In 2016, Colorado voters passed Amendment 70 to increase the minimum wage to $12 an hour from $8.30 by 2020 by slowly increasing it each year until then. While the amendment passed with a 55 percent majority, critics still hotly contest the actual benefits of the bill, pointing out that minimum wage increases often increase unemployment because operating cost increases squeeze profits and force layoffs of low-income workers, a pattern especially prevalent in small businesses. However, how has the minimum wage actually shaped Colorado’s job market over the past few years, and how will it continue to impact new entries into the workforce in the future?
Contrary to what critics might say about minimum wage increases, such policy changes have actually been beneficial for Colorado’s job market and economy over the past few years. In fact, in 2017, Colorado’s unemployment rate dropped to its lowest ever at 2.7 percent and since then has fluctuated between low three percent and high two percent unemployment, and we continue to show some of the strongest job gains in the U.S., all due to a general boom in industry, aided by minimum wage increases.
Medium-income wages may have temporarily stagnated, and most new jobs are only low-income jobs, but with time (even as soon as within the next year or two), these patterns will shift towards increases in medium-income wages due to increases in minimum wage and openings in higher income positions as baby boomers retire in droves.
But what does this mean for the average college student or low-income worker in the workforce? Before entering into the job market or making important career decisions, it is imperative that one understands the ecosystem they are involved in. As of now, Colorado is growing rapidly with many new job openings, yet low unemployment. Typically, this would mean that businesses are competing for a smaller pool of available workers; however, our state is unique in the sense that the pool of workers isn’t small, rather it includes new masses of millenials, individuals re-entering the workforce and out of staters.
Rapid growth, relatively high minimum wages and stable conditions serve as an attractive environment for individuals, especially younger ones, to work in. This is good news for new college graduates or new working-age individuals because entry level workers will not have to battle with the typical trends of a saturated job market with low unemployment. Instead, workers can reap the benefits of new booming industries, rapid growth and job surplus with decent base level pay.
Currently, the increase in minimum wage has actually served as a way to attract new workers, create more jobs, further stimulate booming industries and grow Colorado’s economy as a whole. However, it is important to recognize the merit of some of the critiques of such policies. The benefits of increases in minimum wage, growing industries and new job creation will eventually stagnate as the economy catches up, or even potentially backfire in the future.
In Seattle, minimum wage has been raised to $15 an hour through the same structure as Colorado’s Amendment 70. Yet, the municipality has not seen the same success among new workers as Colorado has. Jacob Vigdor, an economist at the University of Washington, spearheaded research on the effectiveness of Seattle’s new minimum wage laws and found that the growth rate in new workers making less than $15 an hour stagnated, suggesting that they had been priced out of the market. Simply put, employers may have been willing to train new, low-level employees at $10 an hour but not at a higher price. Colorado’s success story isn’t the same for everyone.
In the long term, job markets will become saturated, minimum wage hikes will cause price inflation (increased operating costs cause businesses to raise their prices, effectively diminishing any short term benefits employees saw with new minimum wage laws where they had the opportunity to get ahead of any inflation adjustments) and unemployment may return to where it was a few years ago. Regardless, the next four or five years will likely have lucrative conditions for new workers and college graduates, assuming the economy doesn’t collapse before then. But in the meantime, carpe diem.
