State minimum wage takes second step up in 2018
Mas Torito, owner of Kokoro Restaurant, was in the minority among his peers but with the majority of Colorado voters when he backed a ballot measure in 2016 to lift Colorado’s minimum wage to $12 an hour by 2020.
Although Torito knew he would have to cover those higher costs, he believed it was the right thing to do.
What caught him off guard, however, was how quickly wage increases have had to come.
“Our feeling is that the labor market is so strong and unemployment so low that we have had to increase pay multiple times a year,” said Torito. “Our kitchen employees start at $12.50 an hour as of (last) September. The $11.50 we had been paying earlier in the year wasn’t keeping up.”
On Monday, Colorado’s minimum wage rose to $10.20 an hour from $9.30, which follows an increase a year earlier from $8.41. Two more increases are coming at the start of 2019 and 2020.
Colorado joins 18 states and 19 local governments that will adjust the minimum wage higher in
2018. Of those states, Colorado’s increase is the largest, at 9.7 percent, followed by Hawaii, at 9.2 percent.
Supporters of the measure argue that the dire predictions of job losses and business closures, especially in the restaurant industry, haven’t panned out.
“Job growth has been strong in the industry, profits are robust — $12 billion in the last year and growing — and, of course, the industry is reliant on people having enough disposable income to spend on eating out,” said Michelle Webster, an economist with the Colorado Center on Law and Policy.
Webster said an economic forecast from the University of Colorado predicts continued gains next year in restaurant employment, which accounts for about one in 10 jobs nationally.
Workers earning the minimum wage or just above it say the increase has made a difference in their lives. But they also question whether the ask was too modest given how much housing costs continue to rise.
Nearly a quarter of tenants in metro Denver, for example, pay half of more of their monthly income to cover monthly rent, according to a study from Harvard University.
“A lot of people understand because a lot of people are going through it,” Melissa Hastings, an Adams County resident, said of why voters supported Amendment 70, which lifted the Colorado minimum wage, by a 55 percent majority.
After nine years as a stayat-home mom, Hastings two years ago found herself divorced and cast back into the workforce at age 40 and trying to support two children.
“If the only job you can get is a minimum-wage job, how are you supposed to make it?” she said. “Minimum wage jobs aren’t just for teenagers.”
Hasting holds a manufacturing job that pays $11.55 an hour, a wage she thinks would have been lower absent the higher minimum wage that voters approved. But she still struggles to make it.
Restaurants still upset
Restaurateurs were among the most vocal critics of the minimum wage hikes and, more than a year later, remain so.
“Two restaurants that I spoke with are laying off some employees. Many are raising prices. Some are discussing changing the way that they work so that their cooks interact more with customers — thus making them eligible to participate in a legal tip pool,” said Sonia Riggs, president and CEO of the Colorado Restaurant Association.
Regulations passed in 2011 by the Labor Department during the Obama administration prohibit tips given to workers who interact with the public from being shared with non-tipped workers such as cooks and dishwashers.
Through the first half of this year, the state’s employment numbers don’t show any big declines in industries more likely to hire workers at the minimum wage. But they do show a big jump in compensation for some.
Employment at restaurants and bars in the state is up 2.3 percent in the year through June compared with a 3.3 percent increase the year before. The gains in the first half are close to the 2.5 percent gain in employment statewide.
There were 11,791 dining and drinking establishments in Colorado at the end of June, up 2.7 percent from 11,480 a year earlier, another sign the food service industry continues to grow.
But the numbers also show restaurant owners are handing out much larger paychecks. Total food services wages are up 10.5 percent year over year in the second quarter, and the average weekly wage is up 8 percent to $490.
That contrasts with a 3.3 percent wage increase averaged in 2016 and a smaller 4.2 percent increase in the average weekly wage, which was $1,042 statewide.
A deeper divide
Even if some of their worst fears weren’t realized, one particularly sore point for restaurateurs is that rather than reducing pay disparities, the minimum wage law has actually heightened them.
Tipped employees, typically those who interact with the public, can make no less than $3.02 an hour below the state minimum wage, regardless of how much they make in tips.
That will take the minimum tipped wage from $6.28 an hour this year to $7.18 an hour next year, then $8.08 and finally $8.98 an hour by 2020.
“Restaurants are basically being forced to give 65 percent of their highestpaid employees a 70 percent raise over the next three years, thus making it harder to give the back of house employees, like cooks, a raise,” Riggs said.
Mark Rogers, chairman of the association and owner of two Cheddar Casual Cafes in metro Denver, said the minimum wage is up 23 percent while the tipped wage will have increased 36 percent since Amendment 70 passed.
“Unfortunately, that’s difficult for any restaurateur to handle, whether you’re a corporate entity with scores of restaurants in the state or an independent operator with one establishment,” he said.
Most restaurants will have to increase prices again, in order to make up the increased cost in payroll, he said, adding that others are cutting portion sizes, deploying technology to replace labor or scheduling close to the bone.
”Disparity in the front of the house and back of house is a really big challenge in going about the minimum wage,” Torito said.
Kokoro servers can make $15 an hour in tips on top of a minimum wage that is now at $7.18 an hour, which pushes their pay to around $22 an hour.
As restaurants lift menu prices to cover higher wages, that contributes to a larger check and higher tips. But that only deepens the sense of being left behind felt by kitchen staff, who are more likely to be minority or foreign-born.
To help manage higher labor costs, Torito said he uses a cloud-based platform called Hotschedules to better align hours worked with demand. He tries to upcharge where he can, say for extra sauce.
Like his colleagues, he worries about how to accommodate higher payroll costs the next time a downturn cuts into sales. Still, he continues to believe voting for a higher minimum wage was the right thing to do.
“Overall supporting people having living wages is good business,” Torito said. “It shouldn’t be such a crazy idea for us to say we need to pay our employees more.”