Uproar, but no calamity on wages

Start talking about a minimum wage hike and the gloomy forecasts begin. Higher labor costs will lead to fewer jobs, the basic argument goes, and businesses will suffer.

But a look at cities from San Francisco to Washington, D.C., that already passed wage hikes shows the opposite is true: A higher minimum wage can be a win-win for workers and businesses alike.

The reality is the sky won’t fall if Colorado raises its minimum wage, or if we allow our cities and counties to do the same.

Take a look at San Jose, which bumped minimum pay 25 percent from $8 to $10 an hour in 2013. Naysayers said it would eliminate jobs and threaten retail growth downtown.

Here’s what happened instead: Unemployment dropped from 7.6 percent to 4.6 percent in two years. The leisure and hospitality sector (including food services) increased its labor force by 3 percent in 2013, and another 4.1 percent in 2014. And the number of restaurants downtown rose 20 percent, according to the San Jose Mercury News.

Low-wage workers also have an additional $4,000 a year in their pockets, which they’re pumping back into the local economy for rent, food and clothing. Consumer spending accounts for about 70 percent of U.S. economic activity.

In contrast, Colorado’s minimum wage of $8.23 an hour, or $17,118 annually, falls below the poverty line, and covers 35 percent of the basic needs of a Denver worker, according to the Colorado Center on Law and Policy.

Some 68 percent of minimum wage workers here are over the age of 20, and three-fourths work 20 or more hours a week. Even a $1 increase in the minimum wage would increase household spending by nearly $700 a quarter, and reduce dependency on public assistance — offering workers a hand up rather than a hand out.

What’s missing from the debate is that raising the minimum wage is not a simple trade-off between increasing pay and eliminating jobs. Instead, economists repeatedly found that businesses absorbed labor costs from wage hikes through reductions in employee turnover and training costs, higher productivity, and small price increases. On average, a 10 percent minimum wage hike adds 0.7 cents per dollar to restaurant prices.

It turns out that providing a higher minimum wage creates a virtuous cycle. Happier, healthier employees are typically more efficient, provide better service, and increase customer satisfaction.

Cities like San Francisco and Santa Fe, which passed minimum wage hikes over a decade ago, show that the same positive results hold true over time. A 2011 report on both cities by the Center for Economic and Policy Research found no discernible impact on their employment.

In Colorado, a bill allowing local control of minimum wage rates was postponed indefinitely by a Senate committee last week. They should take another look.

Data from local wage hikes can also help inform statewide debates, like a second Colorado wage measure to raise the floor to $12.50 an hour by 2020 now before the Senate. The measure could also gain enough signatures to make the ballot in 2016 — a move 76 percent of Colorado voters support.

While raising the minimum wage causes plenty of uproar, the evidence shows there’s no calamity. In a virtuous economic cycle, Colorado businesses really can do well by doing good. Lisa Wirthman of Highlands Ranch is a monthly columnist.