OPINION: Minimum Wage Opponents Using Scare Tactics

By Jenny Davies

Economic researchers at several Colorado-based policy organizations supporting Amendment 70 to raise the minimum wage to $12 by 2020 analyzed television ads put up by opponents of the measure and issued the following fact check on the three ads from the campaign opposing Amendment 70.

“The data on job loss cited in these ads is wildly inaccurate and misleading,” said Rich Jones, director of policy and research at The Bell Policy Center. “The consensus among economists is that the minimum wage can be increased as proposed in Amendment 70 without hurting jobs or the economy. The truth is that those who defend paying poverty wages are using lies about mythical job losses and innuendo about rural economies to scare Colorado voters.”

“In addition to deeply totally inaccurate projections on jobs, these ads also miss that when workers have disposable income, they spend more money in the local economy on things like eating out at restaurants like La Cueva or taking their kids to shops like Hot Pots,” said Michelle Webster, manager of policy and budget analysis at the Colorado Center on Law and Policy. “Credible economic research conducted without an agenda shows that raising the minimum wage can help the economy grow because workers have more money they can put directly back into the economy.

These economic researchers expressed these concerns and thoughts on the TV ads:

La Cueva Restaurant Ad
Claim: Amendment 70 will cost $72,000 over a 3-year period, doesn’t know where that will come from with a 3 to 7 percent profit margin.

Facts: An independent study by the University of Denver on impacts of $12 by 2020 in Colorado concluded that Amendment 70 will grow the state economy (GDP) by $400 million. It also will increase incomes of 20 percent of Colorado families, including 200,000 with children. Women have the most to gain from this measure – 290,000 women will see wage increases between $4,000 – $7,000.

As Colorado Restaurant Association CEO and President Sonia Riggs told the Denver Business Journal, “People have more disposable income. And when they have more disposable income, they eat out more.” Economists agree with Ms. Riggs: The evidence shows that raising the minimum wage can help the economy grow because people at the lower end of the income spectrum are likely to spend extra earnings they get, raising their wages is a way to give the economy a jolt.

Our Colorado experience with raising the wage bears this out. The restaurant industry in Colorado continued to add jobs following the 33 percent increase in the minimum wage in 2006. Over 5,000 restaurant jobs were created between 2006 and 2008, when the Great Recession hit.
The restaurant industry is strong in Colorado.

Since the economic recovery began in 2010, the restaurant industry has recovered all lost jobs and continued to add jobs at a significant pace. Restaurant employment is up 17 percent since 2008 – and the industry is projected to register sales of over $10 billion in 2016, growing 8 percent over the previous year. Denver area restaurants saw revenue increase by an average of 7.3 percent between 2014-2015 — the second highest growth rate of all major U.S. cities.

Many restaurant owners in Colorado understand the benefit of raising wages to their bottom line, one of whom is Pete Turner, founder and president of the Illegal Pete’s chain. He is in favor of the ballot initiative after increasing the floor wages at his restaurants last year from $9 an hour to $10.50 an hour. His experience was that hourly-employee turnover dropped down to 29 percent and manager turnover is down to 10 percent,numbers that are less than one-quarter of the industry average and helped him recoup half the cost of the wage increase.

Claim: Colorado will lose 90,000 jobs.

Facts: This claim was thoroughly debunked by local economist Chris Stiffler at the Colorado Fiscal Institute. Stiffler identified fatal flaws in the “Fruits study”:

  • Relied on cherry picked outlier studies with negative outcomes
  • Selectively cited ideas from studies while ignoring how those same sources contradict his findings
  • Did not report the margins of error or statistical significance that is standard practice in credible economic research
  • Made unsupported assumptions about the minimum wage proposal to get to a large job loss figure

The methods used in this study produced wildly inaccurate results when back tested against what really happened in Colorado when we raised the minimum wage by 33% in 2006. The methodology used predicted a loss of 52,000 jobs in 2007 and 2008, yet Colorado gained over 71,000 during that period. The bottom line is this is not a credible analysis that would survive review by other economists — but rather, research-for-hire to support the opposition’s campaign to scare voters.

Grand Junction Chamber Representative Ad

Claim: Colorado minimum wage already automatically increases with inflation.

Facts: The minimum wage increased for inflation only since 2006, but more important is that the cost of living in Colorado has increased almost three times as much as wages since 2000 with no significant slowing of cost increases even during the Great Recession and the slow recovery period that followed.

The nonpartisan Legislative Council staff points out in the voter guide that the minimum wage has not kept pace with the increase in rents. The minimum wage increased by 21% since 2007 while rents increased by 37%.

Claim: But unions are demanding a lot more; Unions are demanding a 44% minimum wage increase.

Facts: The campaign for $12 by 2020 is locally grown with 150+ Colorado small businesses, 50+ nonprofit organizations and thousands of individuals supporting it. The Colorado people are demanding an economy that works for all Coloradans. Low-wage workers in Colorado are feeling the pain of stagnant wages and the increasing cost of living in this state making it increasingly difficult to meet their basic needs. They feel that powerful corporations use their influence to hold down wages and benefits. The data shows they are right.

Productivity continues to increase in CO but wages have failed to follow. Increased productivity has historically resulted in rising wages and better living standards but growth in wages for most families has lagged significantly behind growth in productivity in recent years. In Colorado, productivity increased by 30 percent since 2000, while the median wage has essentially been stagnant over the same period.

Claim: Larger businesses in wealthier areas could probably weather it but small businesses in rural Colorado—family-owned businesses—would be devastated. They would have no choice but to cut jobs.

Facts: More than 150 Colorado businesses have endorsed the measure and the list grows every day in a variety of sectors including restaurant and hospitality, manufacturing, retail, and tech. This increase is phased in over four years, increasing about 10% per year so businesses have an opportunity to plan for the increase. The best evidence shows that minimum wage increases don’t force job losses and it will boost the wages of nearly 480,000 Colorado workers.

After a much steeper 33 percent increase in the minimum wage passed in 2006, rural Colorado employers added more than 6,000 jobs in 2007 and 2008. This real world experience is consistent with research on the employment impacts of raising the minimum wage. The most rigorous studies consistently show that raising the minimum wage has little to no negative effect on jobs, even in sectors most likely to hire low wage workers.

In terms of rural Colorado, families there also need a raise. The cost of living has been increasing all across the state, even during the Great Recession. If we want rural communities to thrive like the rest of the state, we need to give low wage workers in those communities a raise so they can afford to spend money on their own Main Streets.

According to data from the Colorado Department of Labor and Employment, average wages among the majority of small businesses (those employing less than 50 people) in Colorado are already above $12. Only 6 percent of small businesses reported paying average wages less than $12 in the first quarter of 2016.

Small business owners understand that putting more money in workers’ pockets will give workers more money to spend at local businesses. A July 2015 poll showed that 60 percent of small businesses nationwide support raising the minimum wage to $12/hour.

An independent study by the University of Denver on impacts of $12 by 2020 in Colorado concluded that Amendment 70 will increase incomes of 20 percent of Colorado families, including 200,000 with children and grow the state economy (GDP) by $400 million. Women have the most to gain from this measure – 290,000 women will see wage increases between $4,000 and $7,000.

Colorado Families for a Fair Wage is a coalition of small business owners, community partners, working families, and faith organizations working together to help build a fair economy for all Coloradans.

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