Owners cut jobs as wages increase

Colorado Springs Gazette ^ | December 31, 2006 | Sarah Colwell

[Graybeard58]

Some Colorado Springs restaurant owners worry that they will have to raise prices, lay off workers or shut their doors after new minimum wage rules go into effect Monday.

The minimum wage in Colorado increases $1.70 an hour for tipped and nontipped workers Monday. That represents a 33 percent increase for nontipped workers, to $6.85 an hour, and an 80 percent increase, to $3.83 an hour, for tipped workers. Colorado voters approved a constitutional amendment mandating the increases in November.

These costs will be adjusted annually according to the Colorado Price Index, which is based on the cost of living in Denver and Boulder.

Small-business owners, especially those in the restaurant industry, are expected to have trouble covering the increase, said Fred Crowley, an economist at the University of Colorado at Colorado Springs.

Proponents of the amendment say a minimum wage increase is necessary because the previous minimum wage wasn’t enough to live on.

In other states where the minimum wage has been raised, “there hasn’t been evidence of job losses or a detriment to the economy,” said Rich Jones of the Bell Policy Center, a think tank that supported the increase. “This is a modest increase that gives workers a bit more to live on, and it can be absorbed by the economy.”

After the amendment passed, the Colorado Restaurant Association was swamped with phone calls from restaurant owners asking for suggestions on how to cover the increase in labor costs, said Dave Symonds, president of the Colorado Restaurant Association Pikes Peak Chapter.

The association held a series of seminars for members on how they can cope with the wage increase without violating labor laws. For example, some restaurant owners wondered whether tipped workers could perform the duties of nontipped workers, such as kitchen prep work, to offset some labor costs. Attorneys and labor experts told association members this would not be legal, Symonds said. The association will hold more seminars in February.

Many restaurant owners will have to raise prices to make up the increased labor costs, Symonds said. Crowley, the economist, expects prices to go up by five percent to six percent because of the minimum wage increase.

“In most economic models, if your costs go up, you raise the prices you charge. Otherwise, the other option is that you forfeit your profit margin,” which is about five percent on average for restaurants nationwide, Symonds said.

Some restaurants are already changing their business operations.

Conway’s Red Top restaurant recently closed its store at 5865 Palmer Park Blvd. in large part because of the minimum wage increase, said operations manager Ralph Brown. Starting in January, all Conway locations are going to have reduced hours. To save money on rent, managers closed half of the dining area at the South Nevada Avenue store.

“We’re doing anything we can do just to make it through,” Brown said. “In the next three to six months, if things aren’t going right, we might have to close another store.”

Red Top managers estimate the increase will cost them $100 a day per store, which amounts to $180,000 a year increase to payroll costs, Brown said.

“We have to increase prices every year just to stay up with the cost of food, and now we will have to increase prices even more because of the increase in labor costs,” Brown said. “We are trying to put a menu mix together that’s not going to have people running out the door, but we’re going to have to increase menu prices.”

Symonds, owner of the Craftwood Inn and Stagecoach Inn restaurants in Manitou Springs, said he has eliminated four hostess and busboy positions, from a staff of 50.

Andy Michopoulos, coowner of Michelle Chocolatiers & Ice Cream, said his wait staff earns good wages under the old pay scale of $2.13 an hour for workers earning tips.

“If a waitress is not earning between $10 to $20 a hour after tips, then they are not doing their job,” Michopoulos said. Some organizations in the business community are looking into getting the constitutional amendment repealed. The Greater Colorado Springs Chamber of Commerce wants to see a change to the inflationadjustment clause of the amendment, said Stephannie Finley, president of governmental affairs and public policy with the chamber.

The Colorado Restaurant Association “will thoroughly investigate every opportunity to repeal, amend, overturn or challenge the law,” according an association document.

Repealing the amendment will be difficult, Finley said. Since it is a part of the state constitution, voters would have to amend or repeal it at the next general election in November 2008.

CONTACT THE WRITER: 476-4893 or sarah.colwell@gazette.com

AMENDMENT 42

The amendment increases from $5.15 to $6.85 per hour the state minimum wage for salaried workers and increases from $2.13 to $3.83 per hour the state minimum wage for workers receiving tips. Employers must make up the difference for tipped workers whose tips, along with $3.83 per hour, don’t add up to what would be $6.85 an hour, averaged over a two-week period. These increases are effective January 1, 2007. Thereafter, the minimum wage is increased annually based on the Consumer Price Index (CPI) used in Colorado.

