Media Coverage: Colorado’s minimum wage increase will help boost economic growth

The Denver Post
January 11, 2013
By Bridget Kaminetsky and Joseph Thomas
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While stagnant wages and sluggish job growth continue to cloud the post-recession recovery, a bright spot exists in Colorado: 66,000 of the state’s lowest-paid workers got a raise Jan. 1, as the state’s full minimum wage and tipped minimum wage both increased by 14 cents, to $7.78 and $4.76 respectively.

Thanks to a ballot initiative passed by Colorado voters in 2006, the state’s minimum wage automatically adjusts every year to keep pace with the rising cost of living — this key policy reform, known as “indexing,” has already been adopted by nine other states as well. As a result, the wages paid to those Coloradoans who wake up each morning to do the hard work of cleaning office buildings, serving food, and providing care for the elderly will not gradually erode each year as the cost of basic expenses like food, gasoline, and utilities continues to rise.

As the country continues to debate how best to create jobs and accelerate the economic recovery, our elected officials in Washington could learn from the example that Colorado has set in addressing the urgent problems of America’s low-wage economy. After more than three years since the official end of the Great Recession, average wages are still declining in real terms, even as workers throughout the U.S. put in longer hours to help make ends meet. As a result, workers with less disposable income are holding back on spending, depriving local businesses of the sales revenue they need to expand their operations. In a country where consumer spending makes up 70 percent of the total economy, stagnant wages spell limited growth and a continued weak recovery.

By contrast, the modestly higher wages received by low-paid workers in Colorado this year will go right back into the economy, generating economic growth as these workers put food on their tables and raise their families. According to an analysis from the nonpartisan Economy Policy Institute, Colorado’s minimum wage increase this year will boost the average directly affected worker’s pay by $300 per year, generating over $11 million in new consumer spending.

While the value of higher wages for Colorado’s low-paid workers remains clear, those who oppose any increase in the minimum wage still claim that higher wages will only slow job growth or burden local businesses. These concerns find no support from the facts: Indeed, businesses that pay fair wages to their employees ultimately benefit from reduced turnover and higher worker productivity, as their employees are spared from the struggle of balancing two jobs in order to make ends meet.

In fact, the real strain on economic growth in today’s economy stems from the decision made by many national fast food chains and big box retailers to inflate their profits by paying rock-bottom wages, siphoning money out of local communities and impoverishing the customer base needed to sustain economic growth.

And yet, while this year’s 14 cent minimum wage increase will mean a lot to workers that are struggling just to get by, the truth is that Colorado’s minimum wage remains well below the level needed to ensure that full-time work provides a path out of poverty. Contrary to myth, over 68 percent of workers benefiting from Colorado’s minimum wage increase on January 1st are adults over the age of twenty. Seventy-four percent of these workers are employed more than 20 hours per week, and over 42 percent have at least some college education. When large numbers of skilled adult workers find themselves relying on the minimum wage to make ends meet, then a national response is required in order to preserve the American Dream of upward economic mobility.

Congress has only acted three times in the last thirty years to raise the federal minimum wage. It’s time for a new level of leadership. It’s time for Congress to learn from Colorado’s example by raising and indexing the minimum wage.

Bridget Kaminetsky is an organizer at 9to5 Colorado, and Joseph Thomas is an organizer at Colorado Jobs with Justice.

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