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Tony GagliardiTony GagliardiAugust 28, 20177min1086
Tony Gagliardi
Tony Gagliardi

All is quiet on the minimum-wage front at the moment, but don’t think last year’s passage of Amendment 70 is any long-term cease fire. Advocates for higher rates will kick off the 2018 session of the Colorado General Assembly with a push to let cities and counties set their own minimum-wage rates.

New research put out by the National Federation of Independent Business is worth every Colorado policymaker’s attention. The minimum wage is not the only issue measured by NFIB’s Small Business Poll, Job Openings, an update on the one published 10 years ago. Other interesting findings include:

  • One-quarter of small employers have an open position they are trying to fill
  • Of those open positions, 56 percent are full-time jobs, 44 percent part-time
  • The percentage of small employers citing lack of specific skills as the reason a job applicant is not qualified remains unchanged between the 2007 and 2017 polls
  • The attitude and appearance of job-seekers seems to have improved from poll to poll.

Work history, social skills, legal issues, wage expectations, English/math competencies, and drugs were other reasons for applicant disqualification. Only the last showed a slight increase over the 2007 poll.

How small employers advertise open positions, how they’re compensating employees, how they promote, how they’re dealing with federal immigration requirements are also asked. It is, however, questions on the minimum wage that are most valuable for state legislators, given their direct influence on it.

“Would a minimum wage increase to $15 phased in over the next 3 years have a negative impact, positive impact or no impact on your business?”

  • Businesses with 1 to 9 employees—44 percent negative; 6 percent positive; 42 percent no impact; 8 percent don’t know
  • 10 to 19 employees—58 percent negative; 4 percent positive; 29 percent no impact; 9 percent don’t know
  • 20-249 employees—60 percent negative; 3 percent positive; 19 percent no impact; 18 percent don’t know
  • All firms—47 percent negative; 5 percent positive; 39 percent no impact; 9 percent don’t know.

Taking the results from just the 1-to-9-employee group, the poll asked what immediate actions small-business owners take when hit with a minimum-wage increase. (Some would take simultaneous actions, which is why the percentages don’t add up to 100)

  • 84 percent would raise prices
  • 76 percent would take lower earnings
  • 69 percent would not fill an open position
  • 67 percent would increase wages
  • 62 percent would decrease the number of employees
  • 62 percent would reduce employees’ hours
  • 57 percent would increase the use of less expensive or part-time workers.

Amendment 70 is not as draconian as the proposed minimum-wage increase in the Job Openings poll. It increases the rate by 90 cents a year until 2020 when it would reach $12 an hour. Still, the coping actions being taken now by small-business owners are the same, mainly higher prices for consumers and loss of job opportunities, especially for teens and young adults.

It is forever worth reminding everyone that the minimum wage is earned by just 2.7 percent of the nation’s workers, according to the U.S. Bureau of Labor Statistics, and most of them tend to be young. “Although workers under age 25 represented only about one-fifth of hourly paid workers, they made up about half of those paid the federal minimum wage or less. Among employed teenagers (ages 16 to 19) paid by the hour, about 10 percent earned the minimum wage or less, compared with about 2 percent of workers age 25 and older.”

In short, the minimum wage is an entry-level wage earned mostly by teenagers and young adults. One major effect in increasing the minimum wage is eliminating entry-level jobs. Despite these facts, proponents of ever-increasing rates wrongly argue that they’re needed to lift people out of poverty, even though little to no evidence exists to back it up.

Not content with Amendment 70’s passage, minimum-wage advocates now want the Colorado Legislature to allow local governments the ability to set their own rates, which would create a crazy quilt of minimum-wage rates throughout the state and a commensurate paperwork migraine for every business.

If NFIB’s recent poll reminds of us of anything, it’s that costs have consequences.


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Peter MarcusPeter MarcusJune 16, 20176min1905

A recent University of Colorado study backs up many of the arguments made by businesses who opposed raising the minimum wage in Colorado.

The study, published in the journal Regional Science and Urban Economics in May, comes after Colorado voters last November backed gradually raising the minimum wage to $12 per hour by 2020.

The first increase happened in January when the state minimum wage jumped to $9.30 per hour. Prior to that, the minimum wage stood at $8.31 per hour.

In 2018 the wage will jump to $10.20 per hour; $11.10 per hour in 2019; and finally $12 per hour in 2020.

The University of Colorado study, authored by Terra McKinnish, a professor in the Department of Economics, surprisingly found that low-wage workers commute away from states that raise the minimum wage, suggesting that wage-hiking initiatives cause employers to either cut payroll or look for alternatives.

“By making low-skilled workers more expensive, there is the potential for employers to use fewer workers, switch to slightly higher-skilled workers or exchange capital technology — such as self-serve kiosks — for low-skilled workers,” McKinnish said.

The labor economist called it a “disemployment effect.”

But supporters of raising wages across the states question whether the study offers an accurate snapshot. McKinnish looked at census data for 93 labor markets in 23 states where low-skilled workers commonly cross state borders for work.

She assessed out-of-state commuting rates for workers making less than $10 per hour compared to workers making between $10 and $13 per hour, from 2005 to 2008. There was no evidence that low-wage workers commuted at higher rates to neighboring states with a higher minimum wage.

The author then examined data between 2010 and 2011 after a federal minimum wage increase to $7.25 per hour prompted several states to boost their minimum wage, which resulted in less disparity between states.

The last time voters approved a minimum wage hike in Colorado prior to last year was in 2006, when the electorate adopted a wage of $6.85. It was adjusted to $8.31 per hour due to inflation.

“If low-wage workers were previously attracted to commute across state lines in order to receive a higher minimum wage, we would expect the rise in their own state’s minimum wage, relative to that of the neighbor’s, to reduce the rate of out-of-state commuting,” McKinnish said.

But the opposite was found. While moderate-wage workers were more inclined to stay in state, low-wage workers increasingly commuted out. On average, a $1.50 increase in a state’s minimum wage corresponded to as much as a 50 percent increase in the number of low-wage workers commuting out, the study found.

Michelle Webster, manager of research and policy analysis for the Colorado Center on Law and Policy, questioned why the study would have used data between 2010 and 2011, when the economic downturn was showing dire impacts on jobs.

“In 2010 and 2011, many states were still dealing with the effects of the recession, particularly low-wage workers. So I don’t know to what extent she controlled for that and controlled for how particular states were hit harder by the recession based on the industries that made up their economy,” Webster said.

“You can imagine that workers are crossing state lines just to work, and it’s not a function of employers necessarily pulling back on hiring because of the minimum wage, but just dealing with the continuing sluggish economy.”

While Colorado bounced back from the downturn faster than other states, it didn’t return to pre-recession job levels until about 2012. Nationally, jobs numbers didn’t return to pre-recession levels until 2014.

It’s still too early to evaluate any impact on the minimum wage increase in Colorado, though proponents are hopeful that since Colorado’s economy continues to improve, low-wage workers will also see benefits, thereby improving the state’s overall economy.

“I suspect that if the economy continues to do well, then the minimum wage increase in Colorado is only going to support that wage story and continue to lift up the wages of those lowest paid workers in Colorado,” Webster said.

During the debate over raising the minimum wage in Colorado, businesses said it would result in layoffs, reduced hours and fewer benefits.

Employers also said they would have to pass increased costs on to consumers. They argued that small businesses would be hurt the most, especially in rural parts of the state, where economic recovery has been slower.

Some business groups feel vindicated by the University of Colorado study.

“The research confirms the crux of the opposition to Amendment 70 – that such a poorly drafted law, written by out-of-state special interests, will hit rural areas hardest,” said Tyler Sandberg, former campaign manager for Keep Colorado Working, which fought against the wage hike. “Economic policy is complicated and the simplistic one-size-fits-all measure forced into our constitution was exactly the wrong way to address the minimum wage in Colorado.”



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