Denver’s rising minimum wage squeezes restaurants, small businesses

Bobby Stuckey, the founder of the Front Range restaurant owner Frasca Hospitality Group, insists he’s a positive guy — but not when it comes to the impact Denver’s fast-increasing minimum wage is having on the industry he loves.

As the local government mandate forces wage increases on an industry that already operates on thin margins, he fears an accelerating die-off of independent restaurants in Denver, where his company operates Tavernetta and Sunday Vinyl near Union Station.

“You’re going to see so many” closures, Stuckey predicted. “You’re going to have a whiplash and you’re going to have fewer jobs really quickly.”

The Michelin star-earning restaurateur is adding his voice to a chorus of operators who view the 2019 city law — which increased Denver’s minimum wage above the state’s rate and later pegged it to inflation — as a heavy burden that makes an always-challenging industry increasingly brutal. The city’s minimum wage this year is $18.29, and it’s set to increase again Jan. 1.

Restaurants are perhaps the most prominent sector squeezed by the city’s escalating wage floor, but they aren’t the only portion of Denver’s small business community struggling to keep up.

At Twist & Shout, an independent music institution that sells CDs, records, Blu-ray movies and other media at 2508 E. Colfax Ave., owner Patrick Brown says keeping up with his labor costs sometimes means making tough decisions, like cutting back on new inventory. A longtime employee and manager at the shop, he bought Twist & Shout from founders Paul and Jill Epstein in 2022.

“It has an impact on our bottom line,” Brown said of the minimum wage. “Payroll is double what it was, easily, since I started doing the payroll here 10 years ago.”

Denver city officials announced earlier this month that the city’s minimum wage would rise to $18.81 per hour in 2025. Wages for tipped workers (those who make at least $3.02 per hour in tips) are set to increase from $15.27 to $15.79.

The upcoming 52-cent increase is gentler compared to the full-dollar increase that took effect at the start of this year, and it’s much milder than the $1.42 jump from 2022 to 2023, as inflation soared in recent years. The latest increase is more in line with the pace of growth city leaders expected when the City Council voted to tie the minimum wage to increases in the Consumer Price Index.

But looked at cumulatively, Denver’s hourly minimum wage will be $7.71 higher on Jan. 1, 2025, than it was in 2019. That’s a rise of nearly 70% in six years.

“We are the cornerstone species of the American economy,” Stuckey said of independent restaurants. “And these cities that are raising the minimum wage are about to torpedo that cornerstone species.”

Denver’s minimum wage this year is nearly $4 higher than the state’s $14.42 hourly minimum for non-tipped workers, which also is adjusted for inflation annually. The state capital was the first city to take advantage after lawmakers lifted a law prohibiting local minimum wages.

Since then, Edgewater (now $15.02 per hour) and Boulder County ($15.69 in unincorporated areas) have followed suit. The Boulder City Council is now considering setting a city minimum wage higher than the state’s.

Workers “keep continue getting squeezed”

A Boulder minimum wage would affect Stuckey’s Frasca Food and Wine and Pizza Alberico. In Denver, his two restaurants are in Councilman Chris Hinds’ district, which covers most of downtown and other dense neighborhoods populated with small businesses.

Hinds was elected in the spring of 2019, just in time to vote for the minimum wage increase that fall. The councilman says he hears the concerns of restaurant owners, but those concerns are not his highest priority.

“Our housing continues to be more and more unaffordable, and people continue getting squeezed,” Hinds said. “I hear all the time from people who can’t make ends meet because their wages are too low.”

That was also his rationale for voting recently to refer Mayor Mike Johnston’s 0.5% affordable housing sales tax measure to city voters in November. He knows higher wages are only part of the puzzle.

If the restaurant industry wants to advocate for solutions to the city’s cost-of-living woes, Hinds said its advocates should lobby the state legislature to give municipalities the power to adjust the tipped income credit for minimum wage workers. Right now, Denver is beholden to the state-set maximum credit of $3.02 per hour.

Colorado’s cost of living — driven largely by the heavy burden of housing costs — is making the state less attractive to businesses generally. Or at least that is what CNBC suggests in its 2024 ranking of states based on their business climates.

Colorado fell to 16th among states this year, down from 11th in 2023 and fourth in the cable news network’s 2022 rankings. The category that hurt the state the most was its cost of living, where the network ranked Colorado 46th out of the 50 states; Colorado also ranked poorly, at 39th, for cost of doing business.

Rachel Beck is the executive director of the Colorado Competitive Council, an offshoot of the Denver Metro Chamber of Commerce that lobbies for policies that support a strong economy and good jobs in the state.

The organization’s leaders know housing is driving business costs in Colorado, Beck said, but she argues that putting pressure on small businesses by mandating higher wages is not a workable solution. Instead, the state and local governments need to focus on drastically increasing housing supply.

“Proponents of minimum wage increases are very well-intentioned because, theoretically, it’s a way to ensure people have enough money to live in a given location,” Beck said. “But the increase in cost of housing has far outpaced wages. And instead, you end up with unintended consequences, like restaurants struggling to stay in business.”

Rising housing costs also are among the first things cited by proponents of Denver’s strong minimum wage when emphasizing its importance.

Aderaw Belay, a baggage handler and wheelchair agent at Denver International Airport, holds jobs with two contractors there and often works 16 hours days, not including commuting time.

A member of the Service Employees International Union, Belay says the $18.29 per hour he makes thanks to the city’s minimum wage is not life-changing money — it’s money he needs simply to survive when a one-bedroom apartment costs $1,500 a month. Most of his coworkers at the airport have similar stories, getting by with two or three jobs.

“Right now,” he said, “we are thinking about basic life. We are thinking about basic needs.”

“Constantly a challenge just to break even”

Progressive policy advocates have praised Denver’s higher minimum wage. Last year, the Colorado Fiscal Institute cited data compiled by the Colorado Department of Labor and Employment in arguing that it didn’t hurt Denver’s economic performance relative to the rest of the state in the first three years.

“Opponents of local minimum wage policies claim that such laws cause businesses to cut jobs, cut hours and pass the higher costs to consumers in higher prices, which can result in fewer purchases,” CFI senior economist Chris Stiffler wrote in a blog post in July 2023. But in Denver, compared to other cities, “unemployment was lower, weekly earnings increased, and sales tax collections all outpaced the rest of Colorado.”

But restaurant owners and other small business owners have reported more difficulties.

At the Colorado Competitive Council, Beck says having rigid minimum wage laws that cut across industries doesn’t account for the conditions and circumstances in each industry. Anecdotally, she hears that restaurants, in particular, respond to the challenge by cutting hours.

That is the case for Sam Armatas, vice president of Sam’s No. 3 diner, a family business with two locations, one in Denver and one in Glendale.