HOW THE MINIMUM WAGE INCREASE WILL AFFECT A BUSINESS WITH 10 EMPLOYEES

Hours worked annually for 10 full-time employees:

20,800

Minimum wage increase:

$1.70

Hours times wage increase:

$35,360

SOURCE: Colorado Restaurant Association

HOW MUCH MINIMUM WAGE WILL BE ASSUMING 3 PERCENT INFLATION

In five years:

$7.70 nontipped, $4.31 tipped

In 10 years:

$8.93 nontipped, $5 tipped

In 15 years:

$10.35 nontipped, $5.79 tipped

In 20 years:

$11.99 nontipped, $6.71 tipped

SOURCE: Gazette research

[rwgal]

Now the voters who wanted this will be pissed at the restaurant because they will have to wait longer for their meal....let Capitalism work, leave wages alone to the market place.

Meadow Muffin

[ExtremeUnction]

This is a modest increase that gives workers a bit more to live on, and it can be absorbed by the economy.

Wrong. It must be absorbed by the EMPLOYER.

[hsalaw]

Well, duh.

[COEXERJ145]

Colorado just became anti-business.

[stevem]

I'm pretty sure the real minimum wage is zero dollars per hour ($0.00/hr).

[Right Wing Assault]

the previous minimum wage wasn’t enough to live on

I've never seen waitresses dying on the job. Most of them seem pretty healthy and even happy. Must be the tips.

[Obie Wan]

As I've said before, give em a raise and then increase a tax or two somewhere. When will the morons ever learn they're being gamed by the socialists in government ???

[Gabz]

Now the voters who wanted this will be pissed at the restaurant because they will have to wait longer for their meal....

And that it costs more.........

[kcvl]

Rich Jones worked for 24 years at the National Conference of State Legislatures (NCSL), where he was director of the Legislative Programs Division. In that role, he wrote extensively about topics such as management, legislative operations, term limits, staffing and oversight. He has also worked on a variety of policy issues including economic development, financial services and telecommunications. Before joining NCSL he worked as a researcher for the Pennsylvania General Assembly. Rich holds a bachelor of arts in government administration from Shippensburg University in Pennsylvania and a masters in public administration from Penn State.

[goldstategop]

Coloradans are a stupid lot who assume small business owners have bushels of money stashed away somewhere. The latter don't and the result is fewer people will have jobs and folks will pay more for dining out. Congratulations, Colorado!

As a newly minted Coloradan here in Colorado Springs, nothing gets quite up my dander like people's ignorance of economics.

"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." - Manuel II Palelologus

[Conservativegreatgrandma]

The gall of someone thinking they have the right to dictate what someone else must pay their employees.

Why the heck now just raise it to $20.00 per hour, of we're going after a living wage.

[flashbunny]

the idiots who voted for this will get what they deserve - a messed up economy.

[Bob]

I'm pretty sure the real minimum wage is zero dollars per hour ($0.00/hr).

For a few people, it certainly became so:

Symonds, owner of the Craftwood Inn and Stagecoach Inn restaurants in Manitou Springs, said he has eliminated four hostess and busboy positions, from a staff of 50.

But just look at how much more they'd be making - if only they still had a job.

[Jaysun]

the previous minimum wage wasn’t enough to live on

Right, genius. Pay everyone - no matter what they do - enough to live on for any task. Then what do you have? Is there any reason for a teen to look beyond McDonald's when he can live on whatever he earns there? This idea of a "living wage" is not only idiotic and Marxist, it's dangerous.

[sharkhawk]

Wrong. It must be absorbed by the EMPLOYER.

Wrong, it is absorbed by the consumer. If the consumer doesn't pay the price, the restaurant closes and the employees wages go down to zero.

[So Cal Rocket]

HOW THE MINIMUM WAGE INCREASE WILL AFFECT A BUSINESS WITH 10 EMPLOYEES

Hours worked annually for 10 full-time employees:

20,800

Minimum wage increase:

$1.70

Hours times wage increase:

$35,360

Plus another $2,700 FICA and Medicare tax that the employer must pay to the Feds. And I believe that the Unemployment Tax and Workman's Compensation Insurance is based on payroll so there will be an increase in costs for these as well.

