Colorado’s minimum wage is on a fast climb. Since voters approved the creation of a statewide minimum wage in 2007, the rate has risen each year, pushing Colorado toward some of the highest minimum wages in the nation. Government data shows a majority of the state’s restaurants are small businesses, which will be squeezed by annually rising wage mandates.
The statewide minimum wage has risen sharply every year for roughly a decade, and is set to reach $15.16 in 2026, while the tipped wage will hit $12.14 with the $3.02 tip credit. The state is following closely behind some of its major localities, such as Edgewater, Boulder County, and Denver, where the current minimum wages are $16.52, $16.57, and $18.81 respectively.
The tipped minimum wage hikes in particular have become mounting challenges for Colorado’s restaurants. For context, tipped workers like servers and bartenders are paid a base tipped wage, with tips making up the rest of their earnings. This system works because it allows restaurants operating on razor-thin margins to keep tipped workers on staff while keeping prices reasonable, but also because tipped servers and bartenders usually make well beyond the regular minimum wage through their tips. When the tipped wage goes up, restaurants are forced to adapt to stay in business, which could mean price increases that scare away customers, layoffs or schedule reductions for employees, or shutting down entirely.
Pro-wage hike activists typically argue businesses won’t be affected by minimum wage increases because they are large corporations. While businesses of all sizes feel the effects of rising wages, data shows a majority of the restaurants affected by Colorado’s minimum wage are small businesses who may have less wiggle room to adjust to higher wage mandates.
This makes tipped wage hikes especially challenging for restaurants, particularly smaller ones that operate on thin margins. Colorado’s restaurant industry has some larger chains, but also includes a wide range of smaller, independent establishments.
Data from the Current Population Survey show that a significant majority of tipped workers in Colorado are employed in small businesses, rather than in large establishments. About 62% tipped workers in the state work at establishments with fewer than 100 employees.
Colorado’s tipped and regular minimum wage increases have already begun to reshape the state’s restaurant landscape, raising costs and creating new operational challenges that are starting to affect employment.
Across the state, restaurants are showing early signs of strain, with stagnating employment growth and growing uncertainty that mirror trends in other high-wage states. In even higher-wage local markets like Denver, jobs are declining.
Recent brewery closures across Colorado highlight how these pressures are already being felt by small, local establishments—the exact kinds of businesses that employ many of the state’s tipped workers. While all businesses may feel constrained by sharp rising wage mandates, smaller restaurants may be less-able to absorb steep wage hikes. This means they may be even more likely to raise prices, cut hours, or scale back staff to stay afloat.
Earlier this year, state lawmakers approved a bill to require all localities in the state to observe at least the state-mandated tip credit amount of $3.02 per hour. It also gave local governments the ability to increase the tip credit. While this is a step in the right direction of protecting the tip credit, Colorado’s history of steep state and local wage hikes is threatening its mom-and-pop restaurant culture.
While Colorado’s minimum wage path increases every year, more and more small restaurant businesses will struggle to stay open, keep their staff, and keep prices affordable for guests. Colorado’s wage path reflects a broader national debate over how to support workers without overburdening the small businesses that sustain local economies. As the state’s minimum wage continues to rise past $15, understanding these tradeoffs will be key to ensuring that policies designed to help workers don’t unintentionally undermine the employers who rely on them most.