When Looking At The Arguments Around Raising Colorado's Minimum Wage, Context Is Key
The economy is a top issue on voters' minds as the election approaches. In Colorado, voters might be faced with a ballot measure asking them whether or not to raise the state's current $8.31 hourly minimum wage.
First, Initiative 101 [.pdf] backers have to turn in enough signatures to get on the ballot. If they clear that hurdle, voters will decide whether or not they want to see the minimum wage rise to $9.30 per hour. With built-in annual increases, the state's minimum would eventually be $12.00 by 2020.
The debate over raising the minimum wage has been playing out all over the country. The arguments for and against in Colorado mirror the same arguments everywhere else.
"You can have a job and you can be paid such low wages that in fact, even when you work full time, you still end up at or below the poverty line," says Rich Jones, director of policy and research at the nonprofit, nonpartisan Bell Policy Center. "So it's combination of both things, having a job but also having the earnings from that job be enough to allow you to support yourself."
As a supporter of the effort to raise Colorado's minimum wage, Jones' argument is a familiar one, echoed by Vermont Sen. Bernie Sanders, Massachusetts Sen. Elizabeth Warren and other prominent Democrats. On the other side, you have Common Sense Policy Roundtable, a Colorado business group. They released a study by Dr. Eric Fruits at Portland State University in Oregon. Fruits' study sounds the alarm, saying that such an increase could cost the state 90,000 jobs.
"I'm not entirely clear what the problem that's being solved because the number one cause of poverty is actually unemployment and underemployment," he says. "So it's not low wages, it's people who are earning zero wages. If you look, for example, in Colorado, the poorest counties in Colorado also have the highest unemployment. And also the counties with the highest unemployment have the highest poverty. If you're not working, a minimum wage increase doesn't do anything. In fact, it may make things worse because it will reduce your ability to get a job."
In order to process both sides of the argument, we need to put the numbers into context.
Poverty Versus Unemployment Versus The Job Market
If you look to Southern Colorado, counties like Crowley, Otero and Alamosa have unemployment rates above 3.4 – the average unemployment rate for the state. They all have poverty rates higher than 20 percent. Crowley's poverty rate is actually 29.1 percent. In contrast, San Miguel County in southwest Colorado has the highest unemployment rate in the state at 7.9 percent. But their poverty rate is less than half that of Crowley's.
Another factor to consider are the major industries that fuel employment in certain parts of the state. Resorts are the biggest employer in San Miguel County and tourism is seasonal, meaning the unemployment rate changes depending on the time of year. If you look at a chart of county unemployment over time, it plummets in the winter and peaks around the summer. In February 2016, the county's unemployment rate was just 2 percent. As of May 2016, it is 7.9 percent.
Other industries also mess with employment numbers. Coal jobs are going away because natural gas is cheaper. Hydraulic fracturing jobs are also somewhat seasonal (and affected by oil prices). Energy jobs in general, even green energy jobs, tend to fluctuate from year to year. So wages are not the only thing that impact employment numbers.
Previous Wage Increases
For every study claiming that a higher minimum wage will lead to massive job losses, there’s another claiming no such ill effects. It can be difficult to sift through them all. For the purposes of this story, a preference was given to studies that relied on historical data, rather than predictive models.
Economists are also divided on the issue. A 2013 survey by the Chicago Booth School of Business found a near three-way split; When asked whether a federal minimum wage hike to $9 hourly would hurt lower skilled workers, 34 percent said yes, 32 percent said no and 24 percent were not sure.
A 2010 study [.pdf] by the Institute for Research on Labor and Employment at Berkeley University looked at almost 300 neighboring counties in the U.S. over 16 years. One county would have a higher minimum wage than the other. Over time they found that this differential really didn't cost the higher paying county any jobs. There's no shortage of historical studies [.pdf] that come to the same conclusion.
Some studies have found a very small amount of job losses are possible among lower skilled workers and teenagers. Teenagers make up the smallest portion of the labor force - a portion that’s been shrinking in recent years.
Colorado's current minimum wage $8.31 an hour, but in 1998 it was $5.15 hourly. That incremental increase happened over time, but Colorado's employment rate is at a 14-year low. Colorado's minimum wage is adjusted for inflation by law, and yet with each small uptick you don't see a massive loss of jobs.
Other states have recently raised their minimum wage. Seattle instituted a gradual minimum wage hike in 2015. The goal is $15 per hour by 2021, with larger businesses being given a little more time to adjust. But some workers are already taking home $13 an hour paychecks. While a year is not a lot of time to measure the effects, it seems that unemployment has not gone up and prices have largely not gone up so far.
New York City will have a $15 minimum wage by 2018. California's minimum wage will be the same by 2022. Many other states have upped the minimum wage, though not as high as $12 or $15 an hour, but data on the increases remains scarce.
If you want to do more homework on the minimum wage, the federal Bureau of Labor Statistics created a "Minimum Wage Mythbusters" page to debunk a lot of the false information being thrown around.
As for Initiative 101, signatures are due to the Colorado Secretary of State by August 8, 2016. If the signature review finds the proposal to be sufficient, 101 would move to the statewide ballot for the 2016 election.
Read More: Colorado Business Groups Launch Campaign To Defeat Minimum Wage Hike (via Denver Business Journal)
Editor’s Note: This story has been updated to clarify the selection of studies discussed in the ‘Previous Wage Increases’ section. Additionally, the name of the Bell Policy Center was incorrectly attributed and has been updated. We regret the oversights.