Minimum Wage Discussion Continues (July 2022)

At its July 12 Work Session, the Fort Collins City Council continued its discussion of establishing a local minimum wage in excess of the statewide minimum of $12.56.  This is permitted under legislation that was signed into law in 2019. The bill limits to 10% the number of local governments able to do so without further amendment of state statute. That provision essentially sets up a race, of sorts, for local governments to get something on the books before the window closes.

But do we really need a minimum wage that applies only to jobs located within the city of Fort Collins?

On the surface, it would seem to be a moot question as very few employers we’ve heard from offer positions that pay the statewide minimum, even for entry-level positions commonly held by minors living at home.  In fact, we consistently hear pay and benefits have been increasing faster than the overall inflation rate.  According to data the Chamber collects under its NoCo Recovers initiative, wages have increased 12% annually since 2019 versus a 9.8% annualized increase in the consumer price index estimated for our region as of April 2022.

Proponents of a local minimum wage argue three primary points: Current labor market conditions will eventually ease so we need to shield workers from financial hardship when employers inevitably scale back wages; and, if so few employers are actually paying minimum wage, then there shouldn’t be much concern for its implementation.  A third point, which gets the most airtime, suggests that any wage less than $15 per hour exacerbates income inequality and condemns full-time workers and their families to a life of poverty.

We offer the following observations: first, it’s a very rare occasion – and under extremely difficult conditions – that an employer is able to lower wages without losing its workforce and/or reputation.  Second, in many settings, raising entry-level or low-skill wages will apply upward pressure on all wages paid by the company in order to maintain an adequate premium for more productive and senior personnel.

Arguing the third point is a bit more nuanced as the $15/hour standard has been on the table since 2012, even as our economy and cost of living have changed significantly over the past decade.  At the time, academic studies were cited to support a rationale for that number.  Since then, the figure has become little more than a campaign slogan with virtually no real-world significance.

Moreover, an ambitious project at the Massachusetts Institute of Technology allows us to see what the “living wage” requirement is for locations across the country based upon household make-up.  For instance, an adult residing in Fort Collins with no dependents would need to work 40 hours per week at $18.39 per hour in order to afford housing and reasonable living expenses.  If that same adult has a non-working spouse and two children, he/she would need to earn $38.82 per hour to make ends meet.  You can find the information here.

The point here is not to suggest we need a minimum wage dictated by by local government, but to simply point out the campaign to raise the minimum is no longer tethered to rational underpinnings. Experience shows us that small businesses will suffer the greatest impact, more entry-level and low-skill jobs will be automated, and fewer young people will have the opportunity to build the skills necessary for a successful professional career.

In adopting a local standard that exceeds the statewide level, Council would assume responsibility for determining a wage that delivers a net benefit to the community.  While the State relies upon a department of experts (Colorado Department of Labor & Employment), the City has thus far relied upon statistically invalid surveys and a consultant to evaluate the costs, benefits and regional impacts of a higher local wage.  The City does not have the capacity currently to either derive a meaningful data-based local minimum wage rate or enforce a local policy.  The City could decide to create those capacities but at what cost?

Implementation is yet another source of concern. Recognizing the cost and expertise associated with monitoring and enforcing a local standard as operationally prohibitive, staff is suggesting complaints be handled through the court system. Though that may limit the number of cases from a cost perspective, it also opens the door to frivolous legal action against employers that can endanger their reputation within the community while adding yet another cost burden.

With inflation running at its highest level in decades, pervasive supply chain disruptions, and rising possibility of economic recession on the horizon, the timing of this proposal could not be worse for small business.

Source: Fort Collins Area Chamber of Commerce
July 2022