What Does Denver’s Proposed Minimum Wage Hike Mean for the Restaurant Industry?

Colorado’s minimum wage for untipped workers is set to go up on January 1, 2020—from $11.10 to $12 per hour—but a newly proposed Denver measure may increase it even more.

City Councilwoman Robin Kniech, along with Denver Mayor Michael Hancock, are seeking council approval to set the city-wide untipped minimum wage at $13.80 beginning next year. The rate will then increase again in 2021 to $15.87 per hour. The numbers reflect the maximum 15 percent per year increase that’s written into a law signed by Governor Jared Polis back in May. That law allows local governments to increase their own minimum wages, so long as there is a meeting and review process with affected players.

Kniech says that the larger increase is necessary for Denver residents struggling to keep up with the skyrocketing costs of living in the city.

“First and foremost, we have a severe wage stagnation, and our residents are having a difficult time keeping up with the cost of living in our city. Particularly for service workers,” Kniech says. “Secondly, there is widespread research that raising the minimum wage improves health outcomes—for pregnant women and their babies, for reducing suicides—and those are some of the benefits we hope to achieve.”

The minimum wage increase to $13.80 on January 1 would mean a pay raise for 74,000 people who live and work in Denver. Kniech says that the majority of those are people of color, and that under the second increase in 2021, 50 percent of Latinos and 38 percent of African Americans working in Denver would get a raise.

But many in the restaurant community argue that the measure hurts an industry that already operates with lean margins, and that the wage hike will make it too expensive to operate in Denver.

“It would be the biggest minimum wage jump that we’ve ever seen,” says Katie Lazor, executive director of EatDenver, a nonprofit group of more than 200 locally owned, independent restaurants. “It makes me sick to think about the fast-changing expenses restaurants are having to accommodate for. Especially with the already slim margins they’re operating under. The question is, where will restaurant operators get that budget from? Along with everything else—real estate, food costs, health insurance—it has the real potential to make an incredibly scary impact on our local restaurants.”

Jeff Osaka, the chef/owner of 12 at Madison, Osaka Ramen, Empire Lounge, and conveyor belt sushi chain Sushi-Rama, says that restaurants will have to cut staff and/or pass along the higher operating costs to diners.

“I’m all for creating a fair wage—most of my staff already make $15 [per hour] and some way beyond this—but my concern is when it comes to the consumer,” Osaka says. “I don’t think they’re ready for the $25 bowl of ramen or the $25 hamburger, which makes it possible for us to absorb these increases.”

Osaka says that he may increase some of his menu prices, but not to the point where he’ll get pushback from customers. He says restaurants are being forced to rethink how they do business in terms of staffing, too. Osaka’s Sushi-Rama spots, for example, employ a smaller labor force than traditional restaurants. Much of the skilled labor is done at a central commissary kitchen (as opposed to at each individual restaurant) and conveyor belts, not servers, deliver the sushi.

“That’s part of our goal of cutting labor down, because labor has to be cut down. What enables us to pass the value to our guests is streamlining things. Less staff on hand and less skilled labor on hand,” Osaka says.

Labor is a huge buzzword for the restaurant industry, especially when talking about the division between the front of house staff (the people you see when you dine out, including servers and bartenders) and back of house (the cooks preparing your food, dishwashers). Massive wage disparities already exist between the two, mainly because of our tipping structure.

Current state law mandates that tipped staff receive $3.02 per hour below the minimum wage (an amount offset by tips), so the proposed Denver measure would pay tipped staff a base hourly rate of $10.78. If restaurants raise menu prices to make up for higher labor costs, the wage disparity between the servers and kitchen staff increases as checks will be higher and so, presumably, will be tips.

To reduce the wage gap, some restaurants have implemented surcharges or tip pools, but the laws on this are a little tricky. A recent legislative change allows for tip-pooling between the front and back of house staff, but everyone must be paid at full minimum wage, and, according to Lazor, there are negative tax implications associated with this sort of structure.

Osaka worries that the proposed measure will hurt mom-and-pop restaurants most, as the smaller the restaurant, the less wiggle room they have in terms of balancing finances.

But Adam Alleman, owner of East Colfax’s year-old the Game Lounge bar and restaurant, disagrees.

“I don’t want to speak for other businesses, but I’m able to pay more [per hour] than what the law requires, and I’m new. I am supportive of a minimum wage hike, only because I know that it will bring in more customers for me and make for a more vibrant economy.”

Alleman’s economic philosophy is that a rising tide lifts all boats; if you bolster income for minimum wage workers, everyone in the economy will benefit, including his restaurant.

The matter of where Denver’s minimum wage will stand on January 1 won’t be decided until the end of November. In the meantime, there is a six-week process of gathering community input via town hall meetings. Here’s when and where they’ll take place, should you want to participate:

Community Townhalls

SOUTHWEST
Wednesday, October 2, 5:30pm
Justice For All Center
2525 W. Alameda Ave.

FAR NORTHEAST
Tuesday, Oct. 8, 6:00pm
Evie Garrett Dennis Campus (DPS)
4800 Telluride St.

SOUTHEAST
Thursday, Oct. 10, 6:00pm
George Washington High School
655 S. Monaco Pkwy.

CENTRAL
Wednesday, Oct. 16, 6:00pm
Carla Madison Rec. Center
2401 E. Colfax Ave.

NORTHEAST
Tuesday, Oct. 22, 6:00pm
Hiawatha Davis Jr. Rec. Center
3334 Holly St.

NORTHWEST
Tuesday, Oct. 29, 6:00pm
DPD District 1 Station
1311 W. 46th Ave.