AURORA, Colo. — There’s no question Colorado is an expensive place to live. So expensive, an Aurora City Council member recently proposed raising the minimum wage to $20 an hour.
But, businesses say they can’t bear the cost of such a dramatic wage increase, especially as the coronavirus pandemic has slashed demand and interest in restaurant dining and retail shopping.
When Sanjeev Kanherkar and his wife opened the Great Greek Mediterranean Grill directly across from Children’s Hospital in Aurora, they had no idea they would be shut down just one month later.
“We opened this place on February 15th of this year,” Kanherkar explained from the somewhat empty dining room of his brand new restaurant. “And to kind of add salt to the wound, our financing was also denied by the bank because of the COVID crisis.”
His first year has been anything but smooth.
“And even now, are we out of the woods? No,” Kanherkar said.
He fears one more blow could knock his teetering business over the edge.
“Even a tiny bit of fluctuation could actually send us in the wrong direction,” said Kanherkar, who sunk most of his retirement savings into the business.
He’s not alone. He’s just one of thousands of small business owners nationwide struggling to stay open during the pandemic. He and other business owners in Aurora are adamantly opposed to the new proposal that would raise the minimum wage to $20 an hour.
“All of us are really fighting for our survival right now,” Kanherkar said.
Under the proposal laid out by council member Alison Coombs, Aurora would raise its minimum wage in 2021 by 5% from $12 an hour to $12.60 an hour. Then, it would be a gradual raise of 5-10% a year from 2022 to 2026; eventually reaching $20 an hour by 2027.
“We need to make it possible for people to live in our city and be able to thrive on just one job,” Coombs said. “Right now, they’re working two or three jobs and they still can’t afford to pay the rent or the mortgage.”
Coombs says Aurora is a city where nearly 30% of residents spend more than half their monthly income on housing; and it’s not just waiters and waitresses.
“The people working in our nursing homes, the people doing home care, the people working in our grocery stores,” Coombs said. “It’s them. All of whom, we know, are essential at this time (and they) deserve more than just thank you videos.”
But, Aurora Mayor Mike Coffman is opposed to the idea.
“This proposal is a jobs killer,” Coffman said. “A lot of restaurants are in a terrible position right now. Many of them, quite frankly, unfortunately, are not going to reopen.”
Coffman says the timing couldn’t be worse, and the proposal is tone deaf given the state of the economy.
“It’s going to cause a lot of restaurants that are right on the margins to throw in the towel,” Coffman said. “The end point of this policy will be replacing pay checks with welfare checks.”
Economists don’t disagree.
“The loser, for sure, is the business,” said Mac Clouse, professor of finance in the Daniels College of Business at the University of Denver.
Clouse says the proposal is likely to backfire.
“One response some businesses may have is to simply lay off some people,” Clouse said.
Clouse says rather than trying to legislate higher wages, the market should dictate the living wage.
“The labor market wage rates come from the intersection of the supply curve and the demand curve,” Clouse said. “Everybody may lose jobs if a business has to shut down.”
“Everyone is being collectively punched in the gut,” said Mark Shaker, founder of Aurora’s Stanley Marketplace.
Shaker describes himself as a progressive guy and a believer in higher wages.
“There’s no question it’s well-intentioned,” he said.
But, he says, of the 56 small businesses in Stanley – sales are down nearly 40% on average.
“There’s a lot of businesses right now on the cusp of asking, ‘Do we just throw in the towel?’” Shaker said. “To say – ‘Hey! Let’s take this on in the middle of a pandemic.’ It strikes the wrong chord. You’re going to see cost passed through to consumers. It’s inevitable.”
At least one metro Denver business is doing just that.
Amethyst Coffee raised its prices during the pandemic by 50%, allowing them to raise wages and pay each employee $50,000 a year.
Amethyst told Denver7 it could not rely on tips in order to pay people a living wage in a city that only gets more and more expensive to live in.
Coombs argues multiple studies have shown a minimum wage increase does not kill businesses.
“Years where a locality has a minimum wage increase – they actually have a slightly higher small business growth rate,” Coombs said.
While that may be true, Coffman and others say those studies and examples happened before pandemic, which makes them particularly useless at the moment.
“They did it pre-COVID,” Coffman said. “When the economy was hot.”
“Everyone is being generous here with their benefits and pay, to the extent that they can be,” Shaker said. “But, there’s breaking point.”
Kanherkar says it would be a death nail.
“That would probably just sink us,” he said of the wage hike. “Completely. I wouldn’t have a choice but to just shut this place down.”
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