Minimum Wage Increase

On January 1, 2011 Colorado’s minimum wage will increase for the fourth time in five years (“Costly new year: Rising minimum wage just one challenge for employers,” Dec. 18). In a state where the teen unemployment rate is still averaging over 26 percent, it’s going to be even harder to find an entry-level job.

Colorado’s minimum wage is indexed to inflation, which means the cost to hire and train entry-level employees like teens rises almost every year. For labor-intensive businesses with low profit margins, like restaurants and grocery stores, even a seemingly small increase in labor costs can trigger unintended consequences. As customers continue to demand low prices, employers respond by cutting staff hours or positions and—over time—are forced to turn to more cost-effective alternatives like automation and self-service.

The consequences for the teen job market are clear: New research from the United States Military Academy at West Point finds that each 10 percent increase in a state’s minimum wage decreases teen employment by 3.6 percent.

Michael Saltsman, Employment Policies Institute
Washington, D.C.