Five municipalities in Boulder County are considering increasing their minimum wages above Colorado’s current level of $14.42 an hour. An economic study commissioned by the municipalities shows that increasing their minimum wages will significantly raise pay for low-wage workers, but also misleadingly characterizes employment losses from the policy.

Background

In 2019, the Colorado state legislature repealed state preemption of local minimum wages. Since then, Denver ($18.29), Edgewater ($15.02), and unincorporated Boulder County ($15.69) have increased their minimum wages above the state level. Boulder County will raise the minimum wage gradually to $25.00 an hour by 2030, before being indexed to inflation thereafter.

Advocates in Boulder County targeted $25.00 an hour due to research on the county’s “self-sufficiency standard”, an estimate of the income necessary for a family of four to cover their basic needs.1 Similarly, EPI’s Family Budget Calculator estimates that a Boulder County family with two full-time working adults and two children needs a wage of at least $26.24 an hour to cover basic expenses like housing, food, transportation, health care, and child care. Since Boulder County’s minimum wage will not reach $25.00 until 2030, we can expect the costs in the county to be higher than they are today, even with lower inflation than has been experienced in recent years. While the $25.00 an hour target is a much stronger standard than the Colorado state minimum wage policy, it is not extreme compared with the costs low-wage workers face in Boulder County.

Since Boulder County’s minimum wage only applies to the unincorporated areas in the county, five municipalities (Boulder city, Longmont city, Lafayette city, Louisville city, and the Town of Erie) in the county are currently exploring increasing their own minimum wages.

Minimum wage study confirms earnings gains for low-wage workers, but overstates negative employment effects

The five municipalities commissioned an economic analysis forecasting the costs and benefits to workers and the local economy under four different scenarios for increasing their minimum wages. In two of the scenarios, the minimum wages would increase to match Boulder County’s minimum wage by 2030 ($25.00) or 2035 ($28.98).2 The other two scenarios increase the minimum wages to Denver’s level by 2027 ($19.99) or 2035 ($25.32).

Across all scenarios, the study finds that raising the minimum wages will increase earnings for low-wage workers. In the strongest scenario where the minimum wages match Boulder County’s minimum by 2030, 15,805 workers (8.0% of current workforce) would receive increases by 2030 and 26,784 workers (13.5%) would benefit by 2035.

The study also assumes significant reductions in employment due to the higher minimum wages. In the most rapid increase scenario, the study predicts a 1% reduction in employment relative to the baseline. There are a couple of reasons why this negative employment finding is overstated, if not fully incorrect.

The study makes a conservative assumption about the negative employment effects of the minimum wage, which is not supported by the highest quality economic research on the topic. A comprehensive review of minimum wage literature by Arindrajit Dube and EPI’s Ben Zipperer found that the median employment effect of minimum wage increases is essentially zero. Even research focused on the highest minimum wage levels finds no negative employment impact from increasing the minimum wage. That’s because businesses can adjust to the increased labor costs, including through modest price increases, reductions in turnover which save businesses money, and movement of workers from less productive firms to more productive firms. Research using the UC Berkeley Institute for Research on Labor and Employment minimum wage model, which the Boulder study uses as its framework, regularly finds small positive net employment effects from increasing the minimum wage.

Even taking the employment results at face value, the vast majority of low-wage workers will still benefit from the increase. Under the strongest minimum wage scenario, the study predicts employment will fall by 1,896 through 2035. However, the study also predicts that wages will rise for 26,784 workers. As a result, the study’s predictions imply the policy would benefit 93% of these low-wage workers.

Focusing on the total reduced employment also suggests that these workers will find themselves categorically unemployed. In reality, the low-wage job market is characterized by high levels of turnover and churn. Any aggregate reduction in employment is likely to be experienced as fewer days worked or some additional time between jobs, not as a total loss of work. At the same time, these workers will be earning more per hour when they do work because of the higher minimum wage.

Further, the study particularly focuses on teenagers and young workers, misrepresenting the fact that these workers are only a small segment of the low-wage workforce. Instead, most workers who benefit from minimum wage increases are adult workers who work full time. The majority of workers who will benefit are adult women.

The study concludes with a watered-down policy recommendation, suggesting that if the municipalities do increase their minimum wages, they should target catching up with Boulder County by 2035. This slow ramp-up is intended to provide “a degree of predictability and certainty that would allow individuals, businesses, and governments to adapt” to the policy with minimal disruption. In reality, a slow implementation could have the opposite effect because it would increase the time where there is a wage discrepancy between Boulder County and the municipalities. Not only will this make it harder for businesses to adjust, but the various wage regimes will be less transparent for workers and more onerous to enforce for regulators. This is in addition to the fact that a slower wage increase would undermine the potential gains workers could receive.

The report further undermines its stated goal of predictability by calling for a midway review period in 2030 to decide whether to continue increasing the minimum wage. This recommendation will only make it more difficult for workers to know their rights and for businesses to plan ahead.

Instead, the most sensible policy is a coordinated increase by the five municipalities that catches up with Boulder County as quickly as possible. This quicker increase would not only benefit the greatest number of workers, but also lower inequality in Boulder County—which is sorely needed. Unlike much of the rest of the country, low-wage workers in Colorado have actually fallen behind during the pandemic recovery compared with middle-wage workers in Colorado and low-wage workers nationally. From 2019 to 2023, real (inflation-adjusted) wages at the 10^th percentile in Colorado grew 10.9% compared with 13.2% nationally.3 Colorado workers’ real wages at the 50^th percentile grew 15.0%, compared with 3.4% nationally. Increasing the minimum wages in the five municipalities in Boulder County will help shrink the gap between low- and middle-wage workers in the state.

Setting an ambitious minimum wage policy is a key step toward creating a healthier and more equitable economy in Boulder County. While the economic study’s findings on employment losses are misleading and fail to capture the full benefits of minimum wage increases, the potential positive impact for the vast majority of workers cannot be ignored. These policy reforms are crucial for ensuring that all workers in the region can achieve a decent standard of living, which ultimately contributes to a stronger and more resilient local economy.

Notes

1. According to the report, the self-sufficiency wage for a family in Boulder County with two full-time working adults, one preschooler, and one school-age child was $25.44 an hour in 2022.

2. The minimum wage values in 2035 are estimated using Consumer Price Index (CPI) growth projections. Each scenario is modeled through 2035 even if the minimum wage catches up to Boulder County or Denver in an earlier year.

3. EPI analysis of Current Population Survey Outgoing Rotation group microdata. Imputed wage values are excluded from analysis.