Aspen restaurants grapple with minimum wage conundrum
To raise or not to raise
The following are the stated positions for and against Amendment 70, which would raise the minimum wage in Colorado, as offered in the “2016 State Ballot Information Booklet.”
Colorado’s current minimum wage is too low to provide a basic standard of living for some workers. Full-time workers making the minimum wage in Colorado earn approximately $17,285 annually, or about $300 per week after taxes, and some rely on public assistance to make ends meet. While the minimum wage has increased only 21 percent since 2007 (when the last voter-approved increase in the minimum wage went into effect), prices for basic necessities such as health care and housing have increased more steeply. For example, the overall average rent price in the Denver metro area has increased about 37 percent, from approximately $946 in 2007 to about $1,292 in 2015.
Raising the minimum wage may help businesses. Higher wages may improve employee productivity and morale and reduce turnover. This is especially important for businesses that pay the minimum wage, as they tend to have very high turnover. Hiring and training new employees can be very costly for businesses. Lower turnover translates into more experienced, more productive workers and significant cost savings.
Increasing the state minimum wage may actually hurt the very employees that the higher wage is meant to help. If Amendment 70 passes, some workers earning the minimum wage may face lay-offs, reduced hours, or fewer benefits. Also, workers seeking minimum wage employment may have a harder time finding work if businesses make fewer minimum wage jobs available. Finally, businesses may choose to raise prices. Because low-wage workers spend a higher percentage of their income on basic necessities like food, they are particularly vulnerable to rising prices.
Increasing the state minimum wage may hurt small and family-owned businesses, particularly in rural communities where the cost of living is lower and economic recovery has been slow compared with urban areas. Businesses in rural communities have a harder time absorbing increases in costs and may struggle to pay higher costs if the minimum wage increases, which may further distress the economy in rural Colorado.
There are ample arguments for and against the proposed amendment to the state constitution that would raise the minimum wage, and at first blush, local voters might shrug it off because few workers in Aspen earn the current mandatory minimum of $8.31 an hour.
Employers in Aspen, like other resort towns, typically pay more than minimum wage because of the higher cost of living in mountain communities.
“We start people (at) way more than minimum wage,” said Earl Rodgers, co-owner of the New York Pizza restaurants in Aspen and Basalt. “And they get increased fairly quickly.”
But what voters might be overlooking, said some restaurateurs interviewed for this story, is how a minimum-wage hike would potentially create a financial burden for the owners of bars and dining establishments where many workers on their payroll rely on tips.
Amendment 70 asks voters whether they are in favor of increasing the minimum wage in Colorado, but not included in the ballot language is how it will directly affect tipped employees.
The minimum wage for the state’s waiters, bartenders and other laborers who rely on gratuity is $3.02 below the state’s current mandatory minimum of $8.31 an hour.
With the approval of voters, Amendment 70 means the minimum wage would increase to $9.30 an hour Jan. 1, and go up to $12 by January 2020, with subsequent increases based on the state’s cost of living.
For a tipped employee, that means in January their minimum wage would climb from the existing $5.29 an hour to $6.28 because of the state-mandated $3.02 tip credit. By 2020, they would be making $8.98 an hour.
“The simple math on that is the $12 (minimum wage) that’s effective January 2020 — that’s a 44 percent increase,” said Michael Goldberg, who owns Belly Up Aspen nightclub as well as Matsuhisa restaurants in Aspen, Denver and Vail. “But if the tip credit stays the same and doesn’t increase as wages increase, then for the servers, who are typically tipped employees, that’s an increase in the minimum wage of 70 percent.”
In other words, Goldberg said the minimum pay for tipped laborers wouldn’t be commiserate with the hikes for nontipped employees.
“I have no beef at all with the minimum-wage increase,” he said, but noted he saw “no logic” in tipped employees seeing their wages go up at a higher rate than the pay of workers who don’t depend on gratuity.
Another Aspen restaurateur, who spoke on the condition of anonymity, said he also supports the minimum-wage increase — but only for nontipped employees. The business owner said his dishwashers start at $12 an hour, so Amendment 70 would not directly impact their wallets. Tipped employees, he said, “would get a dollar-an-hour increase a year, and the cost to my restaurant is about $15,000 a year, and I’m am probably going in the middle or low middle of the road.”
“I’m all in favor of a $15 minimum wage, especially here in Aspen,” he said. “Everybody should be making $15 an hour, but when my wait staff are making $30 or $40 and hour (in tips) and they’re getting a dollar increase per hour, what do I do as a business?”
The answer, he said, is to raise menu prices and pass the cost onto the consumer.
Jimmy Yeager, owner of Jimmy’s and Jimmy’s Bodega, said he supports Amendment 70, but he’s also eyeing a model that has caught on in larger cities at his restaurants — one where servers and bartenders would not get tipped. Instead, a 20 percent service fee would be added to patrons’ bills, and the fee would be divvied up among staffers on their paychecks.
“A tipped employee is one of the only positions you can think of where the employer is not in control of the wage an employee earns,” he said. “I’m an advocate of the no-tipping situation because it allows us to retain control over our business. It is a better business model because the government doesn’t want these undeclared wages.”
The nontipping model, Yeager said, also would create more of a team environment toward working, with tipped employees focused on the overall success of the restaurant rather than just the patrons who are tipping them.
Among the restaurant groups opposed to Amendment 70 include Dam Brewing Co. in Dillon, which contributed $6,000 to Keep Colorado Working, an issues group against the wage hike, according to the Secretary of State’s Office. The Breckenridge Chapter of the Colorado Restaurant Association also gave $4,000.
Other groups against Amendment 70 include the Colorado Restaurant Association, Denver Metro Chamber of Commerce, Tavern League of Colorado, Colorado Hotel and Lodging Association and Grand Junction Area Chamber of Commerce, among others.
Gov. John Hickenlooper is among those supporting Amendment 70, as well as Bell Policy Center, the Boulder Chamber, NAACP–Denver and others.
The Aspen Chamber Resort Association did not take a formal position on Amendment 70.
Donnie Lee, general manager of The Gant and chair of the chamber’s board of directors, said mountain towns should keep a close eye on the effects of Amendment 70 if it’s approved.
“If McDonald’s is paying $12 an hour in Denver, now Breckenridge will have to pay $15 in order to create the disparity they need to attract employees,” he said. “It will have a ripple effect, I believe.”
One person against Amendment 70 is Bob Morris, who runs Aspen Mountain Lodge. The wage increase doesn’t make sense because of the wide differences in the cost of living across the state’s communities, he said.
“If you’re in La Junta and if you’re in Aspen, those are two different things,” he said. “If you run a restaurant in La Junta and you’re selling hamburgers for $4 and beers for $2, and somebody says you’ve got to pay more, it puts a disproportionate burden on communities.”
Morris, who said he supports a living wage, also said more businesses would have to lay off employees, and high school kids couldn’t get summer jobs with the minimum-wage increases.