[SoldierDad]

Anyone who can't move out of a minimum wage position into a higher paying position after gaining experience and increasing their skills shouldn't complain about the wages they are earning. The minimum wage was never meant to be a "living wage" but an entry level wage on the way to moving into a higher paying position for those who work hard.

Increasing the minimum wage through a forced artificial means such as this can only cause problems with our economy as this article points out. Either we will all be paying higher costs, or employers will have to lay off people, or both (more likely both). Get set for another round of higher unemployment rates, which will increase the crime rate, as the morons who keep passing these increases scratch their heads as to why this continues to not work.

[Raebie]

For tipped employees this is ridiculous. The make far above the minimum wage as it is, more than half of that going untaxed.

[neodad]

Everything will be fine. Colorado will just place an order for about 1,000,000 more illegals.

[goldstategop]

In the restaurant business, there's also the cost of food. That's something a restaurant owner can't do much about but they can control labor costs. To keep prices in line, they'll have to lay off workers or close restaurant locations. People think they can have something with very little pain. In the real world though, someone has to pay the tab. Its usually the restaurant patron who ends up taking it on the chin.

"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." - Manuel II Palelologus

[Raycpa]

More owners will just take employees off the books.

[Non-Sequitur]

Wrong. It must be absorbed by the EMPLOYER.

No, it'll be passed on to the consumer.

[FoxInSocks]

Customers could save a lot by not leaving tips.

[Stayingawayfromthedarkside]

The morons who voted for these increases will not even realize that is the reason they lost their job or half to pay higher costs or both. Plus they will probably blame the national chains for their misfortune.

[Beagle8U]

"Customers could save a lot by not leaving tips."

Perfect way to protest this stupid liberal law. Don't tip the waitress, just tell them you would have if they didn't just get that big raise...lol

[whd23]

Customers could save a lot by not leaving tips.

Could you imagine if enough people wrote on their check: "Congratulations on your $1.70/hr raise! I'm adjusting the tip accordingly."

[BW2221]

I discussed this with my son, who is a college student that also works about 25 hours a week as a server at Outback.

According to him, there's no need to lay anyone off. Turnover is restaurants is such that attrition will solve the problem in a month, 60 days tops.

[Leftism is Mentally Deranged]

Leftist policies hurt those they claim to help. Then when the leftist policies fail, leftists always demand more of the same failed policies.

[tubebender]

Don't forget that every vendor the restaurant owner deals with is affected by the new wage so all his supplies, food and utilities will also increase. The owner can cut some costs perhaps but where is it written that he can't raise his menu prices....

[SoldierDad]

Evil business owners and corporations /sarc off.

I guess the public has forgotten about NAFTA and the other bill whose name I can't recall that resulted in jobs going overseas and lowering wages in the U.S as a result. Let's just blame the small business owner and make them all pay (sarc/).

[Gabz]

According to him, there's no need to lay anyone off. Turnover is restaurants is such that attrition will solve the problem in a month, 60 days tops.

I don't see how, the new hires will still have to be paid at the higher rate.

[reg45]

The Utah Tourism Board should release some ads.

If your Colorado vacation is too expensive, come to Utah!

[traviskicks]

Libertarian ping! To be added or removed from my ping list freepmail me or post a message here.

[NonValueAdded]

Owners cut jobs as wages increase

Gee, who'da thunk it? /UltraMegaGigaSarc

[stevem]

Proponents of the amendment say a minimum wage increase is necessary because the previous minimum wage wasn’t enough to live on.

Since it's all arbitrary, why don't these mindless twits make it $10,000 per hour. I'd much rather make $10,000 per hour than $6.85 per hour. Who knows? Maybe if you are smart enough to think of arbitrary "minimum wages" you aren't smart enough to realize that $10,000 is better than $6.85.

[Keith in Iowa]

>>>According to him, there's no need to lay anyone off. Turnover is restaurants is such that attrition will solve the problem in a month, 60 days tops.

>>>I don't see how, the new hires will still have to be paid at the higher rate.

don't rehire for those that quit...you don't have to pay people you don't hire.

[Gabz]

DUH (she says as she slaps upsideherhead........)

I can't believe I didn't catch that - thanks.

[gcruse]

"Wrong. It must be absorbed by the EMPLOYER."

Wrong. He raises prices. It's absorbed by the customer.

[BW2221]

No, he means cutting through attrition. Don't lay anyone off; just don't replace the first two servers and bussers who quit.

[Gabz]

I see that now, why I didn't at first is beyond me.

It makes perfect sense.

[Small-L]

If I were a Colorado restaurant owner, on each bill, I'd add a line item called "State Minimum Wage Assessment" with enough to cover the increases in costs, just like they do with "gratuity for parties over 8". When the consumers begin to get the message that they are the ones paying for the largess of the politicians, they'll get a short course in Economics 101.

Unfortunately, many tax laws outlaw such a notification--the government can't stand people knowing how much they're being fleeced by their "compassionate" government. The same may apply here.

[doc30]

Employers must make up the difference for tipped workers whose tips, along with $3.83 per hour, don’t add up to what would be $6.85 an hour, averaged over a two-week period.

So if workers make above a certain amount in tips, there is no minimum wage increase? It sounds like a government pan to subsiz=dize the workers who can't bring in tips. I.E. - subsidize the lowest performing employees.

[JeffAtlanta]

No, it'll be passed on to the consumer.

Employers of low profit margin businesses are always able to pass cost increases on to the consumer. In these cases, the business closes and the everyone loses their job.

[JeffAtlanta]

For tipped employees this is ridiculous. The make far above the minimum wage as it is, more than half of that going untaxed.

Actually it's insane. All this did is take away the jobs of tipped employees that were making $10 to $20 an hour. I would imagine that tipped employees would love to just waive their hourly income in lieu of their tipped income.

All this job did is close a lot of business, eliminate a lot of jobs and raise the cost of living in Colorado enough that it would undo any benefit of the minimum wage increase.

I really have to wonder who had the bright idea to increase the minimum wage of tipped employees.

[ex-Texan]

No big deal. Nothing to See Here. Colorado restaurants join thousands of other former U.S. employers. China is eating our lunch. Educate yourself. Time to move on.

[HighWheeler]

"This is a modest increase that gives workers a bit more to live on, and it can be absorbed by the economy."

-- --

If the economy can simply absorb it, then why not make minimum wage $50 bucks an hour? And I don't want to see the price of stuff I buy going up either.

The clowns who did the math did it wrong. Every one of the calculations was off by one year.

The other thing is that the iterative method of adjustment will guarantee runaway inflation, as each successive year's natural inflation rate (which is due solely to natural economic growth) will be piled onto the last artificial increase.

So the actual minimum wage in five years will likely be (1.03 X 1.0609 X 1.10107 X 1.1341021 X 1.168125 X 6.85/hr. = $10.92/hr. (not $7.70 as they think)

But their assumption of a modest 3% inflation during 2007 while supporting a hefty 33% increase in wages is completely idiotic. The person already earning $7.00/hr is going to DEMAND a 33% raise also, why should she be making only $0.15 more per hour than the chucklhead who was just hired? Then the unions will demand a 33% increase. It will not stop until it's been run all the way up the economic wage ladder.

[Arizona Carolyn]

Heck, in California even they won't work for less than $10 an hour these days and in some places want $15.

[buffyt]

I talked to a server here in Calif. at Hometown Buffet and she said she made $7.50 an hour plus tips. My kids worked in Texas for $2.13 an hour plus sometimes no tips. Now THAT low of a wage (at Ryan's Steak House Buffet) is legalized slavery. They worked their butts off for almost no pay. You don't get a lot of tips working at buffet places, although you work your butt off, bringing clean plates MANY TIMES, drinks, rolls, napkins, taking away dirty plates. Also going into the kitchen working for hours folding napkins, doing tons of dirty dishes, for $2.13 an hour. BTW Ryans got sued for this.

[chuckles]

Please, Please, Please, start teaching capitalism in schools.

Lest just say, hypothetically, that you hate Exxon. You force the unions to raise their wages to $50 an hour and raise their taxes to %80 of profits. Exxon has a board meeting. Fires all personnel they can sub out and raise the price of the product to the consumer to to reflect all tax and cost raises. Gas is now $5 a gallon.

CORPORATIONS PAY NO TAXES, YOU DO!

Lower costs to corporations and there will be more jobs for the middle class, lower costs to the consumer, and even more exports because we can compete with more markets.

Somehow this is just too tough for students and teachers to comprehend.( and the average voter for some reason)