On Jan. 1, Colorado and nine other states will increase their minimum wage, providing a boost in income for nearly 1 million low-wage workers.
In Colorado, the 14¢ increase, to $7.78 per hour, will benefit 66,000 workers, according to the Economic Policy Institute (EPI). For employees who work full time, the increase means an additional $300 for the year.
Those earning less than the new minimum (57,000 workers) will get a raise in their pay. The increase also helps workers whose pay is slightly above the minimum wage (9,000) as their employers adjust pay scales to reflect the increase. In total, Colorado workers will see an increase in pay of $17.6 million during the year, which will have a spending impact of $11.2 million on the state's gross domestic product, according to EPI.
Colorado voters approved Amendment 42 in 2006, which increased the minimum wage from $5.15 per hour to $6.85 and required that it be adjusted each year – up or down – based on the rate of inflation in Colorado. Inflation increased by 1.8 percent between July 2011 and June 2012, according to the Boulder-Denver-Greeley Consumer Price Index. In 2010, the wage dropped 4¢ because of negative inflation during the Great Recession; last year, it increased by 28¢.
"Because our minimum wage keeps pace with inflation, hard-working Coloradans can buy the same value of goods and services in 2013 as they did in 2007," said Rich Jones, director of policy and research at the Bell Policy Center. "Maintaining the buying power of low-wage workers boosts the state's economy, which benefits all of us."
The demographic profile of Colorado's minimum-wage workers shows that most are adults working full-time. Almost seven out of ten are aged 20 or older, and three out of four work 20 hours a week or more. About six out of ten are women. In terms of race, whites make up 55 percent of minimum wage workers and 29 percent are Hispanic. Minimum-wage workers account for 3 percent of Colorado's workforce.
The other states that adjust their minimum wage based on inflation are Arizona, Florida, Missouri, Montana, Ohio, Oregon, Vermont and Washington. Rhode Island will join the group on Jan. 1. Nine other states and the District of Columbia have minimum wage rates set above the federal level of $7.25.
Because the federal minimum wage is not tied to inflation, it loses buying power in most years. If Congress does not act, it is projected to lose 20 percent of its real value in the next 10 years. The federal minimum wage would now be $10.58 if it had kept pace with the cost of living since its peak of purchasing power in 1968.
A wide range of studies conducted over the past 18 years have found that raising the minimum wage is an effective way to boost the income of low-wage workers without hurting employment.
Other facts about the minimum wage:
- 66 percent of low-wage employees work for large companies, not small businesses.
- More than 70 percent of the largest low-wage employers have fully recovered from the recession and are enjoying strong profits.
- 58 percent of the jobs created in the post-recession recovery have been in low-wage occupations.
- The shift toward low-wage jobs is a 30-year trend that has been accelerating.
(Sources: National Employment Law Project and the Center for Economic and Policy Research)