Income inequality and the minimum wage in Colorado

Income inequality and the minimum wage in Colorado

Growing income inequality in Colorado

Across the nation, the income gap is growing and the economic recovery did very little to alter that trend.[1] Colorado is no exception to this story. The lowest wage earners in Colorado only saw a one percent increase in wages between 1980 and 2012. While high wage earners, those in the 80th percentile, experienced an increase of 19 percent over the same time period. More recently, it’s clear the economic recovery has not been shared across the income spectrum. Wages among the lowest earners in the state are still below pre-recession levels. Total income is highly concentrated among the highest earners in Colorado. The top 40 percent of earners brought in 75 percent of all income in 2012—much of which was concentrated at the very top with the highest 5 percent of earners bringing in 20 percent of total income in the state. By comparison, the state’s lowest 20 percent of earners took home only 3.5 percent of all income in 2012.

Reducing wage and income inequality: Raise the minimum wage

Growing wage and income inequality hampers our national and state economy. A government set wage floor compensates for the significant (and growing) imbalance in bargaining power between wage setters and the lowest wage workers. Colorado, like several other states, has a minimum wage above the federal minimum wage of $7.25/hour.[2] In Colorado, the minimum wage is adjusted annually for inflation and was raised to $8.00/hour for 2014.[3] Although higher than the federal minimum wage, the current rate in Colorado is still too low and should be raised to the level proposed by President Obama of $10.00/hour. At $8/hour, annual full-time income totals $16,600, increasing to $21,000 annually at the higher wage rate.

Minimum wage workers in Colorado

In fact, minimum wage workers in Colorado are the low-wage families that would be well-served by an increase in wages. According to an analysis by the Economic Policy Institute, about three percent of the workforce, or 66,000 people, earned the minimum wage in 2013. Those workers were mostly over age 20, worked at least 20 hours a week and were primarily women:[4]

·         68 percent are over the age 20

·         75 percent work 20 or more hours a week

·         58 percent are women

Raising the minimum wage supports self-sufficiency and economic growth

Very simply, raising the minimum wage makes good on the promise of work as a pathway out of poverty and spurs economic growth. The weight of current research points clearly to the conclusion that minimum wage increases have little or no negative impact on employment of minimum wage earners.[5] Further, low and middle-income workers are more likely to spend pay increases than other income groups. The additional spending will have an overall stimulative effect on the economy resulting in increasing consumer demand and job growth.



[1] “Counting Coloroado: Low and moderate earners have lackluster recovery,” December  2013, Colorado Center on Law and Policy. Available at http://cclponline.org/wp-content/uploads/2013/11/CC2-Final-2.2.pdf.

[3] See the Colorado Department of Labor and Employment, http://www.colorado.gov/cdle/minimumwage.

[4] Economic Policy Institute, Impact of State Minimum Wage Increases on January 1, 2013. Available at http://www.nelp.org/page/-/rtmw/uploads/January-1st-Minimum-Wage-Increases-Demographic-Impact.pdf?nocdn=1

[5] John Schmitt, February 2013, Why Does the Minimum Wage Have No Discernible Effect on Employment? Center for Economic and Policy Research. Available at http://www.cepr.net/documents/publications/min-wage-2013-02.pdf.

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