Colorado minimum wage climbing 28 cents in 2012

The 28-cent hike in the state minimum wage that takes effect Sunday is a classic case of a glass half full.

For employees making minimum wage, or just a little more, it’s probably a nice boost in the bottom line. For employers who have to puzzle out whether to eat the increase or pass it on to customers, the hike is a headache.

Grant Carey, general manager of Cave of the Winds, said about 70 percent of his roughly 100 seasonal employees earn the minimum wage. This year, he said, he’ll probably just have to absorb the increase and find efficiencies where he can, since the weak economy makes it difficult to raise prices.

“The bite is always a bite, but it’s something that you have to accept,” he said. “We have a good product and we charge a fair price for it, but we want to keep it affordable for families.”

Colorado’s minimum wage is tied to the consumer price index for the Denver-Boulder by a constitutional amendment voters passed in 2006, so when inflation raises prices, the minimum wage climbs along with it. The minimum hourly rate is jumping to $7.64 in 2012, from $7.36, while tipped employees will see wages rise from $4.34 to $4.62.

That rise could effectively give tipped employees a double increase, said Pete Meersman, executive director of the Colorado Restaurant Association, since if restaurants raise their prices to cover it, waiters will receive even bigger tips as a percentage of those higher totals. More likely, he said, restaurants will find ways to cut back on personnel costs.

“It’s very difficult to pass on any type of price increase right now,” Meersman said. “I’m seeing that people are cutting back as much as possible on personnel (even though) that creates some service problems.”

Fred Crowley, senior economist with the Southern Colorado Economic Forum, said most businesses with employees at or near the minimum wage will face that same difficult choice.

“The market is still tight and they won’t be able to pass this along easily,” Crowley said.

On the plus side, however, Crowley said the increase is significant for workers at the lower end of the pay scale and those workers will typically spend all of the pay raise rather than saving it. That puts a little more money into the overall economy.

“There’s actually a small multiplier effect from this thing,” he said.

Kathy White, deputy director of the nonprofit Colorado Fiscal Policy Institute, says about a million workers nationwide will benefit from similar inflation-tied increases, including about 74,000 at the minimum wage in Colorado and another 17,000 that are just above it.

“It’s really not a lot of money to an individual family, but it is enough to offset the costs,” White said. “This is a way of keeping those at the very lowest end of the wage scale afloat, really.”

An analysis by the Economic Policy Institute shows that the increase in the eight states with minimum wages tied to inflation will mean an additional $366 million increase in the country’s gross domestic product and 3,000 additional full time jobs.

Although the state’s minimum wage actually dipped in 2009 after the financial crash in 2008 pushed down prices, Crowley expects inflation and minimum wage increases to be steady in the coming years.

“Inflation is, I think, in the 3-4 percent range for awhile,” he said.

White said she was a little surprised by the 3.8-percent rise in inflation for the past year.

“It sort of bears out the anecdotal stuff: Families are spending more for all of that basic stuff, the things they need every day,” she said.