents may seem on par with inflation, rents in Denver have been increasing near that rate for two years. At an average of $1,500 a month for rent, a 10% increase is $150. For a minimum wage earner, that means working an extra nine to 10 more hours before taxes.
And that’s tough when you can’t get enough hours. Ciarra Junsch, who works at a restaurant in Denver, said her wage increased to $18 this year “but it hasn’t changed my standard of living,” Junsch shared with The Sun’s What’s Working column.
“My hours were cut when I got a raise. I have to work 50 hours to sustain myself but I get 32 at most,” wrote Junsch, adding that she tried to get a second job but it interfered with hours for her first one. “I still get benefits and better pay here than anywhere else, but it is difficult to get by debt free.”
Wage growth hasn’t kept up with inflation
Denver’s new minimum wage will be among the highest in the nation when it goes into effect. Cities that outpace Denver’s wage are mostly in and around San Francisco. Emeryville, just outside of San Francisco, appears to be the highest in the nation, at $17.68. San Francisco, which increased its minimum to $16.99 last month, is also pegged to inflation so it will increase next July as well.
“Denver is going to have one of the higher minimum wages in the country, without a doubt. To some degree, that reflects a higher cost of living,” said Ben Zipperer, an economist at the Economic Policy Institute, a progressive think tank that works on fair pay policies for low- and middle-income earners. “Though I’m sure that if you looked up the MIT living wage calculator, a single adult, even without kids, is going to need much more than $17 an hour in order to make ends meet without any difficulty.”
The Massachusetts Institute of Technology calculator, updated in May, puts a living wage in Denver County at $20.31 an hour for an adult working full time with no children. An adult with two children needs $49.97 an hour.
Denver’s lowest-paid working adults — roughly 147,000 people or 10% of the workforce — made $14.25 an hour or less last year, according to the Occupational Employment and Wage Estimates from the U.S. Bureau of Labor Statistics. That includes workers outside of Denver proper, where the Colorado minimum wage was $12.32 last year (it’s now $12.56). The federal minimum of $7.25 an hour, which was set 13 years ago, is the default minimum in Utah, Wyoming, Kansas and Oklahoma.
Meanwhile, Colorado’s overall wage gains at private employers is up 8.9% this year. But adjusted for inflation, it’s more like a 0.5% increase, according to data from the Colorado Department of Labor and Employment.
“We are seeing wages increase but real wages are still negative wages. They are not keeping up with inflation,” said Nathan Perry, associate professor of economics at Colorado Mesa University. “You can live off small wage gains as long as the world around you becomes cheaper.”
The current inflation comes from multiple factors and not limited to government subsidies that buoyed Americans during the pandemic or Russia’s invasion of Ukraine, which resulted in oil embargoes and rising gas prices.
“That’s what we saw with globalization through the ’80s, ’90s and 2000s. You can go to the store and the cost of goods, they are so cheap, that we can all have more consumption even though we don’t see these big wage gains,” Perry said. “And now, you have this situation where some of this is reversing itself. I don’t want to call it deglobalization but there’s repositioning and you see global turmoil. Some of what we took advantage of in the last 30 to 40 years is unraveling.”
How the minimum wage got started
The first federal minimum wage that stuck dates back to 1938 with the passage of the Fair Labor Standards Act. An early version of the bill proposed 40 cents an hour. It also aimed to end oppressive child labor and sweatshops. After much debate, 25 cents became the first minimum wage. According to the CPI inflation calculator, 25 cents has the same buying power as $5.22 today.
Even so, it wasn’t universal. It made concessions for the lower costs of living in the South, which excluded many Black workers, according to a Department of Labor report. It wasn’t until the 1960s and the civil rights movement that activists pushed for a broader minimum wage.
“Extending the minimum wage to the rest of the economy and raising its level was one of the key points to make jobs good jobs for everybody, not just white workers,” said Zipperer, with EPI. “It was a successful expansion of the minimum wage to both end poverty but also this notion of decent pay and a good job.”
By 1967, the U.S. minimum wage reached $1.40, or about $12.61 in today’s dollars, according to the same CPI calculator. The last increase was July 24, 2009, when the federal minimum wage reached $7.25.
The U.S. is now in the longest period without an increase to the minimum wage. And because of that, cities like Denver, San Francisco and others have passed their own higher pay standards and linked annual increases to inflation. According to EPI’s research, 18 states and Washington, D.C., adopted automatic increases. That includes Colorado, which pegged annual increases to inflation in 2021. On Jan. 1, 2023, the state’s minimum wage will increase to an estimated $13.68 an hour. The Colorado Department of Labor hasn’t announced the new wage yet but confirmed the estimate is what’s anticipated.
Inflation’s not all bad, said Steven Byers, an economist with Common Sense Institute, a conservative Greenwood Village organization focused on Colorado’s economic policies.
“In the long term, we want some measure of positive inflation. Generally, it goes up and it’s very controlled, very small,” Byers said. “Increases to wages will tend to moderate as CPI goes down because there won’t be the same pressure from people wanting raises. … This is just a very unique situation where they’re taking advantage of this unusual inflation that we’ve had.”
And by “they,” he clarified, “whoever’s interested in having higher minimum wages.”
Many companies, especially in the restaurant industry, have been dealing with labor shortages for more than a year. According to Colorado job data from June, the accomodation and food services industry is one of the few in the state that haven’t recovered all the jobs lost at the start of the pandemic. The sector had added back 95% of the jobs. The state overall had recovered 110% of lost jobs. When staffing shortages occur, there’s a ripple effect for wages at many levels, he added.
“If I’ve been working at a job for three years and getting some small raises but now they’re bringing in brand new people who are only making $1 less than me, I’m going to demand that my wage goes up, too,” Byers said. “I definitely expect to see that. And I think you’ll see that from people in supervisory positions as well because now that spread between production people and the managerial staff has narrowed and they’re going to be saying, ‘Hey, I want more money or I’m leaving.’”
As business owners have struggled to hire enough workers this year, paying minimum wage isn’t an issue for many in Denver. Many say they’re already paying more than the city’s current hourly minimum of $15.87.
At Shop At Matter, a Denver bookstore and design consultancy on Market Street, its owners say no one can really make a living off selling books. They rely on their community, which includes their dozen employees. And they want to do right by their workers, co-owner Debra Johnson said.
“If the minimum wage would increase to a point where it surpassed what we paid our newest employees, we would know that we needed to really look at what we were doing and how we need to up our pay structure,” said Johnson, who said that she and partner Rick Griffith are pro-labor. “I don’t know if that’s common among retailers but that is our reality. If our people can’t afford to pay rent and have food on their table and take time to be off with their kids, if that doesn’t work for them, that doesn’t work for us.”
The restaurant tipping point
That letter from more than 50 Denver-area restaurants that called the minimum wage hike “devastating” didn’t condemn the increase entirely.
It’s not about the $17.29 number, said Katie Lazor, executive director of EatDenver, which helped organize the letter. Most Denver-area restaurants pay that much or more to hire dishwashers, line and prep cooks and other non-tipped kitchen workers in this ongoing labor shortage.
“A critical part of this,” Lazor said, “is if the minimum wage was the only significant piece going up, it wouldn’t be easy to adjust to but many more operators would be able to absorb that cost more so then alongside supply chain shortages, the war in Ukraine, driving up prices and increasing all of the challenges. It’s everything all at once that is going to make this an incredibly devastating moment for our local restaurants.”
But it’s also the new reality of wage increases every year. When the ordinance passed in 2019, restaurants had set wages to plan for each year. Then the labor shortage happened and they had to be extra creative to hire and retain workers. It wasn’t just about pay — though 92% of restaurants surveyed in January by the Colorado Restaurant Association said they increased wages or changed their business practices. One in four restaurants now offer hiring and retention bonuses. One third added new benefits, including paid vacation, medical insurance or dental insurance. Wages are up an average of 20% since March 2020.
Of course, rising costs impact multiple sides, said Zipperer, with the Economic Policy Institute.
“Businesses don’t like it when any of their costs go up. I can understand that,” he said. “At the same time, on the other side of the ledger, their workers’ costs are going up and they need to be able to afford food, rent, etc.”
But, added Lazor, “when this ordinance passed, there was no way anyone would have predicted this level of CPI.”
Another sticking point is tipped wages. Those are going up too. In Denver and Colorado, employers can pay tipped workers $3.02 less as long as those workers make at least $3.02 in tips per hour. It must be documented to get the tax credits.
In 2023, tipped wages in Denver are also increasing $1.42 an hour to $14.27 from $12.85 currently. That’s an 11% pay raise.
Increasing wages annually means raising menu prices, which often means a larger tip. It’s creating greater inequity among restaurant workers at the front versus back of the house. While there’s a movement to get away from tipping, society isn’t there yet, Lazor said.
She hopes the city will work with local restaurants to counterbalance the higher cost of serving food in Denver. Some suggestions: tax credits for hospitality-related businesses to support higher wages and benefits; provide local sales tax relief as the state did temporarily during COVID, and allow a higher tip credit beyond the $3.02.
“We all want everyone here to earn a livable wage,” she said. “It just has to come from somewhere